Large Margin Technology

Robin Harris at uses the term Enhanced Margin technology to describe the mark up’s that storage vendors make on reselling their commodity based hardware. But perhaps we should call it Venture Capital Margin Technology (VCMT) , because many of these companies were founded with Venture Capital and they need a healthy Return On Investment to justify the irinitial investors interest. Mining profits when you are the first viable enterprise in a newly identified market and technology niche depends on attracting attention and gaining quick market acceptance and it is not easy, but can be quite profitable. Many of these companies find it very difficult to impossible to maintain a healthy margin when their technology commoditizes. I don’t want to say it matures, since storage technologies are evolving so quickly.

Looking over the storage landscape today, I see some companies that identified Storage market niches that are now abandoning those niches and trying to go up market or down market. This might be a good strategy for corporate ego’s, similar to the VW attempt to market their $100,000.00 Phaeton. But when the customers don’t perceive the value add, there is little chance of gaining new customers and a big chance of losing old customer relationships.

The downward spiral starts with a trickle as customers start to break the vendor lock in by seeking other sources to maintain or replace their technology, but the early adopter and influencer in the marketplace can be quite effective in eroding customer allegiance in proprietary technologies.

Robin Harris understands finance much better than I do. In a recent conversation, he said to watch what the insiders are doing with their stock purchases and sales. According to Robin, the big shots at the large storage vendors are sellers of stock currently. What does this mean for customers who are seeking a five year duty cycle out of their storage arrays? Perhaps, it is time to be much more aggressive in their negotiations with their storage vendors for price and service concessions?

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