Storage Wars: The Force Is With The Channel

In one of the latest volleys, IBM is using the virtualization carrot to recruit more partners to sell its storage solutions into small and midsize businesses. This quarter, the company is set to launch a Seed and Grow program aimed at dramatically expanding sales of SAN Volume Controller with an entry-level starter kit that has attractive additional margins for partners. As part of this effort, IBM is turning to the channel for support, creating a $1.5 million program to recruit as many as 650 solution providers via its broadline distributors-Ingram Micro, Tech Data and Synnex.

The IBM partnering campaign is just one of many battles being fought in the channel via new initiatives from a wide variety of companies including EMC, Hewlett-Packard, Symantec/Veritas Software, Hitachi Data Systems (HDS), Network Appliance (NetApp), StorageTek, Computer Associates International, Sun Microsystems and a batch of newcomers including LeftHand Networks.

Partners say that, ultimately, the winners of these market-share battles will be determined by the channel. The vendors can bash each other all they want but they just play into the hands of solution providers, said Mark Teter, CTO of Advanced Systems Group, a Denver-based IBM, EMC and Sun partner. "It gives us a chance to talk to our end-user customers about what the vendors said," Teter said. "It gives customers choices. Sometimes hearing about who is beating up who causes consternation with customers. There are so many partnerships and competing technologies. We're the voice of the customers."

The real battle royale in the storage wars is the one between Armonk, NY.-based IBM and EMC, Hopkinton, Mass. Earlier this month, when IBM bragged about shipping its 1,000th SAN Volume Controller storage virtualization appliance, it used the occasion to blast EMC's virtualization strategy as one that locks customers into EMC hardware and keeps EMC's business model from collapsing. For good measure, IBM also attacked its rival's relationship with Dell as proof of its lack of channel commitment. IBM General Manager Andy Monshaw accused EMC of choosing Dell rather than the business partner community as its partner of choice. "You can't have a channel like Dell and try to use your conventional business partners and hope for no conflict in the channel," Monshaw said. "Frankly, [EMC has] come out publicly and stated that Dell is their preferred choice. So in a time of conflict, they will move to Dell."

EMC immediately countered that it is the champion of open systems, with a virtualization strategy that allows customers to use their existing storage management software, regardless of vendor, unlike IBM. And despite its relationship with Dell, EMC's solution providers are competing quite well, said John Koury, EMC's vice president of channel marketing. "It shows the power of the channel and the appetite of the channel partners that take training, provide value for their customers and provide value locally," he said.

A key reason for all this intensity is flat hardware sales, leaving vendors scrambling for new weapons with which to control the data center. According to research firm IDC, worldwide sales of storage hardware hit $20.9 billion, up 3.2 percent from the $20.2 billion sold in 2003, while storage software sales grew significantly faster, up 16.1 percent to hit $7.9 billion.

Of the top seven hardware vendors, only EMC, Dell and NetApp saw yearly growth. In fact, said Mark Lewis, executive vice president of EMC, all the growth in the market in 2004 came from EMC. He could be right. In the fourth quarter of 2004, EMC, the third-largest hardware vendor, saw its sales rise 13.4 percent over the previous year. Round Rock, Texas-based Dell's storage sales, the bulk of which consists of entry-level and midrange products from EMC, rose 15.8 percent.

That relentless onslaught has meant dwindling share for IBM, HP, HDS and Sun, three of which depend heavily on alliances. HP, Palo Alto, Calif., and Sun, Santa Clara, Calif., have been depending on HDS for their enterprise-class arrays. Sun also OEMs arrays from Dot Hill and builds others using technology acquired with its 2002 purchase of Pirus. Just this month, IBM reinforced its NAS and entry-level SAN business by signing a deal to OEM NetApp's entire line of NAS and iSCSI SAN appliances. The first shots from that deal are expected in the second half of this year. IBM, StorageTek, SGI and Sun, meanwhile, depend on OEM and reseller agreements with a single supplier, Engenio, for a large part of their array business.

INTENSE RIVALRIES
Solution providers are feeling the pull as vendors court and coerce them.

Dan Carson, vice president of marketing and business development at Open Systems Solutions, a Yardley, Pa.-based storage solution provider, said his company is navigating the battlefield between EMC and StorageTek. "It gets discussed at every meeting, with one saying we should be exclusive to them or do more with them," he said. "There are some tempting offers, which I can't discuss here."

Even more intense are the rivalries in the tape space, especially between StorageTek, Louisville, Colo., and Redmond, Wash.-based ADIC, said Carson. "StorageTek and ADIC have tremendous animosity toward each other. They'll do anything to get business from the other," he said, adding the way to handle it is to be vendor-agnostic. "We go in and look at what's best for customers."

Another intense rivalry is between EMC and Santa Clara-based HDS, said one solution provider. "Neither knows we sell the other," the solution provider said. "If they did, they'd cut us. Well, they probably know. But they don't care so much as long as we close deals."

It's the same with EMC and NetApp, the solution provider said. "We stay low. We really represent us, not the vendors. With a few exceptions, we don't wave any flags high. The vendors want us to lead their charge. But as a successful integrator, we can't do that. We have to be discreet."

The trick, the solution provider said, is to make each vendor think you are working only with them. "The only way to do it is to close a lot of deals for them. So with a large line card, we have to keep busy. The key is, are you selling the vendor? If not, they think you are selling someone else."

Tom Raimondi, president and CEO of MTI, a solution provider that does about $100 million with EMC annually and in which EMC has an equity stake, has a simple view of the storage wars. "Whenever one company starts talking bad about another company, it's FUD," Raimondi said. "The guy who screams louder has nothing to sell. It's a classic strategy. When you're not at the top of your game, scream the loudest." But back to the battle royale.

In the next several months, IBM plans to turn up the heat on EMC with a new version of its SAN File System virtualization software which, for the first time, will include support for tape systems, an important volley aimed at putting a hole in EMC's information life-cycle management strategy. IBM also plans to upgrade its SAN Volume Controller two more times this year. EMC says IBM is overplaying its virtualization hand, citing its shortcomings when it comes to heterogeneous storage environments. "If I were in IBM's position and losing market share, I would go after the market leader, too," said Koury. "That is what they are doing. EMC fears no one in this space."

This week, EMC is rolling out a new high-end NAS gateway in its Celerra line. The company also plans to update its DMX line of enterprise-class arrays and unveil a midrange version of its Centera compliance appliance. In addition, it plans to extend its information life-cycle strategy with a number of new integrated product suites this year and to implement a single unified console for all its storage software suites over the next 18 months.ARMED WITH NEW ALLIANCES
On another front, shifting alliances, either through reseller or OEM deals, have become key weapons for many vendors, as shown by the new OEM deal between IBM and NetApp, Sunnyvale, Calif. In another alliance, Cisco Systems signed deals to resell EMC NAS appliances. The San Jose, Calif., company may be looking to sign a deal to resell entry-level SAN arrays from EMC as well, according to a recent report by RBC Capital Markets. Those moves might benefit its competitors, Brocade Communications Systems and McData, as EMC's rivals back away from Cisco, RBC said.

HP, meanwhile, continues to battle its rivals on multiple fronts. Mark Gonzales, vice president of enterprise storage and server sales, said the Palo Alto, Calif.-based company next month plans to enhance its midrange EVA array, making it easier to use in multivendor and multi-OS environments. Those changes, along with new virtual tape appliances, new iSCSI arrays and the StorageWorks Grid, are scheduled to be rolled out at HP's Americas StorageWorks Conference in mid-May, said Gonzales.

Since EMC's acquisition of Legato nearly two years ago, it and Veritas have become the bitterest of rivals. That rivalry spawned an alliance between Veritas and NetApp against their common foe over the past 12 to 18 months, with several projects in the works to integrate Veritas' Net Backup software and NetApp's NAS appliances and Snaplock software, said Jeremy Burton, executive vice president for data management at Veritas, Mountain View, Calif. "We want to see less and less EMC hardware and software," he said.

Veritas, which is being acquired by Symantec in a $13.5 billion deal, is also making a push in the disk-based backup space with new software optimized for this area, said Burton. Once the deal is done, Symantec, Cupertino, Calif., expects to reinvigorate its channel push by putting its own managers in charge of channel sales for the combined company while letting Veritas people handle direct sales, Symantec CEO John Thompson said last week at a storage conference.

In addition to solidifying partnerships across the industry, NetApp is arming itself through this month's acquisition of Alacritus, which develops virtual tape library software. The company is also focusing much of its R&D on storage virtualization and information life-cycle management, said Chris Bennett, senior director of product management. For instance, NetApp recently introduced its V-series appliances, which allow the virtualization of both block and file data in a single device, and last week demonstrated what it called the first-ever third-party virtualization of EMC storage.

HDS, meanwhile, last week unveiled additions to its software to allow movement of block-level data across multiple storage tiers with no disruption in operation, said Jack Domme, vice president of storage management software. By the end of this year, that movement is expected to be automated according to customer policies, Domme said. Next is to migrate data across multiple tiers on a file-by-file basis, no mean trick when there are hundreds of Tbytes to move, he said.

For its part, Sun last week enhanced its StorEdge 6920 array with synchronous and asynchronous data replication, the creation of up to three mirrored copies of data, and the ability to connect HP and EMC storage arrays behind it into a virtual storage pool. And it is investing in a project aimed at clustering storage in such a way that uses meta-data to enable the efficient searching of large pools of data.

CA, Islandia, N.Y., is pushing against Veritas and EMC by integrating system management, data backup and security into a single Total Protection Suite for the SMB and enterprise space, said Jim Geronaitis, vice president of product marketing at the company.

StorageTek, which last week became one of the first vendors to introduce a 4-Gbps Fibre Channel array, is looking to double the number of U.S. strategic solution providers to about 40 this year, and plans to offer its partners more robust professional services offerings, said George Karabatsos, vice president of reseller sales and marketing. Also on tap is a new set of certification classes, he said.

So as vendors unleash their new storage products and programs, solution providers stand poised to crown the winners. "In the extremely competitive enterprise storage market, manufacturers are looking to channel partners to beat the competition," said Larry Gross, director of enterprise storage at Technology Integration Group, a $222 million solution provider that partners with EMC, IBM and HP. "We at TIG are excited to take advantage of that."

STEVEN BURKE contributed to this story.