Gerard Norsa speaks with Mark Lewis, Compaq's vice president and general manager, enterprise storage group, and Andrew Manners, Australian manager of the group, about the vendor's storage vision and channel strategy.
ARN: Where does Compaq fit into the big storage picture?
ML: Most companies are focused on storage for their own platforms. We have done that and built a successful business, but we have also focused on storage as an independent, heterogeneous platform.
On the storage side of Compaq, we now have four divisions are all dedicated to selling storage as an independent purchase of IT.
One division sells network and SAN-attached library and back-up solutions. We have an enterprise storage business focusing on selling high-end storage arrays. We also have a division selling NAS product lines and an independent software division just selling storage and storage management software. That division is generating upward of $200 million a year now.
What is the revenue split between services and hardware in Compaq's storage business?
ML: We don't track services at the moment. Obviously storage drives an awful lot of services and support, and we have a very strong professional services operation.
Is Compaq's professional services one of the better resellers of Compaq storage solutions?
ML: Compaq has a common sales force [across multiple business units] based on accounts with its large global clients. We work with Pro services on storage and SAN practices to help our own storage sales force sell more complete solutions. We are not so much relying on them to resell our hardware and software as much as to build credible practices such as SAN implementation and integration practices.
AM: Within Australia we have the one sales force that sells across the divisions and they engage professional services when they are needed. They are focused on about 20 direct large accounts.
What is the direct/indirect sales split for Compaq storage globally?
ML: It does vary, but we are still doing 75-80 per cent indirect. In the past, indirect partners often just dealt with fulfilment. We are focusing on minimising that with our partners as it is not of value to the customer or the channel. There is a lot of aging inventory and lower quality solutions going to the customer under that model, so we are now trying to fulfil as much direct as possible.
This doesn't mean we are trying to get rid of channel partners. We are trying to focus them. Storage is a high-value area. It requires a lot of pre-sales work and a lot of knowledge to sell, so we are trying to focus the individual resellers and channel partners on basically building skills to sell storage. The actual fulfilment is going much more direct.
We believe Compaq can differentiate in the storage market by leveraging our channel partners.
Our objective isn't to get every reseller out there signed up, it's to get resellers that are committed to providing some true resources and value-add to the set.
How many resellers are there in Australia truly suitable to selling this type of solution?
AM: Over the last 12 months, we have gone out and asked our entire reseller community who wants to get into storage and we have put a road map in place for them to develop the skills.
From that, we now have 12 partners focusing on our high-end or enterprise product offerings.
Is there room for more?
AM: Absolutely. We've got a program and we invite any partner to come and join that program. We have training in place to build up their skill sets -- it is mainly a pre-sales technical aspect we are focused on. The program is designed so [partners] can add value in the sales process.
Compaq will work with the partner very early in the sales cycle so they get every opportunity to add value.
Do you think there is a bit of a scramble by storage vendors at the moment to secure the allegiances of channel partners that know what they are doing in storage?
AM: [The 12 partners Compaq has accredited] were the result of a 12-month program, so we are confident we have targeted the right partners and ensured they possess skills and experience with our product set.
Typically, the complexity of the market and the solution means a reseller doesn't have the option of taking on 15 solutions and 15 vendor partners.
You can sell five brands of desktop, but you can't really sell five brands of enterprise storage because you can't acquire enough competency to be able to do it. We are comfortable with the partners we have, from a skills perspective as well as a focus perspective, and they will support our products in the market place.
If channel partners can't specialise in five different technologies, with only a dozen of partners, are you comfortable you have enough of them to get a look into all the deals going down?
AM: If we take each of those 12 partners and look at their sales forces, and the accounts, the geographies and the vertical markets they work, then match that to Compaq's sales force which leverages these partners, then we do have a lot of coverage.
The benefit of having a limited number of partners comes from our ability to service them. This means that when we come across an opportunity, our close rate will be a lot higher.
ML: When it comes to partners, we will always set quality as the first hurdle. Signing quantity instead of quality hurts you in two ways. It spreads your resources thinner. You also end up in the situation where the partners who are making the investment in skills development end up coming head-to-head in the market place with the resellers that are not.
How can channel partners start getting involved in the storage scene? What sort of skill sets are really suited to selling storage solutions?
ML: As we move towards SANs and network-attached storage there is a high degree of technology involved, so we are looking for partners that have a decent degree of technology depth. They also need to be able to create and train pre-sales and support architects that really help to create the right solutions.
We look for real value-added resellers that want to take the time to learn storage. We have also had good success with resellers that have some vertical market knowledge.
The finance and telco verticals are the traditional strongholds. Media and entertainment are also making a very strong storage play, while healthcare is a very strong growth market. There is a lot of potential analogue-to-digital conversion of medical records and X-rays out there and a lot of the hard-copy stuff is now being digitised.
Where do storage service providers (SSPs) fit into the whole Compaq vision?
ML: We are already working with partners. I don't really want to comment on the relative merits of the SSP business model, but I do think SSPs have grown out of the proper concept that storage will exist as a utility and therefore service is important.
We have built our own practices internally to sell a private storage utility directly to a lot of our large accounts. It is our same suite of products, but instead of [the large players] buying it and running it themselves, we are saying "rent this and we will run it for you". We also work with storage utility partners.
And in Australia?
AM: We have the ingredients to set it up here, but we don't have the practice. We have a partner-friendly model, so if a company wants to set up a service provider in Australia there is a very effective offering available. We will be providing all the infrastructure and we will bill them on a monthly basis so they can then on-sell the availability of that data to their customers. We have a model that will allow us to work with any of our partners if they want to set up such a service.
We are talking to the major ones in Australia as well as some organisations that want to step into that market.
How do you determine what is a potential direct customer and what is a potential channel opportunity?
AM: In Australia, the direct storage business is basically non-existent. Unless the customer specifically wants to deal direct, we will always work with partners. It is somewhat different in the US where there are more resources available, but we need to use partners to utilise their customer reach and their skills in the sales process.
We do have a universal model to let the customer decide.
Is there an opportunity for partners to bring in the Compaq professional services team to bolster pre-sales and support where there are holes in the channel partner's solution?
AM: Channel partners can on-sell our professional services. We will also be accrediting and authorising some of them to provide our Carepaq services. They will be authorised to perform SAN implementation and installation under a Compaq part number.
How big are storage deals these days?
AM: The clear trend is deals are getting larger and larger. What we are seeing is fewer, larger deals. One statistic that is a good guide is Gartner's suggestion that today 50 per cent of a company's IT hardware budget is spent on storage and by 2003 that will grow to 75 per cent.
ML: It used to be if there was a terabyte deal out there, then that was a pretty exciting thing. Now you are hitting 5-6 terabytes before we get really excited.
With Compaq having its own range of storage software, is it the preferred software you sell every time or is it always open to negotiation? Is every element of every deal always open for negotiation?
ML: That's a good question. We believe part of our "openness" message is in trying to provide a horizontal layer stratification of our software.
Basically you can choose the pieces of our software you want to buy from us and what you want to buy from others. To as great a degree as possible, we try to separate the different layers of interoperability so the customer has some choice.
I think that highly differentiates us from a lot of the more traditional storage companies that cry "buy my whole thing". [Our method] is consistent with a maturing and evolving market.