NEC Exec Sets Sights on Server Rivals

While Hewlett Packard, Dell and IBM continue to slug it out over the lion's share of the server market, NEC has quietly been recruiting channel partners as part of a plan to leverage unrest in the channel to gain market share. Another key part of that strategy is to offer systems that feature fault tolerance at prices that rival standard server offerings from IBM, HP and others. Leading that effort is Larry Sheffield, senior vice president of the NEC Solutions Platform Group, who joined NEC last year after working for Silicon Graphics and IBM for more than 28 years. In an interview with CRN Editor in Chief Michael Vizard, Sheffield talks about what NEC has accomplished since it began its channel push in the U.S. 10 months ago and what it hopes to do next.

CRN: How do differentiate NEC in the server market?

LS: The market that we're after is not one that I would call a commodity play. We are trying to differentiate ourselves with our server technology and hopefully applications provided by our channel that are more mission critical to business. The market today has not fully embraced fault tolerance or high availability. One reason for that is because of the perception of cost, which we now have a solution for. Our dilemma is people don't know we're there.

CRN: What's driving the changes in awareness of the need for fault tolerance?

LS: I think the biggest thing that changed awareness is 9-11 and the need to be able to regroup and rebuild your business very quickly. I also think that the customers are starting to demand that they have for more and better availability than what they're getting currently.

CRN: People have been talking about fault tolerance for years and it's always been a niche market. Why was that the case then and what's different now?

LS: It was too complex and people just couldn't understand it. A lot of that perception has changed. And NEC as a technology company has a reputation that's beyond reproach. We're being pulled into the marketplace because of our outstanding the technology.

CRN: What role does the channel play in your strategy?

LS: We're backed by a $40 billion company in the US. But we don't have the presence or market share that NEC has in Asia where there are 40,000 NEC employees, they have 5,000 people in sales and they very easily can get away with having a direct model with their customers. In the US, because of the complexity and the need to catch up with IBM, HP, Sun [Microsystems] and others, we've decided to fully focus on the channel in order for us to be successful. We're making progress with the channel but we've got a long way to go.

CRN: In light of the viscous price war that is on in the mainstream market, why should VARs consider NEC as an alternative supplier?

LS: Because of our higher value and differentiation. And then the other big piece of the equation where we greatly differ from our competition, whether it be Dell, HP or IBM: we don't compete with them for the services business. We believe that they can increase their margin by doing business with us. The message is you'll make more money off an NEC transaction than you ever could off of any of our competitors. We don't compete at all against our partners.

CRN: What do you emphasize when competing with Dell specifically?

LS: We start talking about the total cost of computing and what are the true costs that a business will have to undergo if they buy a clustered kind of system vs. fault tolerant technology. We also talk about the number of licenses that you may need for your operating systems, the training, the complexity and what happens when there really is downtime.

CRN: What did you learn at IBM regarding channels that you can apply to NEC?

LS: I was involved with IBM at the channel when we started calling people third party programmers. I was part of that at IBM and I was part of using direct versus indirect and the channel conflict that sometimes we created. But that said, I think IBM does probably one of the best jobs with the channel as relates to servers. There isn't any reason for me to go out there and create channel conflict. I want to build channel loyalty--if there's such a thing as channel loyalty. I want that kind of strategy.

CRN: What kinds of investments is NEC making to back that up?

LS: I think they've invested in this space probably $100 million already and don't plan on leaving. NEC up until now has been a Japanese company that really vied to do business internationally and only 20 [percent] to 30 percent of their revenues come [from] outside of Japan. In order to grow the business, you've got to be in the U.S. and you've got to have significant market share. NEC understands that. They want to go from conducting business internationally to really being a global company.