EMC had a bit of its dirty laundry hung out with the revelation this week that the vendor invested in one of its solution providers, causing its other VARs to question whether there is an element of channel conflict.
The $4 million investment in MTI Technology, a Tustin, Calif.-based storage-only solution provider and EMC-exclusive partner, came to light when Tom Raimondi, president and CEO of MTI, mentioned it during his company's earnings call.
It is not EMC's first investment in a channel partner. The vendor, along with Compaq and others, invested in StorageNetworks, the biggest startup"and failure"in the storage service provider space.
There are other precedents for investing in solution providers. Distributors, for instance, have been floating their resellers for a long time, said John Murphy, executive vice president of Advanced Systems Group, a Denver, Colo.-based solution provider that counts EMC as a vendor. "But it's not natural," he said.
While distributors such as Avnet and Bell Microproducts have solution provider arms, it is "unparalleled in the industry" for a manufacturer to invest in a solution provider, said Dave Butler, president of Enterprise Computing Solutions, a Mission Viejo, Calif.-based solution provider and EMC partner.
One EMC solution provider, who preferred anonymity, said that, while EMC has really become a good channel partner in the last couple years, the vendor has always tended to work with favorites among their partners, making it difficult to maintain proper competition among its resellers.
Another EMC partner said it is not the first time EMC has invested in MTI. "It's just the first time it was made public," the partner said. "Imagine what other resellers think."
Kevin Hoffman, vice president of sales at Hoffman Technologies, a Sacramento, Calif.-based EMC partner, said he is not too worried about the investment. "They can invest in me," he said.
Hoffman said the investment does bring into question possible channel conflicts. "But it also shows [that EMC is] interested in the channel," he said. "It's a corporatewide philosophy that is changing. There may be conflict. But it may be positive overall for the channel."
EMC's reason for investing in a solution provider is important, said Murphy. "If they're investing to help [the partner] expand its channel sales, that's no good," he said. "But if it's to expand a certain niche or a specialty where no one else is stepping up to the plate, that's different. If they said to MTI, here's $4 million to hire more sales execs and sell more, it's not natural."
MTI officials indicated the investment could go both ways. Raimondi said at the conference call that "EMC is investing in us so we can expand our business."
However, Todd Schaefer, CFO for MTI, told CRN that one reason for EMC to invest in MTI is a mutual focus on information lifecycle management. "EMC's ILM strategy"we fold right in that," he said. "We have technology and sales resources that have grown up around ILM. We can take this complex ILM message to the masses."