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Are smaller companies storage-stupid?

Storage guru Jon Toigo questions the buying process for small and midsized, storage-oriented businesses.

Recently, Network Appliance Inc., announced its foray into the small and midsized business (SMB) market with the introduction of its StoreVault line. The S500 is a skinnied-down version of its enterprise-class Filer products, offering a base sticker price of about $5,000. Sunnyvale expects, based on extensive "focus group" consultations, to sell a boatload of them.

In case you haven't noticed, the path to the SMB market is one that a lot of enterprise iron makers have been treading of late. The reason is simple: In recent years, large companies have cut back on IT hardware spending -- of which storage gear is the largest component. Meanwhile, SMBs (or SMEs, depending on whose acronym you prefer) have increased spending at a rate of 47% year over year for the last few years. In theory, you can make just as much money selling a lot of lower-priced gear as you can selling a few overpriced big iron arrays.

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EMC's Insignia line is another example of the big guys courting the SMB… and another example of what the marketing folks apparently believe about SMBs: That they are as "storage-stupid" as many of their larger cousins.

In the larger firm, for a variety of reasons, there is a tendency to go with the name-brand offerings of larger players in the market. Sometimes, this is done to get the one-throat-to-choke maintenance or licensing agreement. Other times, the deal is made with the expectation that it will alleviate the hassle of heterogeneous storage management by standardizing on the products of a particular vendor whether they are best of breed or not. (It doesn't, by the way.)

Too often, the acquisition of storage gear in larger firms is out of IT's hands altogether -- the deal having been made in the front office by senior business managers who know less about a vendor's gear than his stock performance over a 10-year period. Microsoft coined the expression "Flashing 12s" to describe the lack of technical acumen of many business managers who cannot even program the clocks on the VCRs, which subsequently flash "12:00" forever.

In the large enterprise market, many of the name brand vendors have been skirting the IT department for some time, preferring to pitch the guys in the suits. Sales representatives take training programs on how to avoid "technospeak" that might confuse the business guy, how to avoid mentioning any product by name or function and how to express the case for the company's products strictly in terms and language that the front office understands: cost savings, risk reduction and process improvement. I suspect that these programs have accounted for a lot more sales revenue than have more reasonable, performance testing-based demonstrations of product efficacy and application fit. Maybe even more than "channel stuffing" -- the booking of phony orders for gear just in time for reporting to Wall Street.

For whatever reason, the big iron guys have saturated the Fortune 500 and are now looking for "green field opportunities" among the SMBs. However, they have been confounded by two obstacles.

First, SMBs are not as impressed by brand name or market pedigree as their larger peers. For the most part, they will not buy a "Hummer" when they can buy a "Yukon," which has exactly the same undercarriage but costs $40K less. The "it's not my money" attitude in the big company does not exist in the SMB, where budgets are tight and price is everything. The sales reps I've talked to who work for brand name vendors complain that, even as they are in the customer's office making their pitch, the SMB guy is surfing the Internet and checking prices for the best bargain on the same amount of storage capacity. Cost probably shouldn't be the biggest gating factor in storage acquisition, of course, but a dash of parsimony may be just what the doctor ordered to mitigate the price gouging we have seen from array builders in recent years.

The second obstacle is reaching the SMB/SME consumer in the first place. Fielding a large direct sales force to make a sub-$20,000 sale is an economic nightmare. Indirect sales channels expose products to significant mark-ups by value-added distributors and value-added resellers, pricing wares out of the "sweet spot" of the SMB. NetApp has chosen to sell direct through Tech Data, while EMC plies its entry-level products through Dell, which may or may not be the solution to the problem. Only time will tell.

The trick that probably won't work, however, is the bait-and-switch tactic that seems to be inherent in the pitches coming out of the EMC/Network Appliance/et al crowd. Looking at a price sheet from EMC for its Insignia is a headache in the waiting. There are so many options to select from, in terms of box configuration and maintenance agreements; it is difficult to discern bottom line cost without someone holding your hand.

The NetApp StoreVault offering is the same beast. Sure, you can get a 1 TB unit that does snapshots for under $5K, but looking closely, you see that adding RAID and a hot spare to the baseline box leaves you with something less than 250 GB of capacity. In my opinion, and that of others, the box has limited capacity, limited auditability, limited manageability, limited support and apparently no investment protection. Is this really what SMB/SME's want?

NetApp guys say that is what their "focus groups" tell them. They quickly add that no one is going to buy just the baseline configuration, of course. So, they are baiting the customer with the low-price sticker, then configuring a much more expensive product that will actually meet his needs. I call that "bait-and-switch."

The question is, at the end of the day, are SMB/SME consumers really so "storage-stupid" that they will buy this stuff? Why not give them what they need instead: Storage products that capture the commodity cost of the underlying disk drives? Just a thought.

About the author: Jon William Toigo is a Managing Partner for Toigo Productions. Jon has over 20 years of experience in IT and storage.

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