CRN Interview: Seagate Builds Out Channel

After years of focusing primarily on major manufacturers, Seagate for the Past year quietly has been building out its system-builder channel. In particular, the company has a major focus on system builders in the whitebook space. In an interview with >/I>CRN Editor in Chief Michael Vizard, Seagate channel chief Desa Zraick outlines what Seagate is doing to distinguish itself from rivals.

CRN: How engaged is Seagate with the channel today compared with a year ago?

Zraick: We've taken a lot of time to reach out and communicate with our partners. About a year-and-a-half ago, Seagate went through an internal epiphany that the distribution channel was not the end customer for us Seagate is now approaching all of its programmatic channel work with a focus on business composition enhancement. We want to focus on value propositions as to why someone would buy the product, why someone would sell the product or integrate the product. Everything that we're doing now with the new and improved Seagate partner program will ultimately enable small and midsize system builders to compete more effectively, accelerate their time to market, improve their ability to provide customer service, reduce their cost of doing business and potentially improve their product quality, while reducing their development costs.

CRN: Are you focused on recruiting system builders?

Zraick: We're applying specific focus and recruitment efforts to the system builders. Specifically, we're looking at whitebook and white-box system builders and then VARs who either buy or specify white-box systems. Those are the guys who basically select which components go in their systems. We have about 12,000 total reseller customers that are registered in our program in North America. I think a very small percentage of them are system builders.

CRN: What are your goals in terms of reaching out to system builders?

Zraick: We're probably looking at getting somewhere in the 20,000 range of system builders in North America. If we look at Intel as a benchmark, they're somewhere in the 28,000-to-30,000 range.

CRN: What do you think differentiates Seagate from rivals such as Maxtor or Western Digital?

Zraick: If we look at breadth of product mix, none of the other competitors can equal the spread that we have. And if we look at the amount of R&D spent on our product and our technologies, again they cannot equal where Seagate is. The net of that delivers a quality of product at potentially a much more effective cost than our competitors. Now that doesn't mean that we're always going to be the lowest-priced player in the market. However, we have much more vertical integration of all the various aspects of hard-drive development. So if you put all of that together, we stand alone as the leader in hard-drive business.

CRN: How does that benefit the system builders?

Zraick: We're giving the average system builder access to our design service center. Our design service center had been the exclusive domain of our largest OEMs. In the service center, they can do all kinds of quality, qualifications testing and technical compatibility testing. They have the support of our technicians. That wasn't available to our average system builders, primarily because a lot of the services that that facility provides were really very pricey. What we've done for our new system-builder program is discounted a whole array of those services by 75 percent.

CRN: There's a lot of concern about how pricing is adversely affected by gray-market activity when it comes to components. Has Seagate done anything to mitigate the effect the gray market has on system builders using new drives?

Zraick: We've put some very strict audit rules and requirements and policing mechanisms to prevent gray-market activity. Any of the distributors or OEMs that move product sideways will get dinged. There'll be penalties attached. There are a lot of controls that we've put in. We started these controls roughly three or four quarters ago, and initially, we did see what you might consider a retaliatory response from the market. They didn't like the fact that they were being constrained from doing business the way they wanted to.

Two years ago, Seagate, like anybody else in the marketplace, was doing the standard quarter-end loading up of the channel. We've completely stopped doing that by implementing minimum and maximum weeks on hand inventory controls. What we've done is we've leveled out all of our product flow. We have no quarter-end stuffing so there's no midquarter dumping going on. We saw a little bit of a dent in our run rates when we first implemented these controls, but we've grown back up again, and in actuality, all of the distributors prefer these controls because it's a lot easier for them to manage their assets. We've taken a leadership position.