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Storage vendors are letting loose the dogs of war, using new technology, partnerships and channel initiatives to bash each other in an ever-more-intense struggle over nothing less than domination of the enterprise data center.
In one of the latest volleys, IBM is using the virtualization carrot to recruit more partners to sell its storage solutions into small and midsize businesses. This quarter, the company is set to launch a Seed and Grow program aimed at dramatically expanding sales of SAN Volume Controller with an entry-level starter kit that has attractive additional margins for partners. As part of this effort, IBM is turning to the channel for support, creating a $1.5 million program to recruit as many as 650 solution providers via its broadline distributors-Ingram Micro, Tech Data and Synnex.
The IBM partnering campaign is just one of many battles being fought in the channel via new initiatives from a wide variety of companies including EMC, Hewlett-Packard, Symantec/Veritas Software, Hitachi Data Systems (HDS), Network Appliance (NetApp), StorageTek, Computer Associates International, Sun Microsystems and a batch of newcomers including LeftHand Networks.
Partners say that, ultimately, the winners of these market-share battles will be determined by the channel. The vendors can bash each other all they want but they just play into the hands of solution providers, said Mark Teter, CTO of Advanced Systems Group, a Denver-based IBM, EMC and Sun partner. "It gives us a chance to talk to our end-user customers about what the vendors said," Teter said. "It gives customers choices. Sometimes hearing about who is beating up who causes consternation with customers. There are so many partnerships and competing technologies. We're the voice of the customers."
The real battle royale in the storage wars is the one between Armonk, NY.-based IBM and EMC, Hopkinton, Mass. Earlier this month, when IBM bragged about shipping its 1,000th SAN Volume Controller storage virtualization appliance, it used the occasion to blast EMC's virtualization strategy as one that locks customers into EMC hardware and keeps EMC's business model from collapsing. For good measure, IBM also attacked its rival's relationship with Dell as proof of its lack of channel commitment. IBM General Manager Andy Monshaw accused EMC of choosing Dell rather than the business partner community as its partner of choice. "You can't have a channel like Dell and try to use your conventional business partners and hope for no conflict in the channel," Monshaw said. "Frankly, [EMC has] come out publicly and stated that Dell is their preferred choice. So in a time of conflict, they will move to Dell."
EMC immediately countered that it is the champion of open systems, with a virtualization strategy that allows customers to use their existing storage management software, regardless of vendor, unlike IBM. And despite its relationship with Dell, EMC's solution providers are competing quite well, said John Koury, EMC's vice president of channel marketing. "It shows the power of the channel and the appetite of the channel partners that take training, provide value for their customers and provide value locally," he said.
A key reason for all this intensity is flat hardware sales, leaving vendors scrambling for new weapons with which to control the data center. According to research firm IDC, worldwide sales of storage hardware hit $20.9 billion, up 3.2 percent from the $20.2 billion sold in 2003, while storage software sales grew significantly faster, up 16.1 percent to hit $7.9 billion.
Of the top seven hardware vendors, only EMC, Dell and NetApp saw yearly growth. In fact, said Mark Lewis, executive vice president of EMC, all the growth in the market in 2004 came from EMC. He could be right. In the fourth quarter of 2004, EMC, the third-largest hardware vendor, saw its sales rise 13.4 percent over the previous year. Round Rock, Texas-based Dell's storage sales, the bulk of which consists of entry-level and midrange products from EMC, rose 15.8 percent.
That relentless onslaught has meant dwindling share for IBM, HP, HDS and Sun, three of which depend heavily on alliances. HP, Palo Alto, Calif., and Sun, Santa Clara, Calif., have been depending on HDS for their enterprise-class arrays. Sun also OEMs arrays from Dot Hill and builds others using technology acquired with its 2002 purchase of Pirus. Just this month, IBM reinforced its NAS and entry-level SAN business by signing a deal to OEM NetApp's entire line of NAS and iSCSI SAN appliances. The first shots from that deal are expected in the second half of this year. IBM, StorageTek, SGI and Sun, meanwhile, depend on OEM and reseller agreements with a single supplier, Engenio, for a large part of their array business.