Tegile CEO: Being Acquired By Western Digital Creates 'Unprecendented' Vertical Integration, And HPE, Dell EMC Partners Should Get On Board

The Future Of Flash?

The planned acquisition of flash storage vendor Tegile Systems by storage components manufacturer Western Digital is "unprecedented" in the storage market in its creation of value from vertical integration, Tegile CEO Rohit Kshetrapal told CRN.

It will mean big margin opportunities for partners, who will also see the benefit of increased investment in channel incentives as a result of the deal, Kshetrapal said. The Tegile CEO also used the interview to make his pitch to partners of other storage vendors, such as Hewlett Packard Enterprise, which acquired flash storage rival Nimble this past spring for $1 billion. Terms of the acquisition deal for Newark, Calif.-based Tegile, which is expected to close during the week of Sept. 4, were not disclosed.

What follows are the highlights of our Q&A with Kshetrapal about the future of Tegile under Western Digital.

What makes this acquisition significant?

Tegile has built memory-based products for quite some time now. We started developing software in 2010, and launched in 2012. And from that time on to today, we're extremely proud of the systems we have built. We have 1,700-plus customers at this time. And our focus is not only the array itself -- our IntelliFlash product -- we also have an analytics product that runs on our arrays that provides reporting. And that's IntelliCare. And so to us, as we looked at Western Digital as the place to be, the partnership with them has been many years now. Over the course of that, we've been using their components, and as we've been using their components and working with them, we felt that the value of the systems integration would be unprecedented in the marketplace. So all the way from memory manufacturing, to having an array fully produced and created by the entity Western Digital. And so this gives us unprecedented vertical integration in the marketplace. That's the overall value. And if you look at this, it allows us to continue to invest in sales and marketing and to grow our business. All 300 employees -- with the exception of some finance G&A aspects, which are fairly normal in these kinds of transactions -- everything else is moving to Western Digital at this time.

What are the implications for channel partners?

From a channel perspective, this allows us to significantly invest in the channel that we already have, as well as look at other channel providers that are now having to deal with multiple lines -- whether it's a Dell EMC, whether it's an HPE. And in comparison, here is a vendor that specifically has one product line, and has all the wood behind that arrow, to scale it with the best economics. And this allows us to invest further in channel marketing, as well as increase our channel trust, and bring over channels that may be disgruntled with the recent other acquisitions that they have seen. Nimble went to HPE recently -- and that channel, some will go do business with HPE, and others have not done business with HPE. That allows Tegile as a Western Digital brand to really expand upon that.

So Western Digital doesn't have any sort of flash product that's comparable to what you're offering? And the Tegile brand will continue?

We are the systems business for performance. They have an object store offering -- there are no performance offerings. It's Tegile as a Western Digital brand, just like SanDisk is a Western Digital brand, and others are.

What opportunities for partners could result from the acquisition?

The biggest aspect here is the investment. ... Tegile has built a great product, but our team size is small. And when you look at it from that perspective, we are the one that had the least funding in comparison to our peer group. Now we get to take this product line and expand into the channel much more than we've ever been able to do. We're also able to provide the right economics, unlike others, because of the unprecedented systems integration value. And that is transferred both to the channel and to the customer.

Is there any overlap between your partner community and Western Digital's partners?

None whatsoever. If you look at it, today the bulk of their business is components. They produce more than 50 percent of the world's storage. And with that, the focus for them has been OEMs as well as the cloud providers. They do have a software business, which started a few years back, with the object store -- which to date has not been channel-driven, it's a direct model. And so now the performance products that have always worked with the channel will continue to work with the channel, and increase the investments in channel.

So will you keep your channel program intact the way it is right now, or will there be any changes?

We'll actually expand upon it. Whether it's the channel or customer, there's no confusion, unlike [with] most of the other vendors. ... HPE is still resolving Nimble -- where 3Par sells and where Nimble sells. Dell EMC is the biggest challenge. There you've got multiple products -- sometimes you've got XtremIO, sometimes you've got DellCompellent, sometimes you've got Unity. That's not what's going on over here. We have one product built from the ground up to go attack the market.

What specific investments will you be making in channel efforts?

Incentives for the channel through MDF, through joint dollars spent on marketing otherwise, through investments in NFR [not-for-resale] units. NFR units are trial units, which we provide to partners at cost. That to us becomes an investment in the channel with product. And they're able to demonstrate [those units], and they're also able to run their own businesses on those -- they're able to be experts on the systems as well.

Not only will you see no changes [in the channel program], but you're also going to see further investments.

Are you fully channel-driven? And are you recruiting partners?

We are 100 percent channel. That's always been our belief. From the ground up, if you look at our exec teams, if you look at our sales teams, they all come from storage players with channel DNA. We don't do business without the channel, and that's the philosophy that we have had right from the very beginning. You cannot be schizophrenic -- either you're channel or you're not channel.

We have about 500 channel partners right now. We are being very welcoming to other channel partners that are disgruntled with the choices that the marketplace is giving them. We have active campaigns to recruit those channel partners.