Recession coming in the storage market?

Potential winners and losers if buyers strike

Recession; the dread ‘R’ word. It seems clear that the USA is entering a recession with financial institutions being battered; Bear Sterns has just been rescued from a financial meltdown.

If consumers batten down their spending hatches then businesses that sell to them will face lower orders, will want to conserve cash, and won’t be able to buy so much storage gear; products or services. Who will be the likely winners and losers if this scenario comes to pass?

The winning storage suppliers will be those that can sell products or services with year one cost-savings in excess of the storage sale cost. It’s a time to be ripping out expensive gear and replacing it with less expensive products or services. Customers need to do more with less.

Storage technologies such as de-duplication, VMware-integration, MAID, and iSCSI SANs will face more interest from customers than supliers selling disk-based archive and virtual tape libraries which require constant spinning (meaning energy-draw) and whose main appeal is faster backup and faster restore than tape.

Tape automation vendors will find plans to replace their technologies with faster disk alternatives may well be put on hold. As long as you can prove your tape automation alternative is a lot cheaper than the disk alternative, surely not that hard, then the Gods may smile on you.

There are must-have technologies in today’s climate, such as eDiscovery and compliance gear. If you can supply comprehensive products at a substantial discount to your competitors then, again, the Gods above should smile on you.

Storage suppliers that are under-performing and/or have over-ambitious plans will face tough times. Investors who perceive that companies in trouble or companies with over-ambitious targets for a recession period will mark them down. Their stock prices will fall.

Companies supplying overall infrastructure products with a payback over several years will tend to face a buyers’ strike as customers put such spending on hold. For example, enterprise content management (ECM) solution sales might face increasingly tough sales cycles. Ditto information lifecycle management pitches. Customers will want an immediate payback to sanction spending.

Storage products that enable some of your business processes to perform better, such as business intelligence, may also face a buying slowdown because the results are indirect. Savings or extra profit are a gamble based on use of the product and not a certainty based on direct cost-savings.

The message for suppliers is to start emphasising the immediate cost-savings advantages of your products and services. This messaging will respond directly to buyers’ concerns in an economic environment in which their own company revenues are under threat.

The massage for customers is to conserve cash and look for immediate cost-savings from any storage purchases. You only spend if you have too and you look to recoup more than the cost of the purchase in the first year of ownership so that the net financial effect is positive.

Buying services which let you throw out existing products and save money could be a worthwhile move.  Leasing must-have products could be better than outright purchase if there are immediate savings and the total cost of ownershp is better.


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