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Impact of storage acquisitions on the channel

Get advice for how to react to storage acquisitions that affect your data storage companies of choice, frequently involving not-so-subtle hints from acquiring vendors that you change what's on your line card.

Has your favorite storage vendor been bought recently? Last year was a busy year for storage company buyouts, and while it made great blog fodder for analysts like me at Storage Switzerland, it also means some very serious decisions for storage resellers. Such storage acquisitions can significantly affect your relationship with data storage companies, projects you had under way and your business strategy going forward.

The No. 1 piece of advice is to not panic. In most cases, not much will change over the first few quarters while the two companies are integrated. Oftentimes, the acquiring company is more than happy to let the acquired company continue on with business as usual. Most integration efforts are focused on the back office initially -- for example, consolidation of accounting functions.

After that comes the next step in integration: mixing the sales organizations. This may cause some strife if your key contact changes, but, again, for the most part these data storage companies want to keep that revenue stream going as long as personalities can be worked around.

Things start getting bumpy when channel programs begin to merge -- typically the third step. (It is important to note that many data storage companies don't even try to undertake this step. They are more than happy to let the acquired company run as a standalone entity -- sort of a "If it's not broke, don't fix it" strategy.) Some companies can't resist tinkering with their new purchase. It gets complicated for you when the acquiring company already has a storage offering or two that you don't sell. It gets especially sticky when you sell something that competes directly with the acquiring company's other offerings. For example, you might have been using Vendor A for the SAN and Vendor B for NAS. Vendor A was acquired, but the acquiring company thinks it has a better alternative for NAS than your vendor B. Of course, you don't agree with that assessment, but Vendor A wants you to lead with its NAS, not vendor B's NAS.

When you confront this scenario, you should ask for a meeting with the acquiring vendor to express your concerns as well as your intended direction. You'll need to be careful with the timing of this meeting. You can't request it the day after the storage acquisition is announced, but you should do it before a new channel program is announced. That way, you may be able to give input around how the program is structured.

If, at the meeting, you tell the acquiring vendor that you plan to stay with Vendor B for NAS, keep in mind that at some point, there will be friction in the relationship with the acquiring vendor and Vendor A. Or, you could switch to the acquiring vendor's alternative. Staying with Vendor B isn't unworkable (for tips on how to set rules of engagement, applicable in such a scenario, see this article on vendor/reseller agreements), but it's not uncommon for the relationship to become unsustainable, at which time you should move to a different storage vendor.

No matter what your decision is in a particular storage acquisition situation, as an ongoing business practice, you should plan for the fact that you'll need to find new storage vendors of choice. If you're doing business with a smaller vendor, just assume that at some point it will be bought. You need to be constantly looking for another vendor with a more compelling offering to switch to so that when a buyout occurs you have options. Vendor relationships are nice; survival of your business is critical.

When I was a CTO for storage reseller, we always looked at vendor relationships as three- to four-year engagements (if we were lucky, we got a little longer out of it). In three to four years, one of a few things would happen. First, if it was truly a startup, the company was either purchased or had become so successful that it began adding other channel partners so fast that the market became diluted. Second, they hired a new vice president of marketing or channels or sales and had a new go-to-market idea that directly conflicted with our strategy. Or, they decided they really needed "to start taking business direct" -- which unfortunately happened frequently. By having another vendor on the bench ready to become our go-to guy, we avoided being in a check-mate situation.

You need to be prepared for any of these scenarios, by developing options along the way. Never get lulled into the idea that today's fantastic relationship can't be tomorrow's disaster. This may seem like all we are talking about is theory here, but those who have been in the channel long enough know that it has happened in the past and will continue to happen. While data storage companies may not come right out and say it, they will drop not-so-subtle hints that you should sell their complete offering.

About the author

George Crump is president of Storage Switzerland, an IT analyst firm focused on the storage and virtualization segments. With 25 years of experience designing storage solutions for data centers across the United States, he has seen the birth of such technologies as RAID, NAS and SAN. Prior to founding Storage Switzerland, George was chief technology officer at one of the nation's largest storage integrators, where he was in charge of technology testing, integration and product selection. Find Storage Switzerland's disclosure statement here.

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