SNW - SMB - IBM execs on price gouging, EMC tie-ups

EMC made two large partnership announcements this week: It signed an OEM agreement with Intel, which will distribute its low-end arrays, and a deal with NEC, which will help it manufacture new low-end storage systems. Analysts agree the deals bolster EMC's already growing presence in the small and mid-sized business (SMB) market. With that backdrop, Andy Monshaw, general manager of system storage at IBM, and Laura Sanders, IBM's vice president of systems storage products and solutions, both pointed to soon-to-be released IDC numbers that will show their overall storage sales outpacing EMC's. They spoke withComputerworld at Storage Networking World in San Diego about the pressure from IBM's chief storage rival.

How do EMC's expanded manufacturing and distribution partnerships effect IBM's strategy?

Monshaw: Number one, they're distributing a product that nobody appears to want, which is a single-controller, low-end storage device. It didn't work with Dell, and now I think they're seeking other partners. Two, they're going to be so over distributed in terms of the low end that it will completely commoditize it. Third, it seems to me this is the beginning to the end of its relationship with Dell. Dell chose Engenio [Information Technologies] on the low end, so I think perhaps we're seeing our first signs of divorce here.As far as us? We had tremendous growth in SMB last year. We grew roughly three times as fast in SMB as in our large accounts last year. Sure, we're always looking for the right kinds of partners to go to market with. We just signed a very interesting alliance with a very, very large industry player in one of the key segments. I don't think I can talk about it yet.

Is it storage?

Monshaw: I don't think we can talk about it yet.

The IBM and NetApp partnership -- some analysts have pointed to conflict between the two of you in the sales field. What are you doing about that?

Monshaw: In general, the partnership is going extremely well. We got products to market in record time last year. I do not see the conflict the analysts you referred to see. To me, it's the uninformed talking to the uninformed. The proof will be in the results.

Users at SNW have voiced anger about storage management software licensing being based on capacity. Every time they add another 2TB, you bill them. Will you address that?

Sanders: When storage management software first came out, everyone said we priced per processor. Everybody hated that and said we want it priced per terabyte. So we priced it per terabyte. I think the issue really is the steepness of the slope. If, every time you buy 2TB, we send you a bill saying, "Thank you for playing. Here's X times 2," I totally agree. It's got to be graduated pricing or site licensing. But the thing that bugs me about this is one of the reasons this was all done is people never had a budget for storage management software. They bought disk or they bought tape. So I'm actually thrilled that they're talking about storage management software pricing, because they're thinking about it as a thing that they need to buy against a value. If there's a different way we need to price and package it because of that, I'm good. That'll be great to have that conversation with our customers.

Users see the price of disk plummeting, yet they feel like they're being gouged. What's IBM doing to provide more honesty in pricing?

Monshaw: That's contrary to what we hear. Incumbency leads to gouging. I think some vendors out there have some hidden costs. Hidden costs for device drivers, for maintenance, for anytime they have to come in and touch the infrastructure, and hidden costs for replication on every disk array. Disk prices have been [dropping] between 35 percent and 40 percent year to year. That's not that different from what it was before. But, let's be honest, some folks charge you for damn near everything.We do get brought into a lot of accounts where the incumbent is pricing very high and [the user is] stuck. But the entrant into the account will have a higher cost just to get in. What we've seen in many, many accounts is a virtualization layer takes away this whole cost of switching [vendors].

Your standardization effort through the Aperi vendor deal you announced at the last SNW doesn't seem to be going anywhere. You have the same number of vendor partners.

Monshaw: We really haven't opened it up until the bylaws are formed, because the current body has to vote on those bylaws.

Isn't your effort toward standards going to conflict with SNIA's SMI-S initiative?

Monshaw: Absolutely not. To me it's very straight-forward. We have standards. We have no reference code or architecture around those standards. It's every man for himself. It's about having some code you don't have to rewrite and rewrite. Every time we write a driver for HP, I bet they already have one. But we write it any ways.

Tape is an enormous part of IBM's business, but it seems to be shifting toward being relegated to archival only. How do you address the drop in the amount of tape being used?

Monshaw: I don't think it's a fair assertion. First of all, tape -- while it is largely used in the archive market -- isn't solely used in the archive markets. Secondly, the archive market is a pretty damn big market. It's four times the amount of capacity than the entire worldwide external disk market we shipped.

That's traditional. Tape has always outsold external disk. But analysts say that's shifting.

Monshaw: The market is not shifting. Archive is really at the infancy of its explosion. There's legislation out there.... Europe is evaluating whether every single telephone call needs to be captured. You going to put that on disk? No way. The trick with tape is just maintain technology leadership. Keep the 10:1-plus separation between low-cost SATA disk and tape and that market will be healthy for a long time.

You spoke a lot about virtualization in your speech here. Can you elaborate?

Monshaw: Network-based virtualization is very real. Disk-based virtualization is also real. There's about 2:1 petabytes managed under network versus disk. Switch-based virtualization is chartware, for now. I don't think you can find any reference customers for that. You can find hundreds and hundreds of reference customers on network virtualization.

Cisco wouldn't be happy to hear you say that.

Monshaw: I'm not in the business to make Cisco happy. We're in the business of dealing with facts.

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