Violin: Partners getting hurt in flash price war

Vendor competition in flash storage market is pushing down partner margins, according to Violin Memory channel exec

Flash player Violin Memory's global vice president for channel sales, Jeff Nollette, has said partners are "sharing the pain" of the recent price battle from vendors in the flash storage space.

Speaking to CRN, Nollette said there has been a concerted effort by some of the large storage vendors to drive down their prices to protect their share of the customers.

"What EMC is doing right now, with regards to protecting their install base, is going to be an issue for everyone in the industry, including themselves," he said. "What will happen is if you [EMC] are replacing VMAX with XtremIO, it's a much lower cost point with a fraction of the services pull. That's not a good thing for EMC, but they have to hang on their install base.

"So I understand what they are doing, but at the same time they are putting severe pressure on the cost per gig price in the marketplace as a whole, and that is not healthy for anyone in the industry, including HP, EMC and ourselves."

But Nollette added that it was not just EMC which is pushing down its prices in the flash space to maintain market share.

"I think it's across the board," he said. "We have seen the same thing from Pure [Storage], the same thing from Hitachi and the same thing from IBM. IBM has gone to extraordinary measures to get certain price points to hold on to their install base."

Nollette said this price war is leading to partners getting hurt in some cases.

"It's fairly common knowledge in the industry that there is quite a bit of sharing of the pain at the partner level," he said. "So the price pressure we are seeing in the marketplace with some of our competitors trying to hang on to their install base has a ripple effect.

"The customers win because they get some very attractive deals, but it hurts the company and it hurts the partners who are offering in some cases some ridiculously low prices on a cost-per-gig basis."

Services to the rescue

Nollette said partners have the opportunity to counteract these diminishing product margins through services.

"Partners actually have a little bit of an advantage over the manufacturers when it comes to margin retention because they have other levers to pull," he said. "We are very supportive and do everything possible to enable the partners to provide all the services to their install base. Services margins are typically not reducing; it's really on the product side."

Nollette also said Violin is putting a lot of effort into making sure its services model is attractive for partners.

"With the depth of the data services we are now offering, there are quite a bit of services to be offered, and it is critical that the partners get trained up and provide those services," he said.

"We are fully supportive of that and will be rolling out a worldwide technical certification programme shortly when it will be more formalised than it is today.

"The idea is, we see the reality of the marketplace and the continued pressure on the point-of-sale margins, which compounds the fact that it is absolutely critical for partners to maintain profitability in order to sell your line.

"There have to be some margin replacements because the point-of-sale margins are decreasing and you have to make that up somewhere."

De-tuning?

Last week investor Clinton Group released a public letter calling for a meeting with Violin's board "to put the company's record up for debate", but Nollette said the firm is not going to change strategy following investor pressure.

Clinton Group, which owns a stake in Violin, released the letter on 30 July which expressed the investment firm's disappointment at Violin's previous refusal to hold a meeting with the shareholder. The letter also said that if Violin's sales don't improve then it will "have to seriously consider seeking the election of replacements to the company's board of directors at the next annual meeting".

But when asked if the company is planning on changing its strategy, Nollette, said Violin is committed to its current plan.

"We are locked into what we are doing and we have a good plan with significant momentum. It's all relative and we are a small company, and I don't mean to say we are taking the market by storm, but we are certainly on the growth path with an accelerating pipeline development curve," he said.

"We are getting more opportunities which is why we were investing more with the sales force. Our model is rock solid and we stand by it 100 per cent. We are not going to divert or diverge, if anything we will be adding to the product line over the next couple of quarters."