Cut Costs Out Of Selling Storage

A study by Info-Tech Research Group shows the data storage market is on pace to grow 35% by the end of 2005. While this statistic is evidence of a healthy industry, storage VARs are sorely mistaken if they think this growth will translate to easy sales for their businesses. The strength of the storage industry has caused several new solutions providers to enter the market, creating an environment of unprecedented competition. Therefore, while the market opportunity for storage solutions is increasing, the pie is being divvied up among more players than ever before. Couple this with an unstable U.S. economy that has been a proven cause of many corporate IT spending freezes in the recent past, and VARs must rely on more than just a sound technology offering to remain successful in the industry.

Dallas Digital Services, LLC believes succeeding in the storage market starts with maximizing internal efficiencies. The storage VAR has mastered the art of reducing overhead costs and operating expenses as a way to ensure steady annual revenue growth regardless of changing trends and buying patterns in the industry. This approach has helped the VAR enjoy consistent revenue growth of more than 30% year over year since 2002. The following are key ways in which the VAR has streamlined its business model.

1. Make Storage Engineers Wear Multiple Hats
For many storage solutions providers, it is common to employ both presales and postsales engineers. A presales engineer typically accompanies a sales representative on a prospect call, performs a site inspection, recommends the appropriate mix of products and services, and designs a solution for the customer. After the deal has closed, a postsales engineer is usually sent in to actually install the solution. Dallas Digital Services combines these traditionally separate job functions into a single position within its organization.

"Every engineer I hire has both presales and postsales responsibilities, meaning they must be able to install the storage solution they design for the customer up front," says Howie Evans, VP of Dallas Digital Services. An employee must have a diverse skill set in order to fill this role. First of all, they should have a good mix of storage expertise and be certified on several storage products and platforms. Experience with operating system (e.g. UNIX, RedHat) server networking is also helpful, but candidates don't need to be experts on these systems — they just need to know enough to navigate through the commands and get the storage products installed. Finally, a Dallas Digital Services solutions engineer must be sales savvy. They must be comfortable interacting with customers and must be able to communicate messages and ideas clearly.

Combining presales and postsales engineering roles not only reduces Dallas Digital Services' labor costs, it also eliminates many headaches that can occur when these functions are handled separately. "When a storage design is handed off to another individual for installation, there is a risk of misinterpretation, and postsales engineers often waste a lot of time gaining clarification on the design during the implementation process," says Evans. "No handoff occurs using our approach, which helps accelerate installation times. Furthermore, having the individual responsible for the final implementation of the storage solution present during a sales call prevents a sales representative from overemphasizing the capabilities of the system or promising more than what the solution can deliver. This ensures that the systems we install exceed customer expectations."

2. Establish Storage Vendor Focus
Dallas Data Services is choosy not only when it comes to hiring engineers, but also when selecting vendor partners. "We get constant phone calls from vendors asking us to sell their products, but we won't partner with somebody just because they came in and took us to lunch," says Evans. "I don't even allow new vendors to talk with our account representatives because salespeople tend to be too easily swayed. I've had experiences in the past where a sales rep was intrigued by a vendor product simply because it could help them land a one-time sale. However, after this one-shot deal closed, we never had use for the product again, and the partnership quickly deteriorated."

To prevent this scenario from occurring, Evans personally conducts initial meetings with all new vendor partner prospects. After determining that the manufacturer's channel program and margins are competitive, he requires all vendors to bring their products to the VAR's lab, where Dallas Digital Services' engineers test and evaluate the technology. It often takes Dallas Digital Services more than a year to determine if a vendor and its products are a good fit for the way it currently builds solutions.

In an industry where some VARs include hundreds of vendor products as part of their solutions portfolio, Dallas Digital Services focuses on building solutions using only 13 carefully selected technologies. Not only is less internal labor required to manage a smaller number of vendor partners, but this approach also allows the VAR to avoid many pitfalls that can occur when working with too many products and vendors.

"If you have too many partners, few of the partnerships are going to be strong," says Evans. "Also, salespeople tend to waffle a lot when they have too many storage products to choose from when building a solution. A sales rep may be influenced to use a different product simply because a particular vendor is offering a strong margin or rebate incentive that month. This indecision can damage our reputation with the customer. Most importantly, when hundreds of products are involved, an engineer is probably only trained enough on each technology to be competent. By contrast, I know my engineers are experts on every aspect of the 13 products we resell."

3. Eliminate Marketing Expenses
Dallas Digital Services not only relies on its tight vendor partnerships for technology focus, it also depends on these relationships to market itself regionally. Dallas Digital Services views marketing as an unnecessary cost. The VAR maintains no internal marketing personnel and sets aside none of its own funds for marketing expenses. Instead, the VAR markets itself entirely on its partners' buck. Dallas Digital Services receives between $20,000 and $30,000 a year in combined market development funds from its vendor partners. The amount of money the VAR receives depends on how much of each vendor's products Dallas Digital Services sells. The VAR uses these dollars to pay for several marketing activities including direct mailers, e-mail blasts, local advertising, and golf outings. In all cases, Dallas Digital Services comes up with the initial marketing idea or plan and works with the specific vendor partner's marketing group to actually design and implement the entire marketing piece or event. Few internal resources are ever expended by the VAR.

In addition to these common marketing vehicles, Dallas Digital Services also works with its vendor partners to host an annual enterprise storage solution seminar series in Dallas and Houston. The seminar series provides end user prospects with educational information on several storage technologies and trends. Dallas Digital Services invited each of its vendor partners to give a nonpromotional presentation on a different storage-related topic, and, in return, the vendors picked up the tab for the hotel reservation, refreshments, and all other costs of the event.

While some might argue relying completely on your partners for marketing limits your exposure, this approach fits right in with the growth plan of Dallas Digital Services. "I'm not going to run out and spend a bunch of money on marketing initiatives that may give us a good return or may completely fail," says Evans. "We approach this business like the stock market — it's great to realize a gain, but you don't ever want to risk losing too much money. It's not our goal to be a $6 million company today and grow into a $20 million company tomorrow. We're after consistent and steady growth, and we're achieving that. In 2002, a year that was bad for the U.S. economy and the storage industry, we grew by nearly 40%. We've grown by more that 30% every year since, and we've done it by controlling our internal costs while capitalizing on new technology opportunities."