It’s a Software-Defined Future: Are You Ready to Profit From It?

Tarkan ManerBy Tarkan Maner

If you’re a solution provider selling hardware and services in the traditional enterprise storage market and your business is robust and growing rapidly, you can stop reading right here. You’re living the dream — and who am I to burst to your bubble?

The traditional enterprise storage business has been great for resellers, many of whom built successful companies around legacy storage providers. Today, however, those same resellers face a shrinking market, increased competition and margins that are rapidly evaporating. According to Gartner’s Forecast Alert: IT Spending, Worldwide, 2Q15 Update, spending on data-center systems will decrease by 0.4% CAGR over the next four years.

If you had any doubts about the future of enterprise storage, M&A activity tells you all you need to know — pay particular attention to a couple of blockbuster acquisitions announced recently. Legacy vendors can see the writing on the wall, and they’re consolidating like never before to cut costs and pursue synergies.

Unfortunately, market consolidation tends to squeeze resellers and make it more difficult for them to differentiate.

This is actually good news … if you’re a reseller that sees opportunity where others see a glass half-empty. Sure, some peers will grit their teeth and work even harder to become leaner and more efficient and maximize whatever profit is still available in a market that’s increasingly commoditized. Forward-thinking resellers, however, will embrace the future, saying, “Hello, software-defined everything!”

It’s a Software World

The software-defined environment is most definitely the coming wave. Indeed, it’s already here, washing over IT and disrupting the way customers have traditionally purchased, provisioned and managed networking, storage and the data center.

In a software-defined environment, the computing infrastructure is virtualized and delivered as a service, or set of services, that includes software-defined networking (SDN), software-defined storage (SDS) and software-defined data centers (SDDC). The revolutionary way these technologies decouple bare metal from the software layer is precisely what’s driving the commoditization of hardware in the data center and eroding the traditional storage market.

Your customers are noticing. Enterprise IT investments in software-defined infrastructure – the technology umbrella that encompasses SDN, SDS and SDDC – are bearing out this prediction. By 2018, analysts predict this market will grow from $21.78 billion in 2015 to $77.18 billion in 2020, with an estimated CAGR of 29 percent. That’s remarkable growth by any standard, but it should be particularly appealing to resellers who are watching the enterprise storage market head in the opposite direction.

Resellers who have long served the enterprise storage market should be well positioned to capitalize on the software-defined model, if they haven’t begun to already. If you’re still on the fence about software-defined, consider how you might leverage your technical expertise, resources and customer relationships to develop new practices around SDN, SDS and SDDC. It’s still early enough in the market maturity process that if you act quickly, you should be able to establish a strong foothold in this technology.

The key is building relationships with the right vendors. In an area that is undergoing rapid change, with new players coming and going, you want to do your due diligence and make sure you’re partnering for success. Aligning with the wrong partner could set you back years or cause you to miss the opportunity that software-defined everything represents.

Like all great opportunities, the window will not be open for long.

As you look to build a successful business around software-defined services, we recommend that you prioritize these best-practices:

  • Maintain openness to emerging technologies. Flexibility is important in the software space. This is due in part to the rapid evolution of software technology; consider for example how quickly cloud-based applications and the Internet of Things (IoT) are changing requirements within the data center. Flexibility is also important to your customers’ environments. IT organizations are typically quite heterogeneous, and you need the ability to work with diverse applications and systems from numerous software vendors.
  • Focus on services to enhance and differentiate your offerings. Resellers have plenty of opportunity to wrap professional services around a software offering in order to deliver a more complete solution and create competitive differentiation. Software services also allow you to solve a broad set of business problems, driving more value for the customer and a more profitable, long-term revenue stream for you.
  • Use consolidation to your advantage. The recent spike in consolidation is problematic for VARs that lock themselves into a single platform. Remaining agnostic will help you compete effectively while providing your customers with more flexibility to find the right solution for their needs and not focus exclusively on narrow, proprietary solutions.
  • Identify and pursue innovative tech partners. As mentioned above, you should evaluate your current relationships with vendors and technologies, both new and existing, to determine which can work with you to extend your solutions. Strong technology partners will have a large, established customer base; a wide portfolio of products; mature solutions, well beyond the first or second generation; an extensive partner ecosystem; and rich technology relationships. They will have a well-developed support model that makes onboarding easy and provides a greater likelihood of success for your customers.

Don’t kid yourself. The days of easy money selling enterprise storage hardware are fading in the rearview mirror. But as one door closes, another opens. “Open” is the operative word here. Open yourself to new opportunities in software-defined storage and the software-defined data center. Partner with the right technology vendor and you will discover opportunities well suited to your expertise and experience, where you can deliver real value to customers and capture a tidy margin for yourself.

Tarkan Maner is a global executive operator, investor and advisor in the information-technology industry. He is CEO and chairman of Nexenta. His operational and investment areas of focus include social media, mobility, internet of everything, big data, cloud computing, where software-defined infrastructure trends now redefine the enterprises from the data center to the end users.

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