IBM Targets EMC With Storage Plans

Andy Monshaw, general manager of IBM Storage, spoke with CRN Editor In Chief Michael Vizard, CRN Editor News Steven Burke and CRN Senior Editor Joseph F. Kovar about the company's bid to go after storage giant EMC, IBM's virtualization software push and other issues surrounding IBM's storage business. Below are excerpts from the interview.

CRN: Talk about the difference between IBM's partner strategy and EMC's partner strategy.

Monshaw: How do we go after EMC? First of all, just from a strategy standpoint, IBM is all about information on demand. It is not about piece parts. It is an end-to-end, information-on-demand strategy. Second, we have a strategy that is open and EMC is proprietary and closed. Our virtualizaiton technologies encompass heterogenous environments. EMC's are on EMC environments. EMC makes about 80 percent of their revenue dollars on the hardware side. They make about 65 percent of their profit inside of copy services. Now you can't unlock and open up copy services if you are EMC because the business model will collapse. This is the issue, and this is where I think going forward we have got the advantage here because we are willing to work with more vendors for our customers to keep it open and give them choice.

How do we go after EMC with the help of our business partners? First of all, EMC has clearly chosen Dell as their business partner. We have chosen the IBM business partner community as our business partner. You can't have a channel like Dell and try to use your conventional business partners and hope for no conflict in the channel. Frankly, they have come out publicly and stated that Dell is their preferred choice. So in a time of conflict, they will move to Dell. And we have seen this with lots of partners that we talk to that deal with EMC: One day they are in favor, one day they are not in favor. We have tried very hard here to be in a steady cadence of increasing the synergies with our partners and increasing our partners' margins.

CRN: Talk about the new initiatives you have regarding partner engagement.

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Monshaw: We have a number of initiatives we have launched this year to further enhance the work with our business partners. The first thing is we have come out with something called SystemSeller, which is packaged offerings for the channel where there is guarantee on how much money there is for the partners. We started out doing some stuff through the xSeries channel with the 300 and 400, our low-end offerings, and we are rolling it out across a set of midrange offerings as well as some tape [products]. The second thing is we have gotten an overwhelming response here at IBM with the bid-certification [or deal-registration] process that was done with the pSeries that basically allows for more margin for us and more margin for our partners. That was very successful in the pSeries and [so] we launched it on the high-end storage [products]. The moment that a product kicks into special bid we certify the partner that will get the margin. That partner keeps and carries the margin on that box. You reduce in-the-field conflict. It allows the partner to invest some of that margin back in the business. Third, and really important to our customers, we are doing a lot more teaming around Tivoli. We have launched combined offerings with storage and Tivoli. The go-to-market makes a lot more sense. The offerings are more unified for a partner.

Probably the biggest announcement we had at PartnerWorld is the new data-retention and compliance centers around a product we call the DR550. It is our data-retention solution. What is important here is that it combines the strength and solutions expertise of our partners with our product offerings. We will be certifying applications on the DR550. We already have 11 centers and we will go to about 30 centers worldwide where people can come in and test and certify data-retention and compliance applications.

CRN: What is holding back virtualization and what is going to kick-start it in 2005?

Monshaw: IBM has been in the virtualization game for 35 years. We have been in the virtualization game a long time. It is not about virtualizing proprietary disks. That is not what this is about. This is about giving the customers a choice of what vendors they want. Let the vendors slug it out on speeds and feeds and performance and copy services characteristics and things like that. Give them the opportunity to manage the data centers they want and then bring that management up to a much higher level, which is the systems level. I think that this year is kind of the turning point for virtualization, and we really believe that virtualization will do for the storage market what Linux did to the server market. CRN: EMC has its Storage Router and is saying that what you really want to do is come up with a piece of software that sits on top of your existing hardware that can manage not just EMC but other environments. What is your response to that?

Monshaw: First of all, just for grins ask them if this thing is being sold through partners. [Editor's note: EMC has conceded that its Storage Router will initially be sold through EMC's direct-sales force and will expand over time to the channel.] The second thing and, more importantly, take a look at the deployment of this and I have been through this in a level of detail. They have done nothing to unlock the proprietary copy services. This is yet one more way of keeping a stronghold on the customer's data and copy services. When this is all said and done I think this will be used by some large enterprises that are all EMC shops and don't want to deviate from that. Other than that, I don't think this is a particularly robust offering. It has a lot of limitations and it has some serious single points of failure as I understand it with the metadata files.

CRN: Can you talk about how many partners in the United States will be selling the virtualization software?

Monshaw: It is available to be sold through all partners. I think you would be hard-pressed to find a partner if you called them on your own that does not think this is a fantastic offering. It scales up to the largest of large enterprises. We actually have a new program we are running called "seed and grow." That is an entry-level SAN Volume Controller offering with 2 Terabytes of capacity on it, which is kind of what we call a starter set. We are going to get this out to as many partners and as many accounts as we can. There are some very, very attractive partner incentives for doing this. We are in the process of launching this in the next couple of weeks.

CRN: Will you try to go in and recruit EMC partners?

Monshaw: Absolutely. Customers are demanding this choice. Eighty percent of the cost of storage is not in the hardware. It is in all the administration and everything built around it. The idea of ripping it in or ripping it out in either direction is kind of a fool's errand. You bring in virtualization and then you allow for some flexibility on what hardware comes in and comes out.

The dynamic that we are going to see is that Dell historically formulates strong partnerships with people and then takes those partnerships direct. We saw that happen with printers and we saw it happen on some other stuff that Dell has worked on for the last couple of years. I think there could be some mass confusion in the marketplace between whether or not the go-to-market with Dell is going to continue and/or they try to take some of these relationships direct and bypass EMC. Dell has declared that storage is a good marketplace for them. At some point in time between EMC, Dell and business partners, somebody gets squeezed out.

CRN: What exactly is the IBM Storage virtualization product?

Monshaw: There are many. There is SAN Volume Controller, SAN File System, Virtualization Engine across all the systems.

CRN: Do these products run on IBM hardware?

Monshaw: They run across heterogeneous hardware.

CRN: Do I have to buy a new array to take advantage of this capability or does it layer in on top of existing arrays?

Monshaw: It layers in on top of existing arrays. I think in this market there will be many implementations of virtualization and there will be a home for each implementation.

We have been pointing to virtualization for as long as I have been associated with storage, which is the last five years. The reason that EMC can't have virtualization take off in their accounts is because it unlocks the business model. It is that simple.

CRN: What is the average selling price on the virtualization engagements?

Monshaw: I'd say about $70,000. By comparison we understand the list price of EMC's offering to be about $200,000 to $300,000.

CRN: IBM is recruiting storage solution providers through the volume distributors Ingram Micro, Tech Data and Synnex. Are the IBM virtualization products a good opportunity for small- and medium-business-focused solution providers?

Monshaw: The answer is yes. We need to get our storage offerings running through these channels. As you know, we have been historically weak in the volume distribution channel. And SystemSeller is going to do that. SystemSeller clothed with SVC [San Volume Controller] and to some degree San File System [SFS], but not as much, will allow them to make a lot of money in this space and will help us in kind of mass deployment of this.