Drive SAN Sales To The Midmarket

Do you think the market for storage products and services has flattened out? If so, you may want to take another look. In fact, according to Gartner, worldwide external controller-based (the controller enables redundancy) disk storage revenue totaled $4.3 billion in the first quarter of 2008, a 10.2% increase over the same
period in 2007. Controller-based storage is moving to midmarket customers — SMEs (SMBs with enterprise-type network challenges) — creating new sales opportunities for more storage vendors, which also creates new sales opportunities for VARs.

When it comes to capitalizing on that market opportunity, Dave McNerney has proven expertise. Four years ago, McNerney recognized this opportunity and took action. “I saw a real need in data centers for good storage service providers,” says McNerney. “I have relationships with lots of companies and organizations that buy storage products. Many of them were complaining about the increasing cost of storage and what they called the diminishing quality of services provided by the top vendors. That’s when we made the decision to start Innovative Sales.” By cofounding Innovative Sales, McNerney — who now serves as the VP of sales — has built a blueprint for success based on providing storage products and services at more competitive prices than VARs selling the market share-leading storage vendors.

Choose Storage Vendors That Align With Your Business Plan
When looking for storage vendor partners, McNerney selected companies other than the market share leaders. “We chose companies such as 3Ware and Promise Technology, because they were stable companies that priced their products less than the big guys,” says McNerney. “Since we started out targeting SMBs, those vendors made the most sense for us.”

McNerney is careful to point out that Innovative Sales has nothing against the products offered by the market leaders. In fact, he often positions his products to complement those already installed. “One of our sales pitches is that customers don’t have to perform forklift upgrades to add our storage products,” explains McNerney. “We can provide  complementary storage at a lower price.”

McNerney has hit on one of the reasons why some storage VARs fail — failure to align your vendors and your services with your customers’ needs and budgets. For instance, if you respect the virtualization strategy of a tier-one vendor, you might become a VAR for that vendor. However, if your customers are on the small end of the SMB spectrum, they are not going to buy your arrays and your virtualization products. There are other examples of  features such as spin down (stopping disks when they are idle) that your customers may not need. McNerney stresses that proper qualification of customers’ needs is paramount to VAR success. That may be a basic ‘Business 101’ concept, but it’s worth revisiting once in a while — especially when you get caught up in all of the technology hype. McNerney learned what his prospective customers needed before he even went into business. He knew the market opportunity existed, so he associated his company with vendors who produced what his customers needed and would be willing to pay for.

Use Storage Demos To Make Sales Easier
Another key to Innovative Sales’ success is providing storage product demos. “We recently landed a sale with a hospital that had a big investment in storage from one of the top three storage vendors,” says McNerney. “We cold-called the IT director and planted the seed that we could provide primary storage (used for transactional data) products to meet his performance needs for less than he had been paying. After several conversations, he agreed to take a demo unit and try it. We provided him with a Promise Technology 12-bay RAID (redundant array of independent disks) unit to evaluate. The Promise array worked nicely in conjunction with the hospital’s existing storage, and it cost about half what the hospital had been paying for storage. The customer purchased the array, and the hospital is now a regular customer of ours.”

For more on selling complementary technologies, check out BSMinfo.com/jp/3478.

McNerney also provided a demo for NASA (National Aeronautics and Space Administration) earlier this year. “In the case of NASA, we weren’t given any details on what the storage would be used for, and we weren’t allowed into this particular NASA facility.” Similar to the demo mentioned earlier, Innovative Sales provided a VTE610fD 16-bay Promise Technology RAID array with Seagate Barracuda ES.2 SAS (serial attached small computer system interface) 3 Gbit/s (gigabits per second) 1 TB disk drives. McNerney is particularly passionate about these Seagate disk drives in dual controller RAID environments based on performance and reliability. After 30 days, the customer not only kept the initial Promise unit, but ordered four more.

Yes, there can be a cost involved in providing demo equipment; however, McNerney says the trade-off is well worth the investment. In most cases, the demos do not cost Innovative Sales any additional money, since the integrator has payment terms of net 30 to 45 days with most of its vendors and distributors. For that reason, McNerney tries to limit the demos to no more than 30 days. McNerney adds that it is critical to maintain regular contact with your customers during the demo period. “If the customer has a bad experience with the product, they may just turn it off and push it to the corner,” he says. “If you wait 30 days to follow up, you will most likely be asked to come and pick up the demo unit — the sale is lost.” Ninety percent of all storage demo units that Innovative Sales places on-site result in sales.

Diversify Your Products, Services
A strong storage sales opportunity is not enough to be successful. VARs still must  have their own ways to make money. In the case of Innovative Sales, one of the answers is to maintain flexibility in the products and services it offers. “One of the advantages of being a smaller integrator is that we can form our services around what our customers need,” explains McNerney. “For instance, we can do none, some, or all of the storage integration, depending on the customer needs. When we sell to NASA, we provide products only. NASA’s technicians perform all of the integration. When we work with smaller enterprises, we can design, install, and configure the storage systems, train their IT staffs, and provide break/fix support if needed.”

In addition to aligning your storage vendors with the needs of your customers, it’s also important to have good margin potential with each of your vendors. In the case of Innovative Sales, the integrator earns an average of 7% net profit margins on hardware. Obviously, professional services generate higher profit margins for the company.

To diversify its product offerings, Innovative Sales sells high-performance file servers and can design and build enterprise networks. This diversity helps to keep revenue balanced when storage sales may slow. Looking to the future, McNerney plans to delve more into storage security and may add a managed services component to the business. His ultimate goal is to be able to provide all data center products and services for his customers.

So, do you still think the storage market is flattening out? If so, here are a few more points to ponder. The number of installed PCs worldwide has surpassed 1 billion units. Gartner analysts estimate the worldwide installed base of PCs is growing just under 12% annually. At that pace, it will surpass 2 billion units by early 2014. With all of those PCs comes the growing need for storage. With industry data growth estimates at 70% annually, storage is still a burgeoning market. All of this adds up to a strong storage sales opportunity for VARs — especially in the midmarket.