There is a fundamental shift going on in the market, the evolution of data center technology at it’s finest, and we are in the midst of chaos.
Now, for most things; economics, politics, and families, chaos would be a thing to avoid. However, in the world of IT, chaos is a lot like a wildfire, it tends to strip the landscape of old, established trees and gives way to new growth, new possibilities. This is clearly happening in our business, one needs only look at the consolidation of Distributors (Tech Data/Avnet), storage kingpings(Dell/EMC) and even Manufacturers and their downstream integrators (Western Digital/Tegile). We’re also seeing a huge M&A bump, with innovators like SimpliVity and HP being sucked up by stalwart HPE, in fears that their “legacy” offerings simply weren’t special enough or different enough to compete with the likes of Nutanix or Pure Storage.
Nothing is safe, and the windows for new technology to emerge from stealth, grab the market and the hype machine while simultaneously establishing partnerships with the existing OEM vendors, distribution and reseller networks and still more, build a enterprise direct-sales team to accelerate revenues and share before the competition catches up…are getting shorter and shorter.
Startups, and to a lesser degree emerging technical firms, don’t enjoy an established distribution network when attempting to gain market share and scale at break-neck speed. These companies lack the resources($) and personnel to run major MDF and Rebate promotions as an incentive for partners to join up.
SimpliVity went from 50-700 employees in less than 2 years, made a huge leap forward and threatened to ruin Nutanix’ party, but fell about six months short of their goal, and quietly sold off to HPE for 600M, about 1/4 of it’s previous years’ valuation.
Fusion-io, arguably the hottest product since VMWare’s ESXi, took the market by storm…selling hundreds of thousand of PCIe flash cards at $20,000 per to the likes of Facebook, Apple, AT&T and even Peter Jackson to help with the Lord of the Rings, prior to being gobbled up and subsequently left to fade away inside the giant flash maker, SanDisk. At the time, they were the fastest growing hardware company of all time. However, the $20,000 card in 2012 was selling for $3,500 in 2014, and that sort of crashing price floor isn’t sustainable.
``As salespeople, we tend to gravitate towards whatever is popular and well known to carry in our portfolio. In many ways, we're lazy. For that matter, companies are too, as they gravitate towards applicants who are ``pedigreed`` with a track record of selling established products that customers already own. That kills innovation in any company.``
But there is another threat to many of these new products and software solutions that many are unaware of. Over the past 25 years I’ve closely watched the trends and the way the game is played in the partner community. With great confidence, I can speak with utter certainty that your current reseller is the ABSOLUTE last place that you should go for advice on adopting new technology. Let me explain…
This is the least talked about tragedy in our business. Simply put, VAR salespeople and engineers are paid on profits, and the more business they drive to their existing vendors, the greater the discount they receive for each subsequent deal.
On top of this profit, companies who employ these teams get “rebates”(better known as”kick-backs”) at the end of each fiscal year based upon the total dollars sold.
Engineering teams get free equipment, free clothes, dinners, added SPIF’s and bonuses for technical certifications.
On top of that conflict of interest, the Sales & Marketing teams get additional funds(MDF)to host events, throw parties and go on trips to see big time celebrities such as Snoop Dogg perform at their sales kickoff.
Think about it…If a reseller sold $10 million bucks of Vendor A’s storage array in 2016, it’s going to be really hard for a hot new startup. Even with a far superior and less expensive flash array solution, how can they convince the leaders of the reseller firm to promote your product? For that group, there’s not much of an incentive, it’s cheaper, and that means less profit for their bottom line, less MDF for events, fewer SPIFs, and you know there’s no Snoop Dogg at the new vendor’s kickoff party.
And therein lies the problem of new technology and the VAR community. A newer, better product from a disruptive company will actually make it harder for a sales & engineering team to hit their growth targets vs. the previous year.
``...your current reseller is the ABSOLUTE last place that you should go for advice on adopting new technology.``
Unfortunately for the VAR, new technology is inevitable, as are falling prices. Someone is going to erode that customer base of Product A, because it’s an old solution, and it’s more expensive. When comparing new technology vs. the previous generation, there is little incentive for a VAR to sell a newer version, as it will be cheaper, take up less of a footprint and last longer, making it harder for the VAR to grow their expected quota year over year as expected.
And this is why there has been a rash of turnover in the industry over the past 18 months, as successful VAR reps & engineers seek out sweeter deals with lower quotas from new tech players. In reality, this brings the sales and technical talent in droves to new product markets, but many find they were reliant on the partner channel for leads and to sell the product, and without that assistance, without that demand for the product, they then retreat to their original jobs or move to another aging incumbent who is reeling from losing their own star players.
Modern technology demands new metrics to make solid strategy, and although our insights might expose quite a few salespeople and engineers who clearly continue to provide advice that satisfy their own interests first, frankly, it’s time someone spoke the truth. Our efforts and enthusiasm for this project is squarely focused on changing minds, debunking “safe” and “standarized” methods of operating it data centers and helping you kick ass at work, each and every day.
So be careful when you’re talking to your past partners about newer technology. You’re probably not going to be getting the honest truth that you expect, for that, you need new someone with a different point of view.