In the shower today, I thought back over a number of meetings with storage vendors I’ve had over the past couple of weeks. Almost without exception, they mentioned AWS and the other large cloud vendors as a major threat and compared their costs to them.
We’ve all seen the calculation and generally we know that for many large Enterprises that the costs often favour the traditional vendors; buying at scale and at the traditionally large discounts mean that we get a decent deal. Storage turns out to be free at the terabyte level and only becomes an appreciable cost once we start getting to the petascale; this is pretty much true for both the Cloud providers and the traditional vendors.
But when I look round the room in a normal sales presentation/briefing; it is not uncommon for the vendor to have four or five people present, often outnumbering the number of customers in the room; account salesman, product salesman, account technical specialist, product technical specialist and probably a couple of hangers-on. A huge cost to the vendor and hence to me as a customer.
And then if we decide that we want to purchase the storage; we then drift into the extended procurement mode. Our procurement and finance teams will talk to the vendor teams; there may well also be legal teams and other meetings to deal with. The cost to both the vendor and the customer is enormous.
However if we go to a cloud vendor; we generally deal with a website. The cost is there; it’s displayed to all and the only discounts we get are based around volume. Now, I know that there are deals to be done with the larger cloud vendors; otherwise I wouldn’t be fielding calls from their recruitment people looking for people to work in their technical consultancy/sales teams but their sales efforts and costs are a lot less.
It seems to me that if the traditional storage vendors really want to compete with the cloud vendors, they need to change their sales model completely. This means stripping out huge amounts of the cost of sale; this means that they also need to consider how they equalise the playing field for customers both large and small; published volume discounts and reduced costs for all, especially the smaller customers. The Enterprise customers will not initially see a huge difference in their cost base but smaller customers will have greater choice and long-term it will benefit all; perhaps even some vendors.
Basically stop selling storage; build better products, sensible marketing and reduced friction to acquisition.
I kind of hope that the move to storage delivered as software designed to run on commodity hardware could drive this but at the moment, I see many traditional vendors really struggling to come up with a sales and marketing strategy to support this transition.
The one who gets this right, could or should do very well. The ones who continue with sales-model that is based on how they sold hardware in the past…could fail very hard.
Yes, there are customers who still like the idea of buying hardware and software in an integrated package; arguably, that’s what the cloud-providers do with serious limitations; but they will look at disaggregated models and do the cost modelling. Your prices should not attract some of the serious premium that you believe that you deserve….so look at ways of taking out cost.
The market today is a difficult one to address. Smaller customers don’t expect to get substantial discounts and need price transparency. They like that they can go to the Dell or CDW (large US etailer) and see what a server will cost.
Large customers demand the discount. In fact many purchasing agent’s annual review is based on the “percentage discount” column on the POs they cut. Price transparency, or at least an MSRP that SOMEONE pays, in this market is actually a minus. The vendor that actually gets 80% of 10,000 will be looked upon as worse than the one that gets 50% of $20,000 MSRP even though that means paying $10K not $8K.
Then there’s all the sales overhead that you’ve described. Coming up with a comp plan that allows the 5 man tiger team when that brainpower (I know I couldn’t come up with a better word) when the customer needs a consultative sale, or can be influenced to buy form my vendor and also allows a customer that knows what they need to buy from the website at a lower price is beyond my limited abilities.
Add in the cloud providers, who have limited to no sales staff/costs, and it all gets very complicated.
Sort of…. what you describe sounds like the first engagement with a vendor where maybe I’m participating in a bake-off.
Once I establish a standard, future purchases are generally quote, buy, deploy… yes, you do have to spend some time staying on top of new technologies and offerings (not like you don’t have to do this with the Cloud either!), but overall it’s not quite the ordeal you describe for sustaining type purchases.
A good vendor can value-add a lot more as well (and a bad one can be a huge waste of time :-)).
Again — speaking from the Enterprise space where, as Howard states, we can often times drive the price we’re after and get pretty steep discounts not available to the smaller guy.
Maybe there should be a GroupOn for Enterprise storage? 🙂
We share your views on this Martin. We no longer sell “Hardware and Software” for On-Premise deployments, instead we deliver a 100% uptime SLA that is billed monthly on a Pay-per-use basis. (100% OPEX, Scale up & down)
We deliver the same economic cost model regardless of where you run Zadara Storage. (In the Public Cloud, in a Co-Lo or in your own DC) .
This radically changes the entire sales engagement process for On-Premise storage. Suddenly the customer isn’t risking his job signing up to a large 3/5 year commitment, instead he is simply buying the capacity that he needs today. Gone is the need to raise an order for additional capacity as you grow, (We over provision capacity and you only pay for the drives that you consume – adding new capacity is simply a button click in our management interface) and we eliminate the entire concept of “Maintenance Renewals”. (We refresh the hardware for you at no cost when needed to continue to deliver on our SLA)
This model scares the life out of some sales folk granted as it means they will only see the value from a customer if they look after them and stay with them for the long-term. From a customer perspective it creates a true partnership as we grow together.
We are seeing massive traction with this new model.
[…] Stop Selling Storage – Storagebod But when I look round the room in a normal sales presentation/briefing; it is not uncommon for the vendor to have four or five people present, often outnumbering the number of customers in the room; account salesman, product salesman, account technical specialist, product technical specialist and probably a couple of hangers-on. A huge cost to the vendor and hence to me as a customer. […]