Every business has to start somewhere, and even the world’s largest and most successful firms began with just an idea.
While the likes of EMC and NetApp may rule the storage market now, below them sits a growing pack of ambitious upstarts looking to take their place, several of which have burst into Europe in recent weeks.
Take US-based flash storage start-up Pure Storage, which issued a war cry to EMC last month when it landed in EMEA. Californian SAN-less virtualised datacentre platform specialist Nutanix is also ramping up on this side of the pond after signing up Exclusive Networks as a distribution partner, with countless others jostling for position.
Analyst 451 Research claims that storage start-up firms worldwide collectively bagged themselves $1bn (£653m) of funding last year, up four per cent annually. But while they may have won investors round, do these newbies offer anything fresh to resellers searching for the next big thing in storage?
Throughout 2012, according to IDC’s External Disk Storage Systems Quarterly Tracker, sequential revenue for the top six storage vendors – HP, EMC, Dell, Hitachi, NetApp and IBM – declined at a steady rate. In last year’s second quarter, their combined revenue totalled $4.9bn, dropping to $4.3bn and $3.8bn respectively in the third and fourth quarters of 2012.
Against the top six’s sequential sales slump, the combined sales for the “others” category steadily grew. By the final quarter of 2012, revenue for the category reached $2.1bn, surpassing the sales of EMC for the first time.
Looking to the future
So what is driving the success of the smaller and newer firms, and is there really a chance that the strength of the top six is anything but rock solid?
NetApp claims that over recent years, it is the only storage vendor to progress from start-up through to the top six. Its UK channel manager Pete Rawden said that while it managed to make the transition from IPO to the top, it has no problem gobbling up its newer or smaller competitors.
“The biggest killer of successful companies is complacency, taking your eye off the ball, and assuming that just because you were good last year that you will be good this year,” he said.
“We always view start-ups or developing companies with respect. Who is to say that one of those start-ups won’t be in the top five in the next few years? If that is so, they will take share from someone, and it could be us.
"We have to respect them, but a lot of the time, we buy them, or others have got to them,” he added, citing 3PAR, EqualLogic, Isilon, Pillar Data and Data Domain as companies that could have been contenders for the top before their respective buyouts.
While selling to a larger competitor can often be the final goal for some start-ups, it can cause more problems than first imagined, and it is often the channel which is left picking up the pieces, according to 451 Research’s vice president for storage research Simon Robinson.
“There are always some risks with [selling up] and the biggest [problem] is where does it leave resellers?” he said.
“It can lead to issues. One example is EqualLogic, which was acquired by Dell. Dell was still direct at the time and it was painful for EqualLogic because they competed with them and it was an unpleasant place to be. Dell learned a lot from that and has improved its model, but it took a period of pain to do that – it is one of the risks the smaller firms take.”
One storage newcomer that claims to be batting off buyout offers from other firms is Pure Storage, which marked its EMEA arrival by tweaking the nose of market kingpin EMC.
Pure Storage chief executive Scott Dietzen told CRN in no uncertain terms that he had no plans to sell the business, despite having received numerous offers, and added that his company is aiming for the top.
“We pump up our salespeople by saying that EMC has a third of the market, and only sells a third through the channel, which means only 10 per cent of companies buy EMC through the channel, leaving 90 per cent left for us and our channel partners,” he said.
Pure Storage claims that it can offer the channel flash products which are price-comparable with disk storage, and is so confident that it is offering a money-back guarantee to customers who are not satisfied with its products’ performance or price.
Price can prove to be an important factor in the channel, as software-only storage vendor Nexenta has learned.
Ryan Tyler, chief executive of one of its key resellers VA Technologies, claimed that his business is experiencing huge growth off the back of working with the vendor, and put the success down to it offering cost-effective products for hard-pressed IT managers.
He said: “From my experience in talking to customers, their demands have not changed, just their budgets; they need to do more in terms of performance [but on the same budget], and a lot of these recent changes have not allowed the big vendors to keep up.
“End users are having brand new projects dumped on them, such as virtualisation for example, but they cannot afford to keep up with the likes of EMC [pricing], for instance.”
Nutanix, a firm which offers products that combine the storage and compute elements in the datacentre, recently signed a distribution agreement with VAD Exclusive Networks.
The vendor’s vice president for EMEA Dirk Marichal said matching the size of the vendor to that of the distributor is the best way for start-ups to prosper.
“The problem with signing up with the big distributors – the Westcoasts and Avnets of this world – is that they are very driven through revenue. They get a lot of kickbacks from the big vendors if they get certain sales, and it is all geared towards that. As a smaller player, you do not get the attention or investment in technical expertise and marketing resources,” he explained.
“It is so typical for start-up vendors from the US to think what works over there will work in Europe, and they go with Avnet and Arrow, for instance, and lose six months before they can react and shift. That is what we have avoided by signing up with a smaller, boutique distributor.”
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