Enterprise storage: Dell to stick with online sales model

Dell Computer will stick with its online business strategy in enterprise storage, even as storage vendors elsewhere are adopting other business models.
Written by Ken Wong, Contributor
SINGAPORE--Dell Computer will stick with its online business strategy in enterprise storage, even as storage vendors elsewhere are adopting other business models.

Speaking to ZDNet Asia on a visit here this week, Dell's director of World Wide Storage Product Marketing Bruce Kornfeld expressed confidence in its online business model, which allows the company to reduce costs by selling directly to customers and eliminating the middleman.

According to a company spokesperson, Dell's global enterprise storage business registered a year-on-year growth of 13 percent for the fiscal year ended June 2001. She did not provide specifics.

Although better known for its strength in online desktop and notebook sales, Dell has been selling enterprise storage on the Web for the past three years. It offers customers a wide range of storage offerings over the Internet--from low-end tape storage to fiber channel-ready storage area networks (SANs).

Kornfeld was in the region this week for Dell's Tech Summit in Penang, which also saw him visiting Singapore and other Asean countries. Accompanying him was Simon Penny, Dell's storage marketing director for Asia Pacific and China.

Asked if Dell would move towards a Storage Service Provider (SSP) model (also known as storage on demand ), like many other storage vendors, Kornfeld said: "I don't see us moving towards… (that) model." This model allows businesses to outsource their storage requirements to an SSP provider. The clients are charged according to the amount of storage required. This is similar in principle to the application service providers (ASPs) model.

While Dell will not abandon its current online business strategy, Kornfeld said he could see more storage vendors heading the SSP way.

Citing the CEO of Compaq, who said recently that hardware has become commoditised and a very difficult market to compete in, Kornfeld said this would push many storage vendors towards an SSP solution. They would hope to generate higher margins with such a model, rather than simply delivering hardware and software.

However, Dell's Penny believed the adoption and acceptance of the SSP model in the Asia Pacific region would lag behind the US market.

Bandwidth, he said, would be the major stumbling block. For an SSP to be successful and provide customers with always-on access, he said, fast and reliable bandwidth must be available. Currently, this is only available in a few countries in Asia Pacific, he said.

Another problem with the SSP model, he noted, is the difficulty in persuading some customers to give up sensitive data to another party. While this outsourcing may be attractive to some, he felt many companies would be unwilling to risk letting business-critical data get out of their control.

Finally, while storage on demand may offer some profitability, it's too far off what Dell and, more importantly, what its customers are familiar with, said Penny.

Kornfeld agreed, and said Dell's online sales strategy is still the way to go as its customers are already familiar with its business strategy and know what to expect when they look for storage on its Web site.

For the year ended June 2001, the computer maker posted total revenues of US$7.61 billion.

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