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Channel survey: Recession taking a toll on storage resellers

We surveyed 544 of your storage reseller peers and asked them about their biggest challenges, as well as what technologies they're most interested in this year. Find out how the recession is affecting them and what technologies they're researching.

It won't be a surprise to hear that storage resellers, systems integrators and consultants who responded to a recent TechTarget survey of channel members are feeling the effects of the recession. But what may be surprising are the number of ways in which the economy is influencing resellers' businesses.

Fifty-seven percent of 544 storage channel respondents to a recent Channel Media Group reader survey fielded by TechTarget said that the impact of the current economy on client spending is one of the biggest business challenges that they face when selling storage products and services. While client spending concerns outpaced the next-most-cited barrier to business -- trouble demonstrating value/saving to customers -- by 20 percentage points, that challenge's appearance as No. 2 on the list indicates that the recession is putting pressure on ROI discussions.

Mark Teter, CTO for Advanced Systems Group, a Denver-based integrator with more than 100 employees, has seen the effects of the economy in his business. The economy "is causing my customers to spend money to save money. IT organizations are looking at how to better optimize their asset utilization," he said. "The current state of the economy is not only making my customers more cost-focused, but it is also changing our customers' project priorities, focusing on things that save money. Our organization has had to adapt to these new changes by selling the ROI and showing the operating expense/capital expense cost savings."

Not all solution providers are seeing additional ROI pressure, though. Eric Nelson, chief development officer at Alteritech Inc., an SMB-focused managed services provider based in Vienna, Va., said, "SMB customers have always focused on less than a 12-month ROI, almost by definition of their business model." But, he said, "we are certainly seeing folks getting more creative with leasing and hosting deals, doing everything they can to spread out payments, minimize up-front cash commitments, and manage cash flow."

The recession is also likely putting the squeeze on margins too, as vendors trim prices. Thirty-five percent of survey respondents said it was a top business challenge for them, but vendors are also working with their partners to help trim product prices without necessarily shrinking margins. Nelson said that Alteritech has been able to maintain its service margins, but that's been made possible through some aggressive pricing from its technology partners. "Our suppliers are getting more aggressive with the deals and pricing they are offering, especially in competitive situations," he said. "We are seeing better deals from our providers and passing the better pricing along to our clients, which is enabling some projects to move forward that otherwise would have been held up due to cost or funding constraints."

Business challenges without an overt tie-in to the recession took the last three spots in the list of six challenges: obtaining adequate training for personnel, meeting partner program requirements imposed by vendors and matching offerings to clients' business goals or roadmaps.

Getting technical

When asked what technical challenges they most often face, interoperability took the top spot, cited by 47% of respondents. Complexity of products and setup/configuration issues, respectively, ranked No. 2 (36%) and No. 3 (35%) on the list. It makes sense that interoperability is the No. 1 technical challenge. Customers often will opt for the products that best suit their needs at the price points they can handle rather than sticking with a single vendor -- and then it's up to the reseller to figure out how to fit the product into the existing environment. And if they want to sell the products they carry, they need to figure these things out or run the risk of losing business.

In terms of the technologies themselves, data protection resoundingly tops solution providers' lists; disaster recovery/business continuity, data security and backup software were rated as the top three products and services that will be most important to survey respondents in 2009. DR/BC was rated as important by 41% of respondents, with data security following closely behind with 40% of respondents and backup software ranked as important by 37% of respondents. Storage area networks, backup disk systems and network-attached storage also were designated as important by more than 30% of respondents.

The top two technologies, in terms of importance to respondents, are ones that respondents are still learning about. Data security and DR/BC ranked as No. 1 and No. 2, respectively, when respondents were asked what technologies they'd like to learn about, at 34% and 33%. Resellers appear to recognize the importance of these tech areas and know they have to get up to speed. Backup software, on the other hand, seems to be relatively better-understood. It was cited by only 22% of respondents as a technology they'd like to learn more about.

Interestingly, two technologies that got a lot of press in 2008 -- storage virtualization and data deduplication appliances or software -- were only No. 8 (29%) and No. 12 (21%), respectively, on the list of the most important technologies to respondents. When asked what technologies respondents would like to learn more about, however, storage virtualization jumped to No. 3 on the list, at 32%, though that's a full 13% lower than in the June 2008 channel readership survey, which had 266 respondents. Still, this indicates that resellers recognize a need to gain expertise regarding storage virtualization even if it hasn't infiltrated the market in droves. About 21% of end-user respondents to a Storage magazine Purchasing Intentions survey fielded recently said they will evaluate virtualizing their installed storage this year, and nearly 30% have already virtualized at least some of their storage.

Only about 20% of respondents said they'd like to learn more about data deduplication. Customers certainly haven't lost interest in it, though there are indications the pace of adoption may be slowing: About 55% of end-user respondents to the Storage magazine Purchasing Intentions survey said their spending on deduplication or single-instance storage would increase or stay the same in 2009, compared with 2008. That figure is about 12 percentage points lower than last year's, but more than twice as many users are using dedupe now (19%) compared with two years ago (8%).

Two emerging technologies getting a lot of attention these days also ranked relatively low in terms of importance to channel respondents, maybe pointing to a disconnect between resellers and their customers. Web-based storage -- aka the cloud -- was cited by only 13% of respondents as important this year. Respondents to the Purchasing Intentions survey, however, indicate that their interest in outsourced backup is picking up quickly. Last fall, only 14% of respondents to that survey said they were outsourcing backup. In the spring 2009 survey, that number rose to 21%. Of course, there are questions around how storage resellers and integrators can participate in cloud services, and that lack of clarity may explain the relatively low interest in it.

SSD, another technology getting a lot of attention in the storage marketplace, was listed as an important technology by only 11% of respondents. Among end-user respondents to the Storage magazine Purchasing Intentions survey, about 6% said they will implement SSD this year, while another 10% are actively evaluating it and 23% plan to evaluate it. While SSD has traditionally been seen as a high-end option and many resellers and integrators focus on small customers, the cost of SSD is dropping, and, according to Storage Switzerland analyst George Crump, it's now a viable option for even small and medium-sized enterprises, even in the midst of the recession. Given those dynamics, it may be wise for storage resellers and integrators to think more seriously about SSD.

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