How to get the best deal


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Rules for negotiating a
prudent storage deal

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Here's eight things you need to know before you make an important storage purchase.
Never purchase under time pressure.
Use a dual-supplier policy whenever feasible.
Don't allow a vendor to bypass the technical staff.
Align the booking time with the vendor's quarterly or yearly financial calendar.
Don't show enthusiasm.
Obtain line-item pricing.
Lean toward purchases rather than standard leases if upgrades or extensions are planned.
Don't let sales representatives get too confident.

Courtesy of Josh Krischer, Gartner Inc.

No. 2: Use multiple vendors. The 80/20 rule as it applies to storage procurement states that you should buy 80% of your storage from one vendor and 20% from another, says Kerns. As a result, the organization has two active storage vendors serving the shop. This stimulates intense competition both before and after the sale. The vendor with 20% scrambles to expand its foothold in the enterprise by cutting the price and delivering attentive, responsive, proactive service. The vendor with 80% has to respond if it wants to retain its leading position.

This sounds good in theory, but admittedly only applies to shops large enough to support two vendors' products. Without intentionally following this two-vendor rule, TSYS has storage equipment from IBM and Hitachi in its data center. Currently, Hitachi is the dominant vendor.

"We thought about something like the 80/20 rule because it keeps the vendors honest, but we didn't do it," says Sink of Kichler Lighting. The problem was the added overhead. It would require Kichler to maintain tools and skills to manage equipment from two different vendors. "This works for large companies that are going to buy multiple [storage] frames anyway."

No. 3: Leverage second-tier vendors. Many companies have procurement rules that require two or three bidders for any significant purchase, including storage. Storage managers typically invite a few of the leading vendors to bid, and this usually results in a decent price. However, if a second-tier vendor--typically a small company or a startup--is invited to bid, almost assuredly its price will undercut the best bid of the three primary bidders by 30%, according to the CEO of a second-tier storage company.

"We recently bid $300,000 on a deal EMC was about to clinch for $500,000. The buyer said the deal was ours. Then, EMC came back and matched our price," the CEO recalls. The second-tier vendor would have made money on the deal at $300,000. EMC, with its higher overhead may only break even, but it will make up for it down the road when it plays hardball with software and services pricing. The lesson: Always include a viable second-tier vendor in the bidding.

The Center for Computational Biology and Biochemistry (C2B2) at Columbia University, NY, discovered this when it put out an RFP for a few terabytes of NAS. In accordance with Columbia's rules, C2B2 solicited bids from the major players as well as BlueArc, a second-tier player. According to the rule, C2B2 must take the lowest appropriate bid. Dell, EMC and Hitachi came in two to three times higher than BlueArc, the winning bid, reports Megan Restuccia, program manager. Now she's preparing an RFP for 100TB of NAS storage and BlueArc will surely bid, putting immense pressure on the others.

The Steamship Authority, Woods Hole, MA, which provides ferry service to Nantucket and Martha's Vineyard, followed a similar strategy when it sought to replace and streamline its storage backup system. The company initially looked at the usual leading tape backup players. Then it brought in a young company, Avamar Technologies Inc., Irvine, CA, which provides a disk-based backup and replication appliance, called Axion E. Avamar badly wanted to win this sale and cut its price dramatically on 3TB of mirrored storage, says Curt Van Riper, program analyst for The Steamship Authority. The Authority bought the Avamar product and has since bought a second.

This was first published in March 2004

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