Adding A Storage Service Provider To Your Toolkit

The storage service provider (SSP) market has grown significantly during the past year, with some estimates placing the size of the industry at 50 companies or more. With the cost of storage now consuming as much as 50% to 75% of a company's IT spending, many users are beginning to look at outsourcing their storage requirements to an SSP. Now might be a good time for VARs to consider grabbing a piece of this growing business.

Partnering For Additional Revenue
For VARs considering offering customers storage on a utility (pay for what you use) basis, Greg Mangold, director of new business development for Boulder, CO-based Creek Path Systems, believes partnering is the way to go. "Some VARs would like to just do it themselves," he said, "but it's a large undertaking. What's involved here is much more than knowing how to put together a SAN. It's running an entire service business."

If you want to get into the business, Mangold believes the first step should be to partner with someone who is already doing it. "You should partner with an SSP or something that smells like an SSP, such as IBM Global Services."

Mangold feels this type of agreement makes sense for both the VAR and the SSP. "Whether we are talking about the large SSPs or smaller ones just getting into the market, one of the things these companies don't have is a large sales force. Even a VAR who just sells large storage boxes will occasionally come across a customer who says the box is too expensive. That is the time to sell that customer a storage utility service."

Moving Beyond Lead Generation
When striking agreements with SSPs, Mangold recommends that VARs do more than just pass along leads. "Get more involved in the transaction," he said, "and definitely close the sale." Mangold believes VARs should buy bulk service level agreements (SLAs) from an SSP and then resell them with a markup. "That gets you involved with the program," he said. "For VARs that offer value- added services, there are additional opportunities. When selling the SLAs, try and add your own SLA onto it. Off-site tape archiving is a good example."

Geoff Sinn, president and COO for Durham, NC-based Arsenal Digital, agrees that VARs should team up with an SSP, or even multiple SSPs. "Selling storage on a utility basis is a very different business model than just reselling hardware," he said. "If you want to get into this business, and you want to do it quickly and in the right way, then talk to an existing SSP and put partnering agreements in place. The best way to do this is to find an SSP that has the same mindset that you do, as well as expertise in the hardware that you are reselling."

Sell Or Refer?
Unlike Mangold, Sinn does not believe that purchasing SLAs is the way to go. He recommends VARs go with more of a referral-type program. "I don't think VARs would want to resell SLAs," he said. "I just don't think they would want to be that involved in it." He instead recommends that a VAR decide what SSP to refer to, and work out the details with it. One question that will need to be answered is whether the VAR will keep a lead role in the sale, or just hand it off and let the SSP handle it. There should also be some type of agreement on the payment structure, and whether it will be a one-time payment or stream of payments. "Most VARs will probably want the money up front rather than over the term of the contract," said Sinn. "We are very flexible and are willing to look at both options. It can be an up-front payment at some predetermined discount or a sharing of the revenue at an agreed amount per gigabyte."