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Sun storage system reorg leaves resellers in the dark

Sun's plan to merge its storage system and server groups and lay off channel staff has left Sun partners wondering about their own prospects.

The reorganization Sun Microsystems Inc. announced Monday has left storage partners wondering whether Sun's drooping storage business can recover, and whether layoffs will cripple a channel program many are dissatisfied with.

"I just heard this morning that they revamped and [laid off] a whole bunch of folks in the storage channel group: channel managers and channel [service engineers] across the country," said one channel partner, who requested anonymity. "I'm not so sure what this all means."

"A whole lot of storage people were laid off. Some were retained, but not very many. The open question is, how are they going to drive the storage part of the business?" said Scott Robinson, chief technology officer at Chanhassen, Minn.- based Datalink Corp. "If Sun needs more expertise then they may have to depend on storage-focused partners to fill the gap," Robinson said.

Sun announced plans Monday to merge the Sun storage system and server product teams and lay off an undetermined number of employees.

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"I'm dramatically increasing Sun's focus on storage today," Jonathan Schwartz said on his blog Monday.

Schwartz also said the company will expand beyond Sun storage systems to become more of a multi-platform storage provider and that Sun is heading toward a world in which open and general-purpose platforms will be the growth drivers.

While Robinson agrees conceptually with Schwartz's assertion that Sun storage systems and servers can be combined, he said that at customer accounts, servers and storage are two separate items.

"They are still separate decisions, and we have a ways to go before these buying decisions merge," Robinson said.

Other Sun storage partners are certainly eager for a revival in the company's storage business. Storage revenue for the fourth fiscal quarter of 2007 was $639 million -- a 10.4% decrease compared to the previous year.

But even if combining the storage and server groups makes the company's hardware efforts more effective, Sun won't get far with the channel if it doesn't ease restrictions and reduce conflicts there, according to one source, whose company recently ended its partnership with Sun.

"The rules and regulations to follow Sun were more stringent than HP or IBM, and it was easier to stay on the path of least resistance," according to the source, who asked to remain anonymous.

The reseller, which was selling the line of high-end Hitachi storage products that Sun resells, established its own relationship with Hitachi, and was involved in more projects based on Hewlett-Packard Co.'s HP Unix than with Sun's Solaris. Certification costs and other expenses required to remain a Sun reseller were barely covered by sales revenue even before a drop-off in Sun business this year.

"When we looked back at the books and were evaluating where we were with each vendor, which ones were profitable and which ones weren't, Sun was actually a loss on the books," the source said.

Others are more hopeful.

"I see it as a positive move," said Steve Chase, executive vice president at Raleigh, N.C.- based Alphanumeric Systems Inc. "I think Sun is going to gain some efficiencies over time, and everybody wants Sun to be more financially competitive," Chase said.

By reducing staff and eliminating duplicate tasks, Chase believes Sun's efforts will have a positive effect on storage VARs in the field, and a unified storage and server team can help Sun storage system partners bring one message to customers, instead of an unstructured selling message between server and storage divisions, he said.

"The challenge is that with the merger all the STK [StorageTek] people became Sun partners as well," Chase said. "They had their own channel team and their own sales team, and it was not uncommon for us to go into an account dealing with Sun servers and find a Sun competitor of ours in there selling the legacy STK side of the house. This will be a good thing to help resolve that," Chase added.

Still, other resellers are not so quick to jump to any conclusions one way or the other.

"It's too soon to tell what this means," said Brian Casey, principal at Littleton, Mass.- based Daymark Solutions Inc. "My hope is that Sun does not lose focus on the channel. The success of merging the server and storage divisions all depends on what they do with discounts, channel support and information flow," Casey said.

Monday's announcement not only means layoffs and personnel changes; it also means Sun is becoming more dependent on storage as an integral part of its revenue strategy.

"One thing that you can count on from Jonathan [Schwartz] is an unwavering reliance on Sun's own intellectual property represented in products that span product groups from servers to storage to software," said John Webster, analyst with Illuminata Inc. in Nashua, N.H. "He believes that Sun has intellectual property in the form of Java, Solaris, Sparc, and he believes that he can make a lot of money on that intellectual property and push it forward as storage products."

"Growing revenue from storage may not be the primary goal. Keeping storage profitable, which it isn't, is the driver right now," Webster added.

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