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Rosy economic forecasts ignore the dour nature of the products being sold

Despite the need to project budgets and hiring plans into the future, relying on generalized economic indicators can be iffy and, in some cases, counterproductive.

Right now, for example, a price of consumer goods and corporate profits, generally low inflation rate tell a different story.

The problem is that all the general economic indicators make broad market projections, but not in your specific market.

So where do you put your money and energy?

If you’re a VAR or integrator, you put it in developing expertise in server virtualization, iSCSI and data deduplication — and that’s according to other VARs and integrators interviewed for R.W. Baird’s quarterly survey of enterprise resellers.

Survey respondents said the last quarter had been good or bad in pretty even proportions (half said their businesses were on plan, and a quarter each said they were either above or below their own projections).

The most consistent feedback, though, was that customers are demanding the ability to virtualize servers, are willing to pay for the privilege and will continue to do so in growing numbers. More than 90% of resellers surveyed sell some virtualization technology, but only 10% of installed servers are virtualized.

Baird and Co. expect that last number to be the growth factor, as customers flock to add virtualization to the servers they already own and plan for it on those they have yet to buy.

iSCSI and data deduplication will be driving forces in the storage world; 70% of resellers said they had strong or modest growth in each technology.

Storage Magazine’s annual survey of the buying plans of large user companies agrees with the principle, though the increases its IT managers cite don’t look like they’d be able to generate the 5% to 15% overall growth Baird expects the majority of resellers to see during 2008.

Users who plan to increase their use of deduplication increased from 30% to 34%, and interest in iSCSI is definitely growing. But 34% of customers already using iSCSI said the low cost was the primary factor in choosing it over Fibre Channel.

The next two reasons — cited at 24% and 18%, respectively — were “performance OK for apps” and “need low-cost capacity.”

The leading reason for not planning to buy iSCSI during 2008 wasn’t an endorsement of the performance or reliability of alternatives. It was “don’t need more storage.”

So, while Baird and your fellow VARs are out there painting the market rose-colored, don’t let the inherent contradiction of any economic forecast slip your mind.

Customers don’t buy virtualization or iSCSI or deduplication for the incredible new capabilities they represent; they do it to save money.

And customers buying new technology strictly to save money are unlikely to launch upgrades or follow-on projects or sign maintenance and support contracts with fat profit margins built in.

They’re more likely to cancel existing infrastructure projects than start new ones.

There are technology markets swelling with the cash of buyers eager to change the way their businesses operate. Most are communications technologies like universal communications, or voice over IP, or digital signage or collaborative applications such as Microsoft’s SharePoint.

They’re not the kind of products people buy because they’re cheaper than the way customers are doing things now.

They’re not infrastructure. So if infrastructure is the bulk of your business, focus your efforts on the growth areas.

But when you’re looking for places for your business to grow, look for technologies that aren’t designed strictly as a way to save money.

In the long run, that’s not going to help your own corporate forecast — not in the long term, anyway, no matter how optimistic your competitors sound.

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