Time for VARs to start sharpening blades

Mark S.A. Smith has been called a guru for blade technology. But at heart the president of Colorado Springs, Colo.-based Outsource Channel Executives Inc. is a hardware salesman.

Blades, he believes, is the place the channel should be now. Here are his reasons:

• Blades account for only 10 per cent of worldwide server market sales, according to IDC. Last year it was only seven per cent but in 2009 it will be one-third of the market;

• Blades enable VARs to install themselves as trusted advisors;

• The storage tie-in means a customer will need extra servers for different applications;

• Finally, Dell, IBM and HP are the only players in the sector.

“HP expects half of its business to be blades, so you have to stand up and take notice,” Smith said, although customers are not buying them in volume. But he believes that is a good thing.

Part of the issue today is that blades are sold into data centres. The servers have only slowly trickled down to the mid-market and into small business. The typical customer interested in blades has between 50 and 100 employees. The channel, he believes, should focus on this sized customer, although there are some heading into the 500-plus employee base as well.

Smith believes the channel should be more imaginative when selling blades. For example, he said IT is better as a system than a system of parts, and that is why blades are hot.

“The concept is putting a data centre into a box and having it run through one simple software piece,” he said.

Meshing with the channel

One of the benefits of blades is they run cooler than standard servers, which means a reduction in electric bills. An accompanying benefit is a reduction in the destruction of parts such as hard drives, CPUs and power supplies fried by cooling fan failures.

Blades provide even more savings because they are half the price to administer. There is no KVM (keyboard, video, mouse) and blades reduce wiring by 90 per cent, Smith says citing IDC figures.

“With no KVM you save 25 per cent a month,” he added.

Less floor space is needed for blades, a big factor in high rent districts, he said.

Morris Maron, business development manager for Insight Canada, is bullish on blades, but says they have to be positioned correctly.

At Insight, blades mesh with the company’s solution-selling approach. “Where there is a large scale server upgrade or a customer is buying 10 to 20 servers we will propose a blade to them because of the efficiencies and the savings in power, real estate, heat,” Maron said. “Also, if they bought a fair size server bank and would like to add five to six servers or it is a net new opportunity, we would position blades as an alternative.”

Furthermore, blades have enabled Insight to continue its strategic advisor strategy. The company’s business model has evolved from being a pure procurement house to being a total solution provider, with centres of excellence and a configuration centre.

Maron believes the blade market will continue to grow even though customer are still hesitant about the technology, especially in Intel-only shops since IBM and HP are pushing AMD-powered blade units.

“At first glance there is some sticker shock. But, if you do true TCO you will save initially on cabling and switching, and in year three or four you’ll save on power consumption. It then becomes more economically feasible,” he said.

Philosophical change

But blades mean a change in philosophy for both reseller and customer. “It is about control over the machines,” he said.

Forty years ago, Smith said, computer centres reported to CFOs because they were seen as an accounting function. “In those days computers were the holy grail. They were housed in separate rooms with a raised floor and their own air conditioning. It was looked after by guys named Norbert. He had a mainframe and if you needed something done you had to be nice to Norbert,” he said. The problem with that was that Norbert took a long time.

Millions of PC sprung up, but they did not talk to each other, they were not backed up and files could be stolen. There were maintenance and software licenses to buy and keep track of. “You lost control,” Smith said. “Before with Norbert you had control. The move back to blades is about regaining control.”

Dell at a disadvantage

Blades give control back to where servers are located along with control of what servers are used for, who manages them servers, how they are deployed and better security , Smith said.

Blades cost more up front, but Smith said the more infrastructure integrated into the enclosure the less it will cost the customer.

The breaking point, he believes is at eight servers. “If a customer goes there they need a blade,” he added.

Another problem for the channel is that blades remove margin- making cabling, but Smith says customers can be sold other things that make more money.

Direct seller Dell Computer has had a price advantage over the channel for more than a decade. However, in blades they are seemingly insignificant, Smith said.

The company only has three blade offerings, which is puny compared to the other two vendors in this space. Dell is aggressive with pricing, but it lacks management tools for blades, he added.

“If you lead with management tools rather than technical specifications or price, you can beat Dell in blades. Blades is a game of inches,” Smith said.

As far as margins go, they are better than servers. Maron pegs blade margins in the high single digits, with the possibility of netting 12 points.

And with the compound annual growth rate of blades moving to 43 per cent through 2008 this market has the potential to be a consistent money-maker for years.

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Jim Love, Chief Content Officer, IT World Canada

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Paolo Del Nibletto
Paolo Del Nibletto
Editor of Computer Dealer News, covering Canada's IT channel community.

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