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Storage keeps midmarket's appetite

Posted: 01 Nov 2005 ?? ?Print Version ?Bookmark and Share

Keywords:storage? flash? crn? survey? growth?

The midmarket's appetite for storage keeps growing. Storage jumped to second place from fifth year-over-year on the list of top spending priorities for midsize IT executives in the November 2004 CRN Business Spending Survey. This bodes well for the channel, which is the chief means of delivering storage solutions to midsize customers.

So, not surprisingly, solutions providers have high sales expectations for storage in 2005. In the CRN Monthly Solutions Provider Survey for November 2004, the number of respondents who said they expected growth of 6 percent or more in storage sales rose significantly compared with November 2003, climbing a solid 9 percent for hardware (to 60 percent from 51 percent) and increasing a healthy 13 percent for software (to 56 percent from 43 percent).

"Midmarket companies are waking up to a couple of things," said Mark Teter, CTO of Advanced Systems Group Inc. "They're saying, 'My gosh, we need more storage,' and, 'It seems we're not managing our storage very well.'"

Smaller companies don't necessarily have smaller storage issues than large enterprises such as solutions providers, vendors and distributors, and the key business drivers for storage sales continue to be compliance, storage and infrastructure consolidation, business continuity and security.

"Compliance is absolutely driving the storage business," said Reagan Dixon, president of Dallas-based storage solution provider Lumenate, which partners with Sun Microsystems, Veritas Software, Hitachi Data Systems (HDS), StorageTek and other vendors. "We had one customer come to us and say, 'Our lawyers told us we have to retain everything forever.' "

And before customers even get to dealing with compliance, Dixon said, many of them have to upgrade their storage infrastructures and start classifying their data.

Jeff Bawol, senior VP and general manager of the enterprise software and storage business unit at Avnet Partner Solutions said, "As long as the consolidation and security issues continue, as long as they're concerned about the use of the current storage they have, you're going to see a strong drive for storage in the midmarket and the software to manage that storage."

Overall, midsize companies appear ready to hone their spending plans toward more specific products and technologies over the near term while keeping the growth rate of spending relatively steady, according to data from the November Business Spending Survey. This is consistent with previous data covering small businesses in that some technology areas, such as storage, are likely to see faster growth than others, thus solutions providers will need to refine their sales strategies to address these opportunities.

In the November 2004 survey on business spending, 46 percent of surveyed midsize companies expected to increase their technology budgets over the next 12 months. This is down rather sharply from 58 percent in August 2004, the last time these companies were surveyed. Despite the decline, however, nearly three times as many midsize companies plan to increase their IT budgets compared with those planning to decrease them.

Those that do expect to boost spending are likely to make new technology investments. More than two-thirds of these companies plan to boost spending by more than 15 percent over the next 12 months. And 79 percent are either "extremely" or "strongly" committed to actually carrying out these planned increases. The strong commitment of these midsize companies to their spending plans should balance out the fact that fewer companies are planning spending increases, keeping the overall growth of midsize-company spending relatively stable over the near term.

Within storage, management software was the No. 1 spending priority for the second year in a row, according to the November survey.

Lumenate has three or four customers committed to spending on storage management software, Dixon said. "We've seen a lot more midmarket companies talking about some sort of software-management framework pieces to their projects," he said. "And they say they have the budgets for them in 2005."

SAN installations followed closely behind storage management software in the CRN survey, tying for second on the list of spending priorities. Advanced Systems Group's Teter said that as the SAN and storage networking industry has matured and broadened, costs have come down and familiarity with the technology has increased, which has opened the door to the sale of these solutions. "You don't have to explain to customers what a SAN is anymore," he said.

On the NAS front, Dixon said Lumenate has seen interest in the technology rise because of its flexibility.

The No. 3 spending priority within storage was enterprise backup, according to the survey. "The backup market is huge," said Andy Khanna, president and CEO of Sonasoft Corp., a San Jose, California-based Microsoft business partner that, four months ago, began shipping a software suite for the Microsoft platform focused on data recovery. "If you're a company with 100 employees and you have an Exchange server that talks to the world for you and it goes down, you're in trouble."

Lumenate's Dixon said he's pleased with the attention vendors are giving to the midmarket, and his company takes full advantage of it. "Because we partner with several different vendors out thereincluding HDS, Sun, Veritas and StorageTekit allows us to pull from a pretty large solution portfolio, so we're going to match you to the right solution," he said. Dixon still expects the evaluation cycle for companies to take some time, which means he expects the real spending push to come from the midmarket in the second half of 2005. That highlights another key feature of the midmarket: the need to use caution. "In today's world, customers are a little more price-conscious, so they are a little more careful about their spending," said Avnet's Bawol.

Yet, the midmarket is definitely a strong area with plenty of steam, Bawol said. The spending on storage in the midmarket is a "sustainable" trend, he said. "This isn't a flash in the pan."

John Roberts, Director for Editorial Research

Timothy Long , Sr. Writer


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