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View from the Hill - #7

Will Sun Succeed in the STORAGE market? - part #2 of a 2 part article

Can Sun reinvent itself as a STORAGE company? And will it be credible if it does?

October 2000:- This is an occasional column by Zsolt Kerekes publisher of the SPARC Product Directory.
See also:- article:- the Top #10 SPARC Manufacturers
article:- Data Recovery for Sun Servers
article:- Should Sun, Apple and Red Hat form an anti-Microsoft Marketing Alliance?
Squeak! - Venture funds in storage
article:- Why Sun's Server Revenue will Decline (Again) Next Year
SAN, Articles, STORAGE News, SPARC - news, Sun SPARC resellers - USA,

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Later... on September 27, 2000 I was contacted by someone on behalf of the Network Storage division of Sun, in response to my invitation for them to comment on these articles. I suggested they should wait until after seeing the concluding part, which was posted October 17.

After sending a number of reminders about this, we received no further replies from which readers can draw their own conclusions.
STORAGE services - click to see larger image
Cheaperbyte had been to a VAR marketing workshop on pricing strategies and segmentation. When he delivered a RAID system to a Sun user the price included FREE delivery. When he delivered the RAID system to a Dell customer the (same) price included... the car.
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In the first part of this article I stated that I didn't think that Sun is credible when it asserts that it is (or aims to be) one of the leading suppliers of enterprise storage systems. I also said that, in my view Sun is starting this race from a long way behind. In the second part of this discussion, below, I put forward some of my reasons for thinking this, and also predict that unless Sun makes very substantial changes in its interactions with this market, it's going to fall even further behind in the race for enterprise storage market share. Here are some of the factors I looked at in coming to these conclusions.

Measuring the behaviour of our readers when they see storage news headlines which include Sun Microsystems...
  • Do you remember those tests in school where you know the right answer, but still can't figure out how to get there from the original question? My own starting point for this analysis was the surprising and compelling evidence that all is not well with Sun and storage...

    If you look at the design of the computer web sites which I edit you'll notice that nearly every single page on these sites carries an image with some text. Take a look at the top left hand corner of this page to see an example. These are editorial banner ads which we use, mainly to alert readers to new articles on the web site, new subject indexes and a selection from the news headlines which we're running on that day in our news pages. These editorial banners use banner ad technology to inform readers about what they can see on other parts of the web site. Looking at the click rates enables us to measure in real-time, usually within a couple of hours, how much reader interest there is in a new subject featured in the editorial banner. On any particular business day we'll be running somewhere between about 4 to 15 editorial banners which include a pool of long term banners, and new ones which are created daily.

    Using comparative click rates as a guide tells me which subjects are more popular than others. The simple consistent format provides a much more reliable indicator than if we used different graphic designs. It also helps me see if we've run a new article on the wrong site.

    Unlike a focus group which asks a very small number of users what they think about about a subject, editorial banner ads provide a comparative measure of the behaviour of hundreds of thousands of readers. What they have been telling me, is that news headlines which include stories about Sun Microsystems and storage get consistently lower click rates than almost any other type of news headline which we run on STORAGEsearch. We get similar results on our SPARC site, but I interpret that differently, because most readers on our SPARC site are interested in other types of products, not necessarily storage. It's the overwhelming disinterest shown by our storage readers to Sun storage announcements that's significant. This is the market which Sun (and everyone else) has to focus on to be successful in enterprise storage. We've run more than 550 different designs of editorial banners so it's statistically significant.
  • As a sanity check on this we are also able to measure the strength of a company's brand in a market by comparing the pageviews for their company profile with other similar companies. This rating is capable of being increased on a particular site when a company is an advertiser - which can result in more readers visiting their profile. On STORAGEsearch, the Sun Microsystems profile ranks 29th in the list of company profiles.

    On our SPARC site, where incidentally Sun is not an advertiser, their profile ranks #1. This shows that, as you would expect, Sun has the strongest brand of any SPARC product supplier even taking into account the local boosting factor of advertisers which compete with Sun. But for storage seekers, Sun is a relatively weak brand.

Sun's image in storage:- the positioning problem when you're not #1, or #2, or even close in one segment, but you are #1 somewhere else...
  • The root cause of this problem may be due to the difficulty that Sun marketers themselves have when they try to portray an image of themselves as a storage company. This is not a new phenomenom. It's why AT&T never became a successful computer company, despite inventing Unix and the ubiquitous C programming language. It's why the Ford Motor Company bought Jaguar instead of developing its own luxury car brand, and it's why IBM's OS/2 operating system lost out to Microsoft Windows as the operating system of choice on most desktop PC's.

    It's difficult for customers to hold more than one mental image of the same company. Sun has successfully built an image of itself as the leading multiprocessor server company. It's done this with clever marketing and its own brands of technology (SPARC microprocessors and the Solaris operating system.) Along the way, to get this message across, it has been helpful to throw out simple messages, which I paraphrase thus:- PC's are bad, Microsoft software isn't as good as ours, Compaq, IBM, HP, Dell etc are the enemy. Those are the kind of messages which you need to give to your sales people and channel partners, in order to become, in people's minds, the #1 supplier of enterprise servers. That's the message which the market remembers.

    It's easy for Sun server marketers nowadays...

    For example:- earlier this year (2000) the average PC portable on the kitchen table at home had a faster (Pentium) processor than the most expensive (SPARC based) Sun mainframe. Was there any threat to Sun's position? Not a whisper. The reason? Was it because Sun could put more processors in a box? No, it doesn't any more, and it doesn't really matter. It wasn't a threat to Sun's dominance of the enterprise server market because most of the applications users want to run were originally developed to run on the Sun box, and work better there, so the market was willing to wait, and Sun still reported record sales of its slow clock speed servers along the way. Yes folks, it's very easy doing the marketing when you're #1 in your niche. It's also easy recruiting people...

    Now consider the problems of the poor old storage marketers within Sun. All the significant technologies in this market were developed by other companies so you don't have a technical edge. You do have a big enough development budget to design pretty looking boxes which you can sell at a high price to your dedicated fans (that works for Apple too). But your business unit would probably struggle to fit into the bottom end of the top 10 storage companies measured by revenue, and everyone else wants to eat your lunch and target your own server customers with their storage products.

    Meanwhile most of the companies which you would like to sell storage products to (if you were a standalone business) are probably competitors which your parent server company has been trying to grind into the dust for as long as you remember. Even if you did develop a great product, they wouldn't want to buy it. If you bypass the server principals and try to target the resellers of IBM, Compaq etc you're starting with a track record of having ignored over 95% of VARS ever since Sun was founded, because Sun doesn't make PC's or printers or other peripherals that these VARS would want to buy, so there was never a need to talk to them before... Sun might say at this point - what about Java? They communicated with a lot of people with that idea... True but, on that basis they might as well roll over and let Microsoft take over the storage market, because more real people work with their software products. I don't know of a reliable formula which would convert millions of people who know about a low level programming language into enthusiastic buyers of storage systems.

    It's hard to come out of a big successful company and launch into a very competitive market when, frankly, you're starting from a long way behind and even your own sales people are going to see that the emperor isn't wearing any clothes. These kinds of problems are not insurmountable, for example IBM became a born again Unix company with its AIX operating system. and a lot of people do buy it (but it took 10 years of hard work). Sun's storage marketers start with the advantage that Sun is a profitable company can afford to outspend many of the companies it competes with. But if Microsoft suddenly declared it wanted to become the leading Linux company it wouldn't necessarily be successful, even though you know they employ lots of programmers and have lots of money.

    To sum up, in my view, Sun's storage marketers will do very well if they can slow down the penetration of other storage companies into the Sun server base. The idea that users of other servers made by Dell, IBM, Compaq etc will seriously think that Sun is the best place they can buy their storage systems, which is a necessity if Sun is to be successful in the enterprise storage market, is something which doesn't seem credible today, or even next year.

What do other storage marketers do which Sun doesn't or can't...
  • It's instructive to see what other wannabe enterprise storage companies are doing, and compare this to what Sun is apparently doing. This is easy because part of the process involves "being visible" in the form of PR and advertising. That's how a lot of companies communicate with their markets.

    For example in the process of scrutinising thousands of press releases this year put out by storage companies, I got the distinct impression that many storage companies think it's quite useful to do some of the following...

    get your software drivers onto Microsoft's operating system CD's. Even little companies manage to do this - because they think it's important.

    partner with lots of other storage organizations, and

    put out a press release every time your product is validated to work with another company's product.

    Sun is good at partnering, but it's used to being the center of gravity in these parterning arrangements, and not a mere planet or a satellite. This is where Sun's positioning as a server company could get in the way of their success in storage. After all, Sun has their own operating system (Solaris)! Who needs anything else? Actually they did mention in a press release that their new storage systems can also work with Linux, although I can't see them investing in trying to get Red Hat Ready certification, or validation by VA Linux. The problem is that Sun runs many of their own compatibility branding schemes, which include Solaris Ready, so they have to cross a wide mental barrier before investing marketing and technical effort to say that their storage systems have been validated by Dell as being PowerVault compatible (or whatever). Hey, those guys are competitors to our (Sun's) OS and servers! Why should Sun seek their approval in a press release?

    Advertising:- in October 2000 I analysed how many web based storage publications Sun was advertising on. I included only vendor independent sites which included enterprise storage products within their content. I included ads, membership listings and sponsorships as "advertising", because all these activities require payment for visibility. Sun was advertising storage products on 27% of applicable storage sites. In comparison IBM storage systems were being advertised on 45% of applicable storage sites, and EMC on 18%. So Sun is about average in this area compared to companies it would perceive as significant competitors. That's hardly a strategy compatible with increasing market share.

My analysis of how Sun compares to some other companies who are aiming for the storage crown...

There will be more detailed analysis of these companies (and others) in future editions of Squeak! But if we disregard pure storage companies like EMC, for the present discussion and just take a superficial look at the storage street cred of some of Sun's server competitors, we can extract some pointers which may be useful.

IBM - has a lot of credibility when it comes to storage. Apart from having more revenue in the storage services market than all its main rivals combined, IBM did invent the winchester disk, and it did invent RAID and it's one of the world leaders in tape drive technology which its upplies to lots of other manufacturers. Incidentally, the first storage system which was advertised in our own SPARC Product Directory (about 3 years ago) was an IBM tape drive, for which apparently, Sun users were a major market. (Depending when you read this article the link to it may still work.)

HP - had a short fling in the winchester market, which most manufacturers found tough going. It's a major supplier of low end storage products such as optical drives and tape drives, and it's these kinds of low cost storage products which get your company into the recognition of the average computer buyer. However, while I still think of HP mainly as a printer company, having used their printers for nearly 20 years, in the storage area my guess would be that their main strategic asset is HP OpenView software which at the time of writing is being used in more than 120,000 multivendor distributed computing environments worldwide. Even storage leader EMC considered it worthwhile issuing a press release about this recently.

Compaq - is one of the world's biggest computer companies and in StorageWorks they have a strong brand of RAID systems which to my knowledge has been successfully sold into Sun's installed server base for many years. This year (2000) Compaq has been partnering with other storage companies at a furious pace as if it were involved in a race (which it is) for mind share. In one of these announcements:- on July 6, 2000 - Compaq Computer Corporation and IBM announced a strategic agreement to accelerate customer acceptance of open storage networking solutions. Both companies are committed to interoperability of each company's storage hardware and software, and will also sell significant products from each other's storage portfolios. The total of investments currently planned by the companies could exceed $1 billion.

Dell - strange as it may seem, when we started STORAGEsearch in 1998, I specifically cited Dell as an example of the type of company which wouldn't be included in this directory, because at the time I thought they were a PC company, and not a serious contender in storage. Well... 2 years in internet time is a long time, and you will see if you check our search-engine that Dell does in fact make an appearance in our directory and news pages because on September 5, 2000 - Dell announced a SAN appliance. Since then Michael Dell has been quoted as commenting on Sun's storage pricing, and saying that Dell will commoditise high-end storage systems and offer them at substantially lower prices than Sun. Actually the amount of data which an organization can generate is not necessarily related that closely to the price it paid for its servers, but it's more closely conencted to the number of users on its networks. So it looks like Dell Computer looked at its crystal ball a few years ago, decided that its own captive storage business might be threatened, and is getting its retaliation in first with some aggressive product strategies. I'm prepared to believe that Dell could become a bigger factor in enterprise storage than Sun, not just because they have a bigger base of installed servers and more to lose, but because they are better at marketing...

What does Sun have to do to improve its image as a potential storage supplier?

You may have noticed that in most of the cases above I've proposed that Sun's main storage problems are rooted in marketing rather than technology. Sun's current weaknesses are due to a historic lack of sufficient marketing investment which it can't do anything about. But there are also positioning problems which may prevent Sun from executing the correct marketing strategies now, even though it realises that success in storage is important (as it is to every large computer company). The current problems are exacerbated because Sun is so successful in another area (enterprise servers). It's difficult for companies to focus successfully on different product areas, because the factors which make them successful in one area may alienate potential partners in another, or create confusion in the minds of potential customers. I don't think that technology is an important issue, because technologies can be bought in or licensed as required, and with the exception of SAN software (which is more of a partnering issue and therefore marketing driven) there is no technical impediment which would slow Sun down. I don't do consulting, but if I were asked what would change my prognosis to one which was more upbeat for Sun in storage, I would suggest the following (not all of which are possible).
  • find a wormhole, go back in time, and invest more in promoting Sun's storage products to 3rd parties
  • spin off Sun's storage business as an independent company with a different name and a mandate to achieve significant market share in the non-captive server market
  • make friends with Microsoft so they offer Sun's storage products at the top of their menus for web storage and network storage
  • communicate more with the storage market about why they should be interested in your products, via articles, press releases, advertising and seminars

As soon as we get it, we'll include Sun's response to this article...

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