NetApp asked its partners to place bets this year on the cloud, on HCI and on all-flash, with the first two acknowledged as being a significant ask for some partners. Almost two quarters in, the company said that results so far have been good.
Last June, NetApp laid out its channel goals for the 2019 fiscal year shortly after that year started, at their Channel Connect Conference [C3] event in Phoenix. They articulated a three pronged strategy for partners, emphasizing the importance of leading with cloud, of selling NetApp’s new HCI solutions, while continuing to sell their joint FlexPod offering with Cisco, and continuing to drive NetApp to market leadership in all-flash. Now, close to the end of their second quarter, Jeff McCullough Vice President, Americas Partner Sales at NetApp, said that the results so far have been good.
“We are pleased with the results so far,” McCullough said. “We saw growth in the channel business, bearing in mind that Q1 is typically our smallest quarter of the year. We had a lot of transition. We rearchitected our sales force to focus on segments. The commercial side saw a lot of change, with the launch of our commercial business. We are starting to see some good results on that. The partners most successful in commercial are ones with ability to the lead and run a campaign on their own.”
NetApp restructured and significantly simplified their sales model for FY 19, NetApp restructured their sales model, adding a Global Accounts category and creating it as a separate sales ‘region,’ so that the model now resembles a pyramid with a small number of Global Accounts at the top, with Enterprise and Commercial underneath.
“Our focus on commercial is not new, although we are mainly an enterprise vendor,” McCullough said. “We have our top 100 global customers, and then under that the enterprise, with 1200 enterprise accounts in the Americas. We have a reasonable market share of that market, and it’s where we have lived for a good chunk of our career. Commercial is everything else.”
The commercial market hasn’t been the main focus of many of NetApp’s high producing partners, but a major agreement with Lenovo announced in early September could change the game there, McCullough said.
“In on-prem, it’s easy to put us in price bands,” he indicated. “Historically, we don’t spend a lot of time on the market below $50,000. Our new partnership with Lenovo will help us there. The midrange product was available at the time of announcement and the entry level will ship in late October and early November. That’s an important relationship for us. Lenovo fills in a route to market. We aren’t focused on SMB and aren’t optimized for the price points they are, and that they will be able to serve. It will let NetApp products get into that part of the market.”
Cloud, of course, shatters the price bands, and NetApp is committed to a cloud-first strategy – something that they want partners to follow. That has its challenges, because while most solution providers today do sell cloud, most don’t have lucrative cloud practices, and some don’t even have profitable ones.
“All of our partners are selling cloud,” McCullough said. “I haven’t met a partner who isn’t selling cloud. But most partners don’t think they are making money selling it. That’s the question – can they turn it into a profitable practice?”
A big part of the answer, McCullough stressed, is the need for partners to sell their own services around the core cloud offerings, much as they have for years around on-prem.
“The bigger opportunity for them is selling services like migrating applications,” he said. “Our profitability story isn’t just the front end, or even the back end, but money they make selling services around them. For partners, it’s all around attaching cloud to what they are selling. If they are selling AWS, why not sell Cloud Volumes for AWS. It gives a great opportunity to attach.
“Our best 20 partners in the Americas do about seven dollars of attach on services for every dollar of NetApp they sell,” McCullough continued. “There’s no reason we can’t help partners build out a cloud strategy, so they don’t just sell cloud because the customer asks for it, but because they have a profitable practice around cloud. We have about 60 partners today in the Cloud First program. The majority in the Americas will likely stay in it this year, especially since we have moved to full availability in Amazon and will be in Microsoft in December.”
McCullough noted that they see a new AWS selling model that lets AWS Marketplace ISVs authorize channel partner sales as so promising, that they rejigged their own program to fit with it.
“AWS announced this a couple weeks ago, for the Channel as a Seller, and just launched it,” he said. “It allows partners to create offers for customers they can sell through the AWS marketplace – with margin built into them. We were one of the first who participated in that. We want partners to participate in every cloud strategy. Now we put money into margin that partners can earn when they sell through AWS. That’s a change from June where we paid the rebate directly. This also has the advantage of paying the money to the rep.”
McCullough said NetApp’s HCI story, which is intimately connected to their cloud strategy and a hybrid go-to-market model, has also been delivering good results.
“Our goal with HCI was moving up in the market, and we are still on a trajectory to do that,” he said. “We launched with a different approach for HCI, with different scale-out for compute and storage. At VMworld, we launched a private cloud reference architecture for VMware. Now we are announcing an HCI reference architecture for OpenShift, and also one for NVIDIA. These are all for very specific targeted workloads. Our HCI is more than us just trying to go grab share with a single use case story. It’s a robust multi-purpose platform.”
Because NetApp was a late entrant into HCI, many partners had been selling other vendors, and the NetApp product was at a branding disadvantage out of the gate. However, John Woodall, VP of Engineering at Palo Alto-based NetApp partner Integrated Archive Systems, said the product and the overall strategy are well designed for success in the long term
“The brand awareness still isn’t that strong, but it is coming,” he said. “Ultimately though, the product differentiation is what matters. The ability to co-mingle workloads at scale is where we expect them to win. Customers can co-mingle SAP, SQL Server and Oracle, with confidence that the platform will scale.”
NetApp’s channel strategy around all-flash was validated by their squeezing into the top spot in the latest IDC shipment numbers, although McCullough tended to downplay that news rather than trumpet it.
“We were number one last quarter, but it’s already in the rear view mirror,” he said. “We will be happy with consistency of performance. Being number one in all-flash is nice, but it is just a data point right now. Are we consistently growing and taking share in the market? That’s what’s important. We are encouraged with our expansion in express packs. We grew the express pack business in Q1 by 350 per cent. We have had really strong consistent growth in that business because customers want it and it’s easy for partners to sell. The sales cycle is less than 30 days, compared to over 90 for other flash products.”
“We like their AFF so much that we have it in our cloud, something that most vendor’s don’t do,” said Mike Smith, President of Ottawa-area solution provider Decisive Technologies. “It gives the customer an experience that’s as good as in their own data centre.”
McCullough said the core channel strategy will continue, with only minor tweaks like the one around AWS.
“This year’s program was built under those three key program areas, and partners are ideally lined up to support these strategies,” he stated. “Those are the focus areas because that’s where the dollars are. Those are the growth parts of the market.”