The Mid-Range: An Untapped Market, Part II

Tuesday Mar 16th 2004 by Leslie Wood
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Mid-size businesses need storage every bit as much as large enterprises, but the mid-range market presents a completely different set of challenges and opportunities for vendors. What can storage vendors do to successfully take advantage of this untapped market?

IDC reports there are over 93,000 North American-based businesses with under 999 employees, compared to just 9,000 large companies with 1,000 or more employees. These "mid-size" businesses account for about half of North American companies’ spending on hardware, software, and other IT services, according to industry analysts.

To the storage industry, this means there is a large, virtually untapped market out there, as the mid-size businesses need storage just as much as their big brother counterparts. This is good news for both storage vendors and the mid-size enterprises, as these companies are finding themselves in a buyer’s market when it comes to purchasing storage products and services.

“Because of their size, the focus of most mid-range firms is on doing business — not on building storage solutions.”

Michael Heumann, AMCC


Let’s pick up where the first part of our discussion on the mid-range market left off.

Choosing Storage Vendors for the Mid-Range Market

There are some storage vendors and industry analysts who believe that a trend is emerging with many mid-size businesses tending to buy storage equipment from the same vendor that sold them their services. “When we’re talking about solutions integrators, mid-size businesses want to deal with a reputable and reliable solution provider,” says Gabriel Lopez, director of product management, FalconStor Software, Inc.

Lopez says that this can help both storage vendors and solutions providers if they work together, as the storage vendor can provide the functionality and flexibility for the integrator to put together a solution that effectively addresses the customer’s technical and financial needs.

Michael Heumann, director of HBA Marketing at Applied Micro Circuits (AMCC) , sees it more as a challenge for the storage vendors, because even though most customers will always look to buy total solutions rather than pieces that they integrate themselves, the challenge for storage vendors today is to identify those buying patterns in mid-size businesses and develop the right partnerships so that they can deliver products needed most by customers without trying to change their buying behaviors.

Heumann, as well as other industry vendors and analysts, also believes that mid-range firms will most often only go with those vendors that can provide them with complete solutions without having to pay too much of a premium to do so. “For many IT needs, large server vendors can service that market very well, and the brand name and perceived reliability that these large vendors bring is often very important to mid-size businesses,” says Heumann.

At the same time, he points out that the ‘white box’ server market is still alive and healthy, with these vendors often filling important niches and/or providing solutions that may not have large enough markets for the big server vendors to be interested in. “Both delivery mechanisms are important, and ultimately customers will go with the vendors who provide real value to them, whether they are server vendors, service vendors, or storage vendors,” concludes Heumann.

Jeff Silva, vice president at MaXXan Systems, Inc. agrees and thinks mid-range companies will go with the storage vendor that will give them the best bang for the buck. Servers have become commodities, he says, and smaller companies look for price, ease of procurement, and quality in terms of vendor reputation.

Page 2: Understanding the Needs of Mid-Range Firms

Continued from Page 1

Understanding the Needs of Mid-Range Firms

Another issue that seems to arise is whether or not storage vendors fully understand that before they develop their ‘go to’ market strategies for the mid-range, they need to understand both the storage architecture and the preferred buying behaviors of mid-size businesses. Lopez says that understanding the needs of the customer is the only way to tailor a solution to meet a customer’s requirements.

“Most mid-size companies do not have the sophisticated environments that large enterprises have, and many still rely on internal or direct-attached storage to satisfy their requirements because they are simpler to manage.”

Jeff Silva, MaXXan Systems


Heumann agrees but takes the issue one step further. “One thing we have seen over the past few years is that companies that try to force customers to adapt to ‘go-to-market’ models that are not what the customer is used to and that do not provide additional value over those the customer is used to are bound to fail.”

His contention is that SAN storage vendors that have historically serviced large enterprises will only be successful selling to mid-size businesses by adapting to existing mid-range business market delivery models, and by then augmenting them to add value.

On the architecture side, Heumann sees medium-sized businesses adopting ever more sophisticated IT tools to improve their productivity while also improving the efficiency of the tools that they already have. And many industry professionals believe that storage vendors can provide real value to these customers by showing them how new storage architectures can help them leverage these new capabilities while at the same time not introducing additional storage management workload.

This, says Heumann, requires storage vendors to understand the strengths and weaknesses of existing storage architectures for mid-range businesses so that the storage vendors can help provide solutions to these issues, not just technologies and/or components.

Is Storage a ‘Natural Fit’ for Mid-Size Businesses?

A recent Gartner report stated that less than 10 percent of the IT staff in mid-sized firms have storage responsibilities. If this is in fact true, are storage services really a natural fit for mid-size companies? Lopez says that anything simplifying and helping to standardize the storage practices for mid-range businesses is going to be a plus, especially with a shrinking IT staff that has to take on more responsibility.

Silva says it really depends on the type of storage service. “Most mid-size companies do not have the sophisticated environments that large enterprises have, and many still rely on internal or direct-attached storage to satisfy their requirements because they are simpler to manage.” However, he adds that as they begin to implement network topologies for storage, they will look for the easiest way to do so.

“Some storage services in the form of consulting and education on SAN implementations or data protection, backup, and restoration would be necessary, but I don't think they would be willing to turn over outsourcing responsibility for managing their storage resources to a third party,” he concludes.

Page 3: Storage Drivers for the Mid-Range

Continued from Page 2

Bringing Third Parties into the Mix

That raises another issue of whether or not mid-range firms will balk at the suggestion of third parties managing part of their infrastructure. Lopez seems to think that it has nothing to do with the size of the actual company, as most businesses would rather manage their infrastructures internally before considering third parties. Silva agrees.

“Companies that try to force customers to adapt to ‘go-to-market’ models that are not what the customer is used to and that do not provide additional value over those the customer is used to are bound to fail.”

Michael Heumann, AMCC


Heumann, on the other hand, contends that some will and some won’t. “As storage vendors, we need to develop go-to-market strategies that can work with both scenarios effectively, so that customers can choose the approach that is right for them,” he says.

Is the Focus on Doing Business or Building Storage Solutions?

Service and customer support, the reliability of the storage vendor, ease of doing business with that vendor, and product flexibility all rate very high with mid-size businesses when it comes to implementing a storage solution. “Because of their size, the focus of most mid-range firms is on doing business — not on building storage solutions,” says Heumann.

He says that the storage solution is seen as a tool to enable the company to perform better or be more competitive in its business. “This is why it is very important for storage vendors to strongly partner with their VARs to provide optimal support for these customers so that they can concentrate on running their businesses.”

Storage Drivers for the Mid-Range

Storage needs are driven by different requirements, and depending on the size of the business, those requirements may change, so it is vital that storage vendors interested in tapping into the mid-range market understand what is driving the need for storage.

Lopez says that in addition to cost savings being a major factor, ease of procurement (including returns), ease of implementation, and technical support are a few other drivers for increased storage requirements in mid-size businesses. Silva adds business continuance, compliance with federal regulations, and 24x7 operations to the list.

However, Heumann points out that often times when people use the term “cost savings,” they are generally referring to acquisition costs. While this is important, total cost of ownership is an even greater consideration, cautions Heumann.

“For instance, a storage architecture that cost $20K versus $40K would not provide a net cost savings if the $20K system required the addition of a dedicated IT resource to manage it,” he says. Similarly, storage products that require server reboots to add storage and/or reconfigure the storage fabric cause server downtime that can cost businesses significant revenue.


Overall, the most important factor to take away is that while businesses in the mid-range have storage needs every bit as important and vital as those of larger enterprises, these firms present a completely different set of challenges and opportunities for vendors. Effectively tapping the mid-range storage market will largely depend on vendors realizing this and tailoring their products and solutions to meet these unique needs.

» See All Articles by Columnist Leslie Wood

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