Resellers Rally 'Round SOX

Remember the speculation a few months back that Sarbanes-Oxley was stalling storage spending (see Another Reason to Hate Compliance)? The theory was, large organizations didnt want to buy new software until they met their initial compliance deadline. Well, a recent survey of enterprise resellers found Sarbanes-Oxley to be much more of a spending stimulus than detriment.

According to equity research firm Robert W. Baird & Co. Inc., 44 percent of value-added resellers (VARs) surveyed said Sarbanes-Oxley helped them last quarter, and only 1 percent said it had a negative impact. The rest said it had no impact on sales.

Baird surveyed 40 VARs with aggregate revenues of more than $4 billion in mid September.

Sarbanes-Oxley was originally considered a boon to storage vendors because it requires organizations to retain more information and have the ability to produce it quickly when audited. But Veritas Software Corp. (Nasdaq: VRTS) and other software companies said sales dropped in June as organizations curtailed spending while concentrating on reaching compliance (see Veritas Rides Earnings See-Saw).

"Sarbanes-Oxley did not have that much impact on overall IT, and almost no impact on infrastructure at all," Baird analyst Dan Renouard says. “There were a lot of fears that it would hurt the market, as companies would delay spending and lock down their systems. Then Veritas missed its numbers and pointed to Sarbanes-Oxley as a major reason why."The VAR survey also indicates that major storage vendors performed similarly in the September quarter to how they did in the previous one. They had a positive outlook for EMC Corp. (NYSE: EMC), IBM Corp. (NYSE: IBM), and Network Appliance Inc. (Nasdaq: NTAP), and low expectations for Hewlett-Packard Co. (NYSE: HPQ) and Veritas. (See EMC Bucks June Swoon, NetApp Nets Plenty, IBM Posts 2Q Results, and HP Storage Slammed.)

When asked who among infrastructure vendors they thought had the best quarter, 38 percent of the VARs chose EMC, 31 percent said IBM, and 16 percent said NetApp. Most of the VARs (53 percent) said HP had the worst quarter, and 22 percent picked Veritas as the worst.

“Clearly, EMC, IBM, and NetApp are executing the best in the field with solid product portfolios and strong momentum,” Renouard says. “Although HP has announced several initiatives to improve, none have been in place to help in September. Veritas continues to receive negative impact from the channel.”

Perhaps the best news for EMC was that most resellers (69 percent) thought Hitachi’s new TagmaStore high-end SAN system would result in moderate share gains, and the rest said it would have no impact on the SAN market (see Hitachi Struts Mr. Universal). Hitachi sent EMC into a tailspin when it rolled out a high-end system in 2000 (see EMC Hammered).

NetApp scored particularly high with large resellers and IBM gained momentum in servers and midrange storage, according to the survey.HP changed executives, rolled out new products, and began hiring back storage sales specialists after announcing miserable financial numbers for the previous quarter (see HP Plots Storage Comeback). It will probably take at least another quarter to start turning things around. When asked to identify major problems with HP, 62 percent of the VARs said sales and marketing, 56 percent chose product weakness, and 49 percent blamed channel policies.

— Dave Raffo, Senior Editor, Byte and Switch