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Don't let recent price wars fool you. The vendors aren't lowering prices to help you during tough economic times. Vendors are in a survival mode, lowering their prices to establish or increase market share. There's an interesting discussion to be had whether vendors were fair with pricing before the land grab they find themselves in today. Capacity prices have historically decreased 30% per year, but I've seen 50% annual decreases in switch port and storage capacity for the last two years. Even the price of high-functionality storage management software such as remote replication has fallen by 35% this year.
During the robust market expansion of the late '90s, storage vendors enjoyed healthy margins. The combination of increased competition and economic recession put pressure on these vendors, and for the past 24 months, margins have been either flat or down. Why should you care, though? You're getting a great price, right? But is it really the right price? Premium pricing pays for premium service and support, as well as premium product functionality, among other things.
Traditional pricing exercises have evolved into four steps: determine IT specifications, do an "apples to apples" procurement comparison, pick the finalists and lastly, negotiate pricing. That was adequate for yesterday's world, but new complexities in IT have created new problems in negotiations. With more and more valuable data on the line, the cost associated
with making a wrong procurement decision increases exponentially. That's why I advise my clients to expand their traditional buying process to ensure they pick the best solution, as well as buy it from the proper channel. The following steps are designed to work in conjunction with standard feature comparison and TCO analysis.
Step 1: Determine what the storage deal is and establish a solutions criteria
Different types of storage deals need different evaluation criteria. There are more items to consider when starting from scratch. If you're enhancing or upgrading, you need to consider the status of your incumbent brand. Are you happy with it? Can it be easily upgraded? What would it cost to change brands? How much would it cost to migrate data and learn new management, data replication and backup tools?
In a new deal, you need to consider if it's more effective to bundle storage with servers, whether or not you should consolidate primary and/or secondary storage and whether or not to go with multiple vendors.
Step 2: Assign a relative value to each component of the solution criteria
What are your priorities? Performance? Availability? Service and support? Price? You need to understand what's important in your solution and rate your solution accordingly (see Figure 1).
In this chart, capital outlay is clearly the most important selection criteria. This client is buying for an important - but not critical - application, so availability is second. Operational costs are important and significantly affected by manageability, so they come in third. The system has to perform well and service and support are important, but in these cost-conscious times, these criteria fall well down on the priority list, so they come in last.
Step 3: Assign a raw value to each solution option
Now that you have your priorities lined up, look at how the different vendors rate on a scale of one to five (see Figure 2). Vendor A has a great price so they receive a five, while Vendor B is on the expensive side, so they receive a three. Both are nearly equal on an operational cost basis (power, cooling, floor space), on management attributes and on service and support. Vendor B has slightly better performance and availability, so they receive a score of four, while Vendor A gets a three. In this chart, although the raw values show a tie between the solutions, once the criterion has been weighted and vendors have been rated, solution A is the stronger choice.
But choosing the product is only half the battle. You need to buy your solution, and then have it installed. The same method of selecting criteria, assigning raw values and then establishing a weighting value can be used for selecting whom you want to buy from.
Step 4: Assign a relative value to channel options
Are you concerned about training? How important is channel independence if you've already chosen a hardware platform? Should you buy direct? How close do you want to be to the manufacturer? How much flexibility do you need? Once you've thought about these questions, you can assign relative values.
Step 5: Rate channel options by criteria
Now rate channel options vs. criteria on a scale of 1 to 5. For example, buying direct, by definition, doesn't have vendor independence, but might lend itself to a strong implementation and knowledge-transfer capabilities.
The ESG has witnessed the hassles that IT professionals go through in today's procurement cycles. We get to see the good decisions as well as the bad. Finding - and getting - the right price is still an art form, however, if the process is supported by well-defined requirements and logic similar to the step-by-step process shown above, you can improve the likelihood of making the best possible decision.
This was first published in October 2002