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EMC storage resellers losing midmarket to NetApp, iSCSI storage

EMC storage resellers are finding innovative ways to fight back as customers turn to Network Appliance (NetApp) for network-attached storage (NAS) and iSCSI to expand tiered storage applications.

EMC storage resellers are finding serious competition from Network Appliance Inc. at large and medium-sized enterprise accounts where EMC was once a much more dominant player. NetApp's combination of new storage product offerings, partnerships with companies like VMware, Microsoft and Oracle, its push in the iSCSI storage market and an effective channel program have all helped move it forward.

But NetApp's leadership in the network-attached storage (NAS) market, a channel program effective enough to bring in 63% of its revenue, and the flexibility of its NAS offerings, which fits well in some environments as first-tier storage products, are what is really driving it, according to Gartner Inc. analyst Pushan Rinnen.

The latest Gartner report showed that NetApp took home 48% of spending in the worldwide NAS market for 2006, followed by EMC at 13%, HP at 7% and IBM at 5%.

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Customers want iSCSI for some applications and are leaning toward NetApp to fill that need, according to Jamie Shepard, vice president of technology solutions at Marlborough, Mass.- based International Computerware Inc, an EMC storage partner that engages large and midsized accounts.

"Customers are finding second sites where they can afford to put two arrays and NetApp does iSCSI replication and EMC does not," Shepard said.

To hold onto a sale, Shepard has gone as far as dipping into his company's EMC co-op marketing funds to pay for a CLARiiON CX310 that has iSCSI and Fibre Channel connectivity.

"We dropped it off at the customer's site and let them play with it for a couple of weeks. We stepped up as a partner and said 'hey, I'm going to lose to NetApp or EquaLogic again, so I'm going to stick in the box at the customer's site and show them how easy it is.' That resulted in a sale," Shepard said.

William Frank, storage practice manager at Waltham, Mass.-based EMC and NetApp partner NWN Corp., said enterprise customers prefer NetApp when they choose iSCSI adoption.

"Enterprise customers that have a Fibre Channel infrastructure tend to stick with EMC, but an enterprise customer that wants iSCSI they will choose NetApp," Frank said. "In the iSCSI space, NetApp is moving from strength to strength, but EMC is struggling," Frank adds.

NetApp's products are also easy to use, which makes them even more attractive, according to Jason Forrest, National Practice Director at San Francisco, Calif.-based FusionStorm.

"[NetApp] is developing a good enough solution for someone to deploy a thousand users on iSCSI," Forrest said. "Sometimes customers just want that storage solution for their needs and NetApp's product is easy to use. Their product is a hammer, and everything looks like a nail to them," Forrest said.

NetApp's numbers tell the story. The company's May 27 fourth-quarter earnings call confirmed its growing footprint at large customers.

In fact shipments of its high-end FAS6000 series increasing 35% from the third quarter; its midrange FAS3000s were up 19% sequentially and its low end FAS200 series increased by 6% sequentially.

Forrester Research Inc. analyst Stephanie Balaouras reckons that since NetApp introduced the FAS6000 one year ago, the company can now compete in some domains where normally only an EMC Symmetrix DMX an IBM DS8000 or an HP StorageWorks XP, or HP EVA8000 would normally compete.

"Now that NetApp has a storage array that scales up to 500 terabytes (TB), I think that's opening up a lot of doors for them, where in the past they could not have played, Balaouras said.

Balaouras also said many companies have a tiered storage strategy where they will retain a DMX for the mainframe, and then have a second tier for business critical systems, tier three might be storage for a company's online backups and archives and a fourth tier for permanent storage. According to Balaouras, when NetApp seals deals in the second, third and fourth tier they score big at customer sites.

"It's still a win because most of the growth is actually in the lower tiers. Most of the data growth is in unstructured content like emails, files and rich digital objects, that's growing much faster than your traditional database content," Balaouras said.

"There are lots of challenges, and everybody is very tough whether it's NetApp, HP or IBM and everybody is heavily channel oriented in there," according to Pete Koliopoulos, EMC's vice president, global channel marketing. "That means your program and pricing elements have to be lined up, your marketing has to be crisp and clean. It's a constant battle in that space," Koliopoulos said.

Still EMC in certain accounts is a tough nut to crack. During the company's May 23rd conference call, Dan Warmenhoven, NetApp's chief executive officer, said the company had not significantly increased its wins against EMC.

"Our frequency of engagements against EMC was up and our percentage of wins stayed fixed. Our win rate against Hewlett Packard went up," Warmenhoven said.

That doesn't mean NetApp isn't fighting on to usurp EMC whenever it gets the chance. NetApp's president, Tom Mendoza, describes engagements at customer sites with fighting words.

"We're attacking them on many of their home courts. We have to keep taking share from them, and those engagements are going to take longer because you are ripping something away from somebody," said Mendoza during the May earnings call. "We are finding ourselves up against them in very much their own strongholds and putting them on the defense a lot, and those are tough battles, but the fact of the matter is this is what we have been doing for the last year."

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