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How to get the best deal

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Storage gear is a buyer's market, but that doesn't mean every buyer is getting a great--or even a fair--price. According to Gartner Inc., the difference between disk subsystem vendor bids can be as much as 300% for comparable products. At the same time, the increased importance of software in the pricing equation, combined with new pricing models and metrics such as price per managed port, make it difficult to ascertain what even constitutes a good price.

"Hardware prices are always coming down, so the real action is with the software," says Michael Rogers, director of storage administration, TSYS Inc., a credit card processor based in Columbus, GA. This is where buyers will win or lose the pricing battle, while the basic hardware increasingly becomes a commodity.

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Checklist for better storage purchasing
Here's eight things you need to know before you make an important storage purchase.
Identify your needs before choosing technologies.
Buy storage, not visions.
Separate storage procurement from server procurement.
Negotiate pricing for future capacity or feature/function upgrades that include quarterly pricing adjustments.
Check hardware and software maintenance prices and free periods.
Pay attention to software/features prices.
Buy only what you need.
Try to negotiate three-year warranties.

Source: Gartner Inc.

Although there's no magic formula, there are proven ways to get the best price on storage. The key is to resist proprietary vendor features, do business with multiple vendors and know what you must have for storage well in advance so purchases are timed appropriately. And for whatever price under negotiation, understand the true TCO. The lowest acquisition price isn't necessarily the best deal in the long term.

In a recent report titled "How to Get More for Less in Storage Procurement," Josh Krischer, vice president and research director for enterprise servers and storage at Gartner, offers tips on how storage managers can get the best price. In the report, Krischer lays down the fundamentals of negotiating with storage vendors (see "Checklist for better storage purchasing," on this page).

For example, Krischer identifies the propensity of IT organizations to overprovision their storage as a sure way of paying too much. "Do not buy excess capacity," he advises in the report, adding that "buying excess capacity inflates costs and causes faster capacity growth." (For additional information, see "Time to get organized," in the February 2004 issue of Storage.)

Play hardball with vendor negotiation
Anybody can play hardball and negotiate the best price for an individual piece of storage equipment. However, you don't necessarily gain much in terms of the overall cost of your storage infrastructure. To negotiate the best storage prices consistently and effectively, it's important to write an enterprise storage plan.

"Most enterprises aren't just buying storage just once a year," says Randy Kerns, senior analyst, The Evaluator Group, Greenwood Village, CO. Storage infrastructures are refreshed at least twice a year as companies buy and retire storage. This pattern must be part of the storage negotiation process.

"You need to have a buying cycle and a plan that identifies storage turnover and growth," Kerns says. Try to buy when the vendor is closing out a quarter or a financial year. In particular, publicly held storage companies are very susceptible to negotiating pressure as the financial quarter or year closes--a point when they are scrambling to post attractive sales figures.

The enterprise storage plan also allows the company to use the warranty period to maximum advantage. Storage vendors are increasingly offering three-year hardware warranties. After the warranty, the customer pays the annual maintenance fee, usually 15% to 18% of the acquisition cost. "It's best to acquire and retire storage to coincide with the warranty," says Kerns.

"Thirty-six months of free maintenance is a common practice for enterprise storage vendors' hardware. Free maintenance for software is 12 months, but you can negotiate for more," says Krischer. After the free maintenance period, vendors typically charge 1% to 1.5% of the list price per month.

Replacing the hardware after three years is a no-brainer: With the same money or even less, you can buy better storage. It's harder to determine the optimal time to replace software, however. "You have to develop an expert practice just around storage procurement," says Kerns.

This was first published in March 2004

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