Storage Purchasing Strategy: Channel Choices

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In telecommunications, "the last mile" refers to the final leg of delivering phone, Internet or television to the customer. The provider brings solutions from a wide, confusing space with multiple purchasing options, and simplifies and installs it for the customer -- for a price.

Value-added resellers (VARs) and systems integrators (SIs) are kind of like your local cable company. These indirect sellers -- a.k.a. the channel -- take a wide array of services and distribute them to end users. While its role might not be sexy, the channel plays a bigger part in what your company buys for storage and other areas of IT than you might realize.

Let's identify and define the different types of channel players, and the roles they play in the "distribution" (pun intended) of vendor storage solutions.

Value-added reseller (VAR). VARs invariably deliver a broad selection of technologies and solutions from different vendors across some selected geography, vertical market, or both. Successful VARs make their money not only by reselling vendor products and solutions, but also by providing services (the added value) for installing, integrating and supporting those technologies.

Systems integrator (SI). System integrators traditionally do not take title to products and play more of a consulting role, making technology recommendations based on the unique needs of their client. SIs can provide a varying and broad range of professional services: assessments, system design, installation, and ongoing services and support to architect and integrate the solutions into a client's IT environment.

Distributor. A traditional distributor of storage solutions purchases the technologies directly from the vendors at discounted prices and then sells them to VARs, SIs and – sometimes -- to very large organizations. Distributors don't usually wrap much in the way of services or support into their offerings because they rarely sell directly to an end-user organization. VARs and SIs will often buy from distributors; most end-user organizations will not.

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In the case of VARs and SIs, the lines can get a bit blurry. VARs can look a lot like SIs, and SIs can appear just like traditional VARs. It's most important to understand, though, that the main role of both is to be a trustworthy resource to help solve their clients' specific IT needs as they grow and change over time. As a result they have a huge influence over what gets bought by a significant chunk of the market.

So, why doesn't every company, regardless of size or vertical market, just go and purchase storage and other solutions directly from the EMCs, IBMs, HPs, NetApps, Dells, Hitachis and Oracles of the world, especially if they might get a better price? Essentially, why does IT need the channel? Simply put, large, multi-national vendors don't have the time, support staff or bandwidth to properly treat and satisfy, on an individual basis, each organization using one or some of their solutions.

I say this not to point out a weakness or flaw with the major vendors, but rather to illuminate the kinds of problems that the strong VARs and SIs set out to solve. Take the case of an infrastructure failure; using VARs and SIs gives a business "one throat to choke," so to speak, meaning that there's one place to go for assistance. For companies with small -- or no -- IT staff, having a dedicated, knowledgeable team that understands its IT ecosystem and that is trusted is imperative.

VARs and SIs have completely different business models than vendors and IT end users, so let's see what makes these types of businesses successful -- or not.

As with any business entity, relationships are paramount to success. With channel partners, though, managing the relationships they have with both vendors and clients ultimately determines their profit margins, and consequently, the overall success of the business. It goes without saying that it is in the best interests of VARs and SIs to keep their end-user buyers happy with quality products, competitive prices, and top-notch service. However, what's often overlooked is the importance of the vendor-to-partner relationship -- and there's a lot at play in this marriage. Every major vendor makes significant investments in an effort to have a well-functioning, high-performing and diverse indirect sales program. What does that look like, though?The vendor-to-partner relationship is a delicate dance. A vendor such as, say, EMC wants the highest "share of wallet" from each of its partners, with the hopes that it will sell more EMC storage, as opposed to promoting, say, more IBM or NetApp solutions. It's a dance for the partners, though, because VARs and SIs will often opt for the vendor that gives them the best prices -- or is less distributed and hence offers them a way to be differentiated from their competitors -- so that they can turn a bigger profit in the short term.

It's simple business mechanics and there's no way around it; incentive-based discounts and favorable pricing on products are a major motivator for VARs and SIs to carry and sell one particular vendor solution over another.

Another relationship-rattling concern is just how well can each vendor actually equip partners to sell its solutions? If the EMCs, IBMs, HPs and Dells don't do a thorough job arming the VARs, SIs -- and distributors, too -- with the necessary product knowledge and sales tools, then VARs and SIs simply won't work hard for very long promoting products that they don't know how to sell and support.

It can be quite a fragile existence, and a strong vendor-to-partner relationship typically sees the vendor constantly grooming and keeping up-to-date with the successes and challenges of its partners. The best relationships are ones where the partner has everything it needs from the vendor in order to sell to an end-user.

For an end-user that's found the right channel partner, all this sounds great; the vendors and the partners are battling to make your IT life better. To an extent, that's true, but there are a few challenges that a typical IT end-user might run into when engaged with a VAR or an SI.

The first is that you might well end up paying more than if you were to go to a distributor, or even directly to the vendor. This is -- or can and should be -- because VARs and SIs often bundle higher levels of service and support to justify higher pricing. If you don't need the support, and your in-house IT staff can handle integration and maintenance, then you're probably better off going to the distributor or vendor. Although most companies don't have the luxury of a massive IT department and don't have that type of ability, some do.

The next challenge that many VAR or SI engagements entail is that they sometimes don't have the depth of technical expertise to solve every glitch on their own. You have to keep in mind that these resellers' main job is to sell product. Because partners focus on the installation and integration of multiple technologies, the channel partners' relationships with vendors are pivotal, and delivering quality service for the end user is often a matter of just how quickly the VAR/SI can get the vendor to respond and help it solve the problem.

If you're currently mulling over a storage purchase decision, here are some questions to think about before you decide which avenue to take:

-- What are my data center's true capabilities? Do we know what this business or application really needs? Can we handle integrating, operating and maintaining the IT infrastructure?

-- If we can't handle our own maintenance, how vital is my data to everyday operations? Can I afford downtime or disruption? How much or how long? Overall, how much help -- and what sort -- do we need?

-- If I opt for a VAR or an SI, what specific criteria will I use to pick between the myriad of options? Am I looking merely for advice, do I want a long-term partner, or am I simply looking to buy something?

Yes, these are open questions, but even having some specific criteria around how you'll choose a product and a supplier is a whole lot better than a quick Google search under "I need some extra TB"! It might sound trite, but "stop and think" isn't a bad strategy -- and isn't always easy to remember in the headlong rush to get stuff done.

Storage solutions, no matter the vendor, are investments. Just like a car, house or a school for your children, performing your due diligence early can save you headaches. With so many choices of what to do, how to store and whom to trust with partnering for your data needs, it's imperative that you know your own business needs before moving forward. Getting that "last mile" right -- all the time -- is critical to the success of your business.