IDC Study Shows Growth Slowing in ChannelBy Sean Gallagher | Print
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IDC's survey shows storage remaining the strongest of the industry segments, with Sun, NetApp and Hitachi making strides.
A survey of resellers released by IDC shows that channel partners felt a broad slowing of growth or an actual decrease in sales coming on in the second quarter of 2007 across nearly all industry segments except storage, where most partners saw sales staying about the same.
However, Network Appliance, Hitachi and Sun Microsystems storage partners reported positive news for the second quarter, with increased sales since the beginning of the year. Sun, NetApp and Hitachi were the only companies with no partners reporting more than a 20 percent decline in business.
The IDC Channel Panel survey, released Aug. 3, found that 53 percent of Sun storage partners reported increased business over the first quarter, while only 17 percent reported a declinedown from 22 percent with declining business in the first quarter. The survey also found that while SAN (storage-area network) and NAS (network-attached storage) sales remained level for most vendors, 17 percent of channel partners selling DAS (direct attached storage) reported a decline in business.
Sun's improvements came on the heels of a controversial direct sales program earlier in the year that had many partners talking about quitting work with the Santa Clara, Calif., company. The 25th anniversary discount program, announced early in the second quarter, was quickly amended to include channel partners, but only after many of them had sales cancelled by customers.
"I think it's really interesting that [Sun's channel partners] can't quite seem to leave Sun, even when they get ticked off," said Christina Richmond, research manger with IDC's Hardware Channels Research team. "There are really only two vendors who have heterogeneous attached storage[Sun's] StorageTek [unit] and EMC. After Sun apologized and changed the program, the channel said, 'Hey, they've come back around and they're still doing some good programs,' and they came back to them."
The spike in business may also have something to do with Sun's financial year, Richmond said. Sun's fiscal year ends in July.
Network Appliance's and Hitachi's storage partners also reported a good second quarter, according to the IDC report. None of Network Appliance's partners surveyed reported a decline in business, while 45 percent reported an increase. Of the Hitachi channel partners surveyed, 38 percent saw increased business, while only 12 percent saw a decrease.
Dell's sales in storage remained largely unchanged across the channel, with 83 percent of channel companies reselling Dell storage reporting no change in business. Richmond said this might be because of the uncertainty surrounding Dell's channel strategy, particularly following its acquisition of managed service technology vendor SilverBack Technologies. "They're taking a wait-and-see approach," she said, to determine whether Dell intends to compete with channel partners with managed services offerings.
Dell, of Round Rock, Texas, has already begun advertising storage managed services in some areas. "Up here in Massachussets, Dell is running an ad where they're talking about providing backups and the whole nine yards," said Brian Ritchie, senior vice president of partner sales of Glasshouse Technologies, a consulting and managed services firm based in Framingham, Mass. Ritchie said Dell isn't competing head-to-head with his servicesGlasshouse serves larger enterprises, while Dell is currently targeting its services at midmarket and SMB (small and mid-size business) customers.
Ritchie said the flattening of channel sales of storage hardware may correspond to a drop in demand he has seen among customers for storage hardware as they shift their focus to managing what they have.
"The place we're seeing a lot of demand is from customers getting tired of throwing more tech at the problem," he said. "Most partner business is based on education and [sales of new hardware]. If the customer is saying, 'I'm not using the stuff I already have effectively,' that's going to negatively effect their business."
In PC sales, Toshiba led the pack in increased sales, as the only vendor with more than 30 percent of surveyed partners seeing increased business this quarter, at 32 percent. Acer, which had seen almost a solid year of sustained growth in business, saw the biggest drop in increased business quarter over quarterfrom 49 percent in the first quarter of the year to 23 percent in the second quarterand had the highest percentage of partners seeing decreased business in the second quarter among the vendors named by partners, at 21 percent.
"Interesting watching Acer for a while, from about four quarters ago when they first started to have this hockey-stick growth," said John Grady, associate research analyst for Hardware Channels Research at IDC. "They haven't had much of a partner program, and most of their business has been based on large margins."
Toshiba's success may be a reflection of the effort the company has recently put into its channel program after returning from an all-direct model. Toshiba brought in Jerry Lumpkin from distributor Ingram Micro as vice president of channel sales in September 2005, and has invested more than $20 million in its channel program, said Richmond. Toshiba's efforts may have something to do with Acer's declining growth.
"Toshiba totally revamped their whole channel program," he said. "They went back out and wooed the resellers they lost when they went to the direct model. They got back a lot of their old partners and went after new partners. And they continue to make changes and investments in their programit's a very robust program [that] can make [channel partners] a lot of money. Acer's definitely feeling some of that heat."