You’d think with the economy in shambles that now would be a good time for a discount on that data storage array you’ve been coveting from the likes of EMC (NYSE: EMC) or NetApp (NASDAQ: NTAP), but so far storage pricing seems to be holding up.
Auto dealers and retailers offer big discounts to boost sales when the economy sours, so why aren’t data storage companies doing it? You’d think that with budgets being cut drastically, storage vendors and resellers would be offering fantastic savings on the cost of new hardware or software. But rebate and trade-in deals to rival the automotive industry don’t appear to be on the way just yet.
“On some products and technologies, pricing is holding, particularly for those where there continues to be strong demand,” said Greg Schulz, senior analyst and founder of StorageIO Group.
Mind you, there are some deals to be had, and prices in general are heading southward. One anonymous user witnessed a deal with Compellent (NYSE: CML) and EMC where both were forced to drop their prices significantly on a midrange array due to price pressure from the Sun (NASDAQ: JAVA) 7000 series.
Jim Dougherty, lead engineer at Plixer International Inc. of Sanford, Maine, is noticing more price cuts gradually creeping in.
“You are seeing the better deals or leverage on the larger items/quotes,” he said. “The vendors know that the business is out there and will do whatever they can to obtain it.”
Others report a steady if unspectacular decline in prices that began well before the current woes.
“Pricing was already dropping due to the arrival on the market of products built from general purpose server components,” said Jason Williams, CTO and COO of Digitar Inc. of Boise, Idaho, a company that has saved a lot of money with commodity hardware and open source storage. “With more companies embracing those solutions due to financial pressures, traditional proprietary vendors are being forced to lower their prices to stay competitive.”
Schulz, for instance, mentions that 4Gb Fibre Channel SAN products have become more affordable, thanks to the arrival of 8Gb and Fibre Channel over Ethernet (FCoE) lurking just around the corner. He has also noticed a price drop in 10Gb Ethernet ports as well as many midrange storage systems, including those using high-performance Fibre Channel or SAS disk drives.
“From a storage system perspective, particularly for entry-level solutions, some real bang for the buck can be found” in solutions such as the EMC Clariion AX4, Dell (NASDAQ: DELL) MD1000/3000 series, HP (NYSE: HPQ) MSA2000, IBM (NYSE: IBM) DS3000, NetApp FAS2000 and Nexsan SATAbeast systems, among others, said Schulz. “Prudent buyers that can plan and leverage their purchasing plans and capacity plans have great opportunities to leverage current vendor incentives and promotions,” he said.
Similarly, Chris Beck, a network administrator for the City of Fontana, Calif., has observed that products seem to be cheaper than before. He recently replaced an HP EVA 5000 with a Xiotech Emprise 7000 as the city’s core production storage system.
“The cost of our Emprise 7000 was about a third of the cost that we paid for our EVA 5000 back in 2001 — and the EVA 5000 had less than half the capacity back then that it does now,” said Beck. “Even the new EVA 8100 that was our second option was less than half the cost of the original EVA that we purchased.”
Maintenance and Services Deals
One area where the better deals are to be had appears to be in services. According to Schulz and Williams, the bargains are often in multi-year support contracts.
“Anything that will ensure multi-year revenue to a vendor can be used now as a great bargaining tool on the rest of the hardware in the deal,” said Williams.
Tim Chester, CIO of Pepperdine University in Malibu, Calif., agrees. While he isn’t seeing much in the way of hardware price cuts, what he is noticing more value add in ongoing deals. This includes free consulting and more help on implementation. He has also noticed far more cold calling from vendors, which bodes well for easier negotiations going forward.
Resellers and consultants are noticing it too.
“Companies are definitely pushing back on vendors wherever possible,” said Chip Nickolett, owner of Comprehensive Consulting Solutions Inc. of Brookfield, Wisc. “Usually there is some threat of discontinuing use or migrating off a product used as leverage to renegotiate an existing multi-year agreement or achieve more favorable terms on renewals.”
And don’t expect too much customer loyalty in the current climate. The likelihood is that users will lose their long-term preferences when a potential usurper provides a low enough offer.
“I will go outside of normal channels to find that price,” said Rainer Mueller, IT analyst for the City of Encinitas, Calif. “I will also play one vendor against another — unfortunately, it has come to that.”
So far he hasn’t seen much in the way of cut-rate storage. What he has found, though, are desktop systems with more bells and whistles at better prices than a year or two ago. He’s also seen some especially aggressive pricing in the antivirus software market.
“Newer companies tend to go after the pricing provided by older, more established companies,” said Mueller. “We received a bid from a newer player that offers us three years of coverage compared to what we paid for one year with the older company.”
Leasing, SaaS and Open Source
All of this may add up to radical changes in buying patterns over the long term. With dollars for outright purchasing growing tighter, leasing may make a comeback.
“I’m seeing and hearing a pickup in leasing activity, which has been rather light to non-existent for the past several years, as a means of stretching dollars and cash flow,” said Nickolett.
Other possible shifts in the market might appear in the areas of open source software and Software as a Service (SaaS).
“SaaS and open source have become vehicles for newer vendors to provide a credible threat,” said Nickolett.
He suggests a complete proof of concept effort to demonstrate the technical capabilities of such alternatives — then create a plan to migrate 10 percent to 15 percent of your IT footprint to that platform as part of a strategic cost reduction effort.
“You’ll soon have your vendor’s attention,” said Nickolett. “I personally believe that our current economic crisis is the change agent that will drive SaaS and open source to the next level of widespread enterprise adoption.”