Server-centric vendors: wake up!

Server-centric vendors: wake up!

Sales agreements have been a bone of contention between vendors and integrators for years. As systems vendors add more products to their lines, they seemed compelled to spew out an equal number of agreements.

Integrators are often angered when locked out of selling certain products for lack of an agreement. Some vendors have caught on and now extend their contracts - with a catch: you still have to sell their servers.

Most server-centric sales agreements state that somewhere between 30 and 50 per cent of all revenue can be derived from the hardware with a minimum figure set as the volume bar for retaining sales agreements.

This figure is meant to weed out resellers and other companies with limited value-add and to let the vendor focus time, attention, and resources on partners that deliver the highest ROI. It's theoretically a good and necessary strategy, and it works well in many cases.

But many integrators that primarily sell networking equipment, for example, have trouble clearing the server bar. They may meet the dollar volume - but not the server volume.

As the storage market explodes into distribution, storage-centric integrators face the same challenge.

These SIs (systems integrations) add value through their knowledge of storage, configuration, and installation services. Nevertheless, those services often go ignored by server-centric vendors.

Customer relationships, too, carry a high value for the SI, but many are in the same boat as networking integrators. They're neither equipped for nor interested in selling servers, and they want to be recognised and authorised for selling storage. These SIs believe that the server-centric manufacturer does not support their sales efforts and business models and that they're being slighted by the vendors that let larger, server-centric competitors tread on their turf. Rather than validating the expertise of the storage integrators, some vendors are favouring the few server-centric integrators that clear the volume bar.

Clearly the allegiances of these storage integrators has been sorely tested. They're being pushed away from server-centric vendors that also have large storage businesses. As these vendors impose broad certification, storage integrators may not be able, or willing, to absorb the cost for the limited return, nor will they be inclined to change their business model.

Other suppliers

Instead they'll forge relationships with other suppliers who acknowledge and validate their value-add. They will seek out storage-centric manufacturers, some second-tier, that are eager for their expertise and customer base. These new sales agreements won't have a server volume bar.

Server-centric vendors had better wake up and smell the coffee before it's too late. Let storage-centric integrators do what they do best and reward their value-add. The revenue may be somewhat less than "traditional" server-centric selling, but partnering with these SIs is likely to improve the vendor's overall gross margin.

Storage-centric integrators do deliver real system value. They understand how and when to sell storage. They lead with storage, and they develop relationships that help create recurring revenue streams.

They may not have a great deal of value-add in customising or even selling application software, for instance, but they've built successful businesses from which server-centric vendors have reaped benefits for many years - when storage wasn't in vogue. Now that storage solutions are hot, these SIs should be rewarded for their efforts.

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