SNW Reflections: Recommendations for Weathering the Forecasted Economic Downturn; “Loyalty Goes out the Window”

I just got back to Omaha after spending the last three days at Storage Networking World (SNW) and used the time on my flight home to reflect upon some of the conversations I had during my time there. While I still plan to do more blog entries in the coming days around the technologies that I reviewed at SNW, I first wanted to share some of the thoughts and feelings of those in attendance about how they think the economic crisis will affect tech in general and how companies should prepare to act in 2009. In particular, I wanted to share the thoughts of those who have weathered economic downturns in the past and how users have responded to them.

This topic first came up during a conversation I had with LSI Corp‘s Director of Product Marketing, Steve Gardner. He asked me what my thoughts were in terms of how I thought users might respond in the event of a cutback in tech spending. My feeling was that users would be more willing to look beyond traditional solutions to more innovative and cost-effective approaches to try to do more with less.

In this case, Steve disagreed with me. His experience told him that companies became much more conservative during economic downturns and shunned new technologies in favor of staying with established vendors who they know would survive. I had to concede that was my experience when I worked at First Data. When times were tough in early 2001, the introduction of new technologies from anyone other than those from established storage vendors (Cisco, EMC, HDS, HP, IBM, Symantec, etc.) essentially slowed to a crawl.

I then had the opportunity to discuss this same topic while I was doing a joint briefing with 3PAR and Symantec. While I do not classify 3PAR as an “emerging” vendor, it also does not have the same name recognition that an EMC or IBM may have. Conversely, Symantec is one of the stalwarts in storage software so I was interested as to how they would respond when sitting next to one another.

3PAR’s VP of Marketing, Craig Nunes, felt that if an economic downturn does occur, data growth is not likely to experience any slowdown. If anything, personnel will be cut and budgets slashed while data growth will continue at its current pace. In these circumstances, companies will need to find more effective ways to optimize their storage capacity and get more bang for the buck from the new storage systems that companies deploy. He concluded, “When budgets are squeezed, loyalty goes out the window.”

Sean Derrington, Symantec’s Director of Storage and Availability Management Group, perceived the situation differently. Storage hardware is sometimes easier to replace but software gets stickier over time making it more difficult to replace. If anything, Symantec is seeing corporate initiatives to consolidate and standardize on one product as a means to cut costs and simplify their environment. By selecting just one product, companies can eliminate redundant licensing costs, negotiate more aggressive deals, reduce their training costs and better leverage their existing investments. However he did concede that Symantec receives a lot of requests for new features and every feature cannot always make its way into their product line as quickly as companies may like.

Based on the feedback from these individuals and others, here are some recommendations as to how companies will want to manage their tech buying going into 2009:

  • Exercise extreme caution if buying from start-ups. While start-ups may have great technology, rumor has it that the venture capital market is drying up. So unless they are already well-funded or already profitable, odds are that they may not survive any extended economic downturn.
  • Don’t throw the baby out with the bath water. Just because you have not heard of a product or company does not mean the company is not on solid financial ground or does not have great technology to offer that will substantially cut costs. Economic downturns can be a great time to negotiate deals on hardware or software that you may want but were previously outside of your price range.
  • Explore leasing as an option. LSI Corp’s Gardner observed that in the past when credit became hard for companies to obtain, leasing became a popular option. So if you need new hardware or software but don’t have the cash and credit has dried up, ask your vendors what leasing options they offer.
  • Leverage existing technologies. Symantec’s Derrington brought up a good point that as slowdowns occur, companies may already own the features that they need in their existing software. So before going out and buying new technologies, check to see if an upgrade to a newer version of the software you already own will deliver the functionality that you need.
  • Software (or storage) as a service (SaaS) options are now more widely available and are viable options. 3PAR’s Nunes has encountered more companies using SaaS (at least at a departmental level) as a way to get the services that they need at a price point they can afford. While he felt that companies would save more money if these departments or business units acted as a one and consolidated these services internally, he also recognized that companies cannot always collaborate to make this a reality.

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