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Storage hardware sales are also holding up -- for now -- for Alliance Technology Group, a Hanover, Md.-based solution provider.
"Right now, everything looks all terrific," said Hope Hayes, president of Alliance. "But every time I pick up the paper, someone's closing or laying people off. We've had some clients buy less, some buy more, but we've picked up new clients because a couple of our competitors are dying on the vine."
Hayes said that Alliance's business is still expanding, and that it is currently looking to fill several open positions. And, because of the difficulties many solution providers are having with their business, there are a lot of sales reps with good client bases looking for work, she said.
Minneapolis-based Datalink, one of the few publically-listed regional solution providers, in early February reported that tight customer spending, especially on new products, caused its sales and earnings to drop during the fourth quarter compared to last year.
Yet while product revenue dropped 14 percent year-over-year, services revenue rose 10 percent as customers looked to do more with existing storage infrastructure, the company reported.
Scott Robinson, Datalink CTO, said fourth-quarter results reflected tight budgets among customers even as they collected and stored more data. They are adopting specific technologies such as data deduplication and server virtualization to increase storage efficiency, he said. "Customers are hunkering down," Robinson said. "But they are looking at efficiencies."
In 2009, Datalink expects services revenue to continue to grow faster than product revenue, and software sales to grow faster than hardware sales. And whether hardware sales even grow this year is an open question, Robinson said.
Even though services-oriented storage solution providers are doing well, storage hardware vendors have painted a bleak view of their business.
On the storage systems side, IBM reported a 20 percent drop in its storage business, while Hewlett-Packard recently reported a 1 percent drop in its enterprise storage and server business. NetApp reported a drop in hardware sales, which more than offset its growth in software and services sales. Meanwhile, EMC reported a 4 percent increase in storage systems revenue and a 3 percent drop in storage software revenue.
As a result, many hardware vendors, including IBM, EMC and Seagate, are restructuring and laying off personnel.
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