Nobody ever got fired for buying IBM, EMC, BMC Software ... er, Legato ... er ...

If you were a Wall Street investment analyst looking for opportunities in high tech, asking the advice of any "name-brand" IT market pundit would probably get you the same story:

  • Point: About 60% of IT spending comes from the top 2% of global 2000 companies.

  • Point: CIOs and CTOs in larger companies prefer to buy their technology only from big, established vendors - regardless of the fact that most of the truly innovative ideas these days tend to come from smaller startups that have no installed base and, therefore, no connection to the "old ways" of doing things.

  • Point: In large enterprise settings (those with refrigerator-size storage boxes), conservatism is the order of the day. Budgets are tight, and the focus is on return on investment (not in the financial sense of the word but as a code phrase for "payback analysis").

  • Point: No one in larger companies is all that interested in "strategic business value," regardless of the lip service they pay to the term. CTOs and IT managers are interested in one thing: self-preservation. Self-preservation is expressed as a simple equation: IBM, EMC, HDS (getting the pattern here?) equals CYA (or, cover your you-know-what).

Bottom line: Don't invest in start-ups, however "best of breed" they might be. Forget about technical merit of original technology, or labor cost savings, or measurable business enablement value. These are concepts from another time - a time before the dot-com bubble burst, before Enron, before 9/11 and the war on terrorism and the axis of evil. Today, the smart money - the only money - is on the purveyors of Big Iron, because no one gets fired for buying companies with three-letter acronyms for names. Nobody is buying anything from the small fry that, in all likelihood, won't be around a year from now.

The message of the analysts, most of whom are paid good money by the three-letter companies to articulate this view, is simple: If the big boys don't buy the products of the small guys, then the small guys have no bucks. No bucks, no Buck Rogers: Small companies are a bad investment.

Right or wrong, this market advice becomes a self-fulfilling prophecy when it is internalized by IT decision makers themselves. You don't need to look too far to see signs that this is exactly what is happening in the storage technology market.

In many interviews conducted with IT managers and technical C-level executives over the past few months, a common theme is emerging. It appears that, as the economy gets tougher, the tough guys are seeking cover within the shadow of the blue chip vendors.

Said one data center manager for a large financial institution recently, "There is a reason for the rationale of buying from the big boys for mission-critical platforms - risk management. I'd like to work with the smaller vendors. We, however, are in the business of risk management. How am I going to control the fate of that small vendor? I can't."

The fellow went on to say, "I don't mean to discourage innovation - I just don't think we'll see startups thrive in storage over the next few years. Most will reach a critical juncture (and ugly decision point) of developed IP, dwindling cash flow and buyer risk aversion. Those with the best IP will end up in the arms of EMC, Veritas, IBM or BMC (please help them if they end up at CA). Or innovation and experimentation will continue in university labs, much like the distributed file system advances today."

He concluded, "CYA is now back in vogue, along with ROI. It's pretty dull. But administrative boredom and regular hours are a sure sign of a successful data center."

CYA is a three-letter word

This view, which is well on its way to becoming a kind of "common wisdom" in the industry, flies in the face of recent developments, however. Ask an IT architect for a large Canadian retailer who found his storage management strategy "knee-capped" last month by the sudden and unexpected decision by BMC Software to drop its Patrol Storage Manager software product (see story).

According to the architect, he linked his strategy for storage infrastructure management on BMC Software's Patrol Storage Manager (PSM) three years ago, at a time when most of the promised application-centric management functionality had yet to be delivered in the product. Despite the deficits, the decision was considered a safe one.

"We saw the move as strategic. We knew it was a product in development and that there would be growing pains. But we believed in the philosophy and approach," he said. He added that BMC Software's product roadmap seemed credible because of the company's reputation as an established player with long-term staying power. He was shocked and angry when he was advised that the company had decided to drop PSM.

He noted that more than 100 companies besides his had also bought the BMC product and that informal discussions of legal remedies were underway. He added: "The message I hope BMC gets is that despite promises to support the current release, the announcement tarnishes their credibility in Enterprise Systems Management and has, at minimum, knee-capped some of the short-term tactical plans their customers had for deploying their technology for real ROI."

The BMC Software decision was the latest of a series of moves made by Big Vendors in storage that left their customers hanging, observed one reseller. "I know a few resellers who spent a lot of money building a business around a product that was supposed to come out of Veritas and Sun Microsystems a year ago: The ServePoint Appliance, a NAS with a Veritas File System and some other secret sauce. There was a lot of hoopla around the initiative, and then the whole thing fell apart."

Add to that Maxtor's failed MaxATTACH NAS products, IBM's failed first-generation iSCSI arrays, Veritas Software's failed SANPoint Storage Management Server appliance and a number of other false steps and missteps by industry behemoths, and one could legitimately ask whether risk aversion and CYA are really the assured benefits of the conservative buy.

Size doesn't matter

Popular wisdom aside, the truth is that size is important in storage decision-making. But, it is only one criterion of many that should go into a storage technology acquisition decision.

With the current economy, cost is central to all purchases. The smart money is on the selection of products, regardless of source, that deliver immediate and measurable value to the organization. For a large organization, one that tends to hold on to products for only about three years anyway, the risk of buying from a small vendor is mitigated by the forklift upgrade that happens shortly after the product is deployed and value is realized. Given this fact, eschewing worthwhile technology for reasons of vendor size is just stupid.

In difficult economies, strategic is out and tactical is in. That is the rationale that saw ultra-conservative Big Blue IT shops in the 1980s trying to save a few bucks by buying off-brand memory cards from a vendor no one had ever heard of instead of paying premium prices for the same products in the IBM parts catalog. In so doing, a little company, EMC, was placed on a path to financial success.

John William Toigo is an author, journalist and speaker who has written more than 1,000 articles and two books on storage. His two books are entitled Disaster Recovery Planning and The Holy Grail of Storage Management.


Copyright © 2003 IDG Communications, Inc.

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