The Hottest Technologies

Storage and security vendors dominate CRN Emerging Vendor list, offering higher margins and faster ROI

CRN logo By Steven Burke, ChannelWeb
10:30 AM EDT Fri. Oct. 27, 2006
From the October 30, 2006 issue of CRN
Storage and security companies dominate CRN's Emerging Vendor list of 75 companies delivering high margins for partners by bringing to market innovative, easy-to-use and affordable products that compete with offerings from industry giants.

Thirty-nine percent of the companies on the Emerging Vendor list are storage vendors with products designed to effectively store, protect and manage the ever-increasing blizzard of information from the Web and computer networks of all sizes, while 25 percent are security vendors aimed at stopping the increasing number of security threats, including everything from identity theft to spam and viruses.

> Bumper Crops
(NUMBER OF EMERGING TECH 75 COMPANIES REPRESENTING EACH TECHNOLOGY AREA)
 
STORAGE 29
SECURITY 19
SOFTWARE 7
NETWORKING 7
SERVICES 5
VIRTUALIZATION 4
HARDWARE 2
VoIP 2
Nine percent of the companies are software companies, while only 3 percent of the companies categorize themselves as hardware vendors. That underscores the move by more VARs to sell high-margin software rather than low-margin hardware products. Other hot categories on the list: virtualization, services and networking, which combined accounted for 21 percent of the vendors.

One of the compelling advantages of dealing with emerging vendors, VARs said, is their willingness to make changes to products based on the feedback from partners in the field. That provides more satisfied customers who are looking to solve specific pain points, they said.

In the case of Compellent Technologies, a Minneapolis storage vendor on the list, that meant consulting with VARs and their clients before the product was even designed. "We were one of their first partners," said John Dusek, owner and president of Convergent Storage Solutions, an Apple Valley, Minn., Compellent partner. "We signed up before they had a product. The founders of the company brought in partners and customers and asked for a wish list to build the perfect SAN. Compellent actually built what customers asked for."

Before teaming with Compellent three years ago, Dusek said, a SAN solution from larger vendors might come in at some $500,000 and take five business days to install. That compared at the time with $150,000 for a Compellent SAN that could be installed in one day with a customer fully trained to run it, he added.

One of the advantages for customers buying Compellent is it leaves a bigger portion of the IT budget for services aimed at driving more value, Dusek said. "Compellent is one component of the entire package. Professional services is another 10 [percent] to 20 percent that goes along with the Compellent product. Customers can afford that because they are saving a lot of money. That's very good for our business. The more we interact with our customers, the more we understand their needs and the more help we can give them."

Storage giant EMC often plays the "trump card pretty hard" that no one ever got fired for buying EMC products, Dusek said. Nevertheless, Convergent has been successful selling the Compellent product, he said. "We've been very pleased with the product and the people behind it. Compellent was able to start with a clean slate, while the EMCs and HPs of the world have a lot of legacy software to re-engineer. That is a huge advantage over something that has been out there for five to 10 years," he said.

What unites all the vendors is the more compelling economics they achieve for both customers and VARs when the products are stacked up against the offerings of the industry giants. That means higher margins for VARs and a faster ROI for customers. One reason for the higher margins is these products are not overdistributed. In fact, all of the vendors on the list are recruiting channel partners, with a whopping 52 percent seeking specific vertical or geographic coverage, and 48 percent looking for broad and deep channel coverage. Fifty-five percent of the emerging vendors are bypassing distribution, establishing tight, one-on-one ties with partners.

"Just because a technology is coming from one of the big guys doesn't mean it's good or that it's a fit for organizations trying to protect themselves," said Babak Pasdar, founder and CTO of igxglobal, a Clifton, N.J., security solution provider that partners with Consentry Networks, a Milpitas, Calif., network appliance control (NAC) vendor listed among the CRN Emerging Vendors. "The reason we looked at Consentry is we believe that core security protection is going to be hot. NAC has evolved into its own ecosystem. Cisco doesn't own it."

Cisco may have the most comprehensive solution, Pasdar said, "but it's also extremely complex, and it's an all-Cisco, all-the-time solution. We looked at the other folks out there for something that was robust but could be easily implemented. It's my job within the organization to evaluate technologies on their individual worth rather than branding," he said.

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