Last month, Quantum said it plans to acquire Advanced Digital Information Corp. (ADIC) for $770 million, forming the third-largest independent storage vendor after EMC and Network Appliance. While the acquisition has yet to close, Quantum Chairman and CEO Rick Belluzzo and Vice President of Worldwide Marketing Rob Pickell talked to CRN Senior Editor Joseph F. Kovar about the new role Quantum will play in the industry and the channel.
CRN: After the merger, how many direct sales reps will Quantum have?
Belluzzo: North of 300. Two-thirds from ADIC, one-third from Quantum.
CRN: Given that, how are you going to keep a focus on the channel as you essentially triple your direct sales force?
Belluzzo: It's not really a direct sales force. It is about having a sales presence that works with partners to win business and service customers, and not lead the relationship but be an integral part of it.
Pickell: There's always a lot of confusion around direct vs. indirect. [Our two companies' business is] actually almost all indirect, but I think the difference is what we call "direct assist." What we mean by that is, taking direct responsibility along with our channel partners to go out and find end-user business. But the intention is to develop that business with our channel partners. I think that's our model, and ADIC has taken it to a model with more scale. They described their model almost the same as we describe ours. They like to talk about their direct-assist, channel-oriented salespeople out working their network. And their network is their channel partners and their industry partners. That makes a ton of sense in contrast to the system OEMs, where by the very nature of their presence in the end users' sites they're going to have the inherent ability to know more where the business is. In some ways, we work a whole lot harder to get in front of that business and get a shot at it.
CRN: Will your distribution channel change?
Pickell: ADIC's model, as they moved their focus up-market and into the data center, had changed quite a bit the last couple of years. They've actually built their go-to-market strategy and even their manufacturing strategy in a way that distribution is significantly less at its core. For example, their most recent product launches, the i500 and their i2000, are configure-to-order products. The intention is to work with the VAR to sell the deal and then fulfill it directly with the VAR. They built their business around that model. As we look at the overlap with our distributors and ADIC's, there's actually a 100 percent overlap, and we're the superset. So there's not the classic situation where we work with these four guys and they work with those six and two of them overlap and then suddenly we have too many.
CRN: Have you started talking to legacy ADIC channel partners who do not carry Quantum about how to come into the Quantum channel program?
Belluzzo: What we're going to need to do for both companies is have a vehicle for us to converse with ADIC partners, our partners, and combined partners, and have them advise us on how to move forward. I think it would be great to create in some ways a body of partners that can give us advice on how we should evolve things.
Pickell: Think about those three buckets. With non-ADIC partners, we've talked to them a lot. The second bucket is partners who sell both, and there's quite a few of those. The position of Quantum vs. ADIC has evolved over time. They can come to the table and talk very eloquently about how we approach the business compared to ADIC. The pure ADIC partners, we're still aggressively in competition with [them]. That's the last group [we can] go to, for obvious reasons—but [it's] a very important group.
CRN: Is Quantum going to have a program to reauthorize ADIC-only partners, or are you going to grandfather them into the Quantum program?
Pickell: I think the vision is: It's not legacy Quantum, it's not legacy ADIC—it's future Quantum. I don't think there's any big vetting process for somebody, or some new screening where there are winners and losers. I think we need to describe to the partners, 'This is what the new program looks like going forward, and here's our expectations of you, and here's our commitment to you as well.' And my guess is that the vast majority of the collective partner base will map into that new program very cleanly.
CRN: As you look at what you expect the next phase of your channel to look like, are you happy with the number of partners and type of partners you have now?
Pickell: In the volume part of the channel base, more is OK. We probably have 6,000 or 7,000 registered partners on a global basis, and if that number goes up to 7,000 or 8,000, that's fine. These are the guys who sell opportunistically quarter in and quarter out, and you want almost as many of them as you can work with in some ways. If you look at more of the enterprise level, we've invested in working with partners to enhance their capability to add value, to approach a situation where they're helping an end user scope whatever their particular need is, and matching it with the right class of solution selling. So to the extent of 'we want to evolve', we can never have enough of that type of orientation among our high-end partners.
CRN: Quantum has gone through a series of acquisitions in the past few years. Is Quantum still looking to acquire? What would fill out your vision of the future?
Belluzzo: The ADIC acquisition is the most important. That will keep us busy for some time getting it right. What we end up with is this [total] $1.2 billion storage company with a good global presence, lots of resellers, a lot of sales. We really have critical mass around the storage infrastructure. If there's anyplace where we would look to continue to expand our portfolio, it's more in the software and disk-based backup, new solution areas, than it would be in tape products. Having said that, I wouldn't expect anything soon, because we are focused on ADIC.
Pickell: With the ADIC transaction, where we have the size of the channel and direct-assist sales force we're talking about, we can start thinking about going out there and doing similar things that some of the mainline companies like EMC and [Network Appliance] and others have done, being able to go in and fill out pieces of their technology through acquisitions and then quickly monetize that.
Belluzzo: If you don't have a strong go-to-market footprint, those transactions are hard to move forward because we may get some new technology but ultimately we can't put it in a form that expands the opportunity. It's hard to make it work. We clearly could have gone out and looked for some solutions that were technology-oriented. But we feel that the important first step is to do something that is consistent with our business that increases our go-to-market footprint. Especially in this environment, where companies don't want to do business without unproven startups.
CRN: What can we expect from Quantum for the rest of 2006?
Pickell: One of the areas that we're most excited about is the ability to very aggressively move forward in our nontape portfolio—being able to expand our backup and recovery and archiving solutions outside of our core tape business. This is an area where we think the ADIC/Quantum intellectual property, engineering resources and services infrastructure will be extremely synergistic. The goal is to be able to develop an overall code base portfolio that allows us to build on our core backup and recovery tape business into new solutions areas like disaster recovery, operational recovery, and compliance and retrieval.
CRN: How is the competitive environment changing with your upcoming acquisition of ADIC and Sun Microsystems' acquisition of StorageTek?
Belluzzo: The most significant change that occurred in the market was the acquisition of StorageTek by Sun, which took a large, heterogeneous, independent player into a particular systems company. In backup, recovery and archiving, especially with tape products, HP has its own vertically integrated business, IBM has its own vertically integrated business, now Sun has its own vertically integrated business. We think the world needs an independent player with scale. That's what we tried to do. With the acquisition of ADIC, we think we now will have the critical mass to do that, to be the company that's so focused on these segments during this environment of change that we can innovate and change and bring more scale so that ultimately we succeed and gain share because we're able to innovate in these areas.
Pickell: As much as we talk about the importance of taking our business beyond tape, at the same time I think we have to reaffirm our commitment to making sure we're showing the thought leadership around where tape really has the strongest value proposition. As a strong, independent player, where our future still absolutely rests on the viability of tape, we need to be very clear to define, for the market, where tape fits in, because there are lots of larger players that can live with or without tape, depending on their businesses. For them, it's not a strategic critical factor, where for us it absolutely is.