Zerowait Corporation

When customers pay a premium price for enterprise class storage systems they have a right to expect reliability and high availability for theirs storage dollars. Therefore, it is troubling to many data center managers when they see that Sun is suing NetApp yet again, alleging that they violated Sun’s patents. Plus,a former EMC employee is saying things like this

“I don’t think [disk array manufacturers are] going to be forthright with giving people that data because it would reduce the opportunity for them to add value by ‘interpreting’ the numbers.” Steve Smith, independent consultant, former EMC employee

Today starts the new quarter for Zerowait and we expect our family of customers to continue to expand. Our first quarter exceeded our growth expectations. Apparently more companies are instituting their austerity programs and IT budgets are tightening. Savvy customers recognize that Zerowait can help them control their High Availability NetApp storage costs for the next few years.

Many folks have realized that High Availability NetApp storage does not become archaic just because NetApp has a new model to sell. No matter how much money NetApp spends on their new marketing campaign, customers will look to see if the new model actually provides them with any better performance then the model they have. If what the customer has is good enough for what the customer is doing, why should the customer upgrade? NetApp sales folks like to tell their customers that buying new is cheaper than NetApp’s maintenance costs for their legacy equipment. This may be true, but more customers every month recognize that Zerowait provides an affordable and reliable source of legacy equipment service and support for NetApp that saves them money!

A maturing market offers alternatives to customers and brings end user prices down. In view of the current economic conditions, customers should expect to see higher discounts off NetApp’s price list as NetApp tries to grow their market share in the total storage market. We have seen NetApp discount legacy support when they are confronted with a customer with our quotes. Competition works : )

I visited some customers in New Jersey last week. One customer asked me how I thought the economy would change the storage environment. I told him that overall people were not going to start suddenly to delete emails and Powerpoints to save their company money anytime soon. Therefore sooner or later folks are going to run out of storage again. If your IT department is trying to centralize storage in a tough IT spending environment it might become problematic to enforce standardization rules. If departmental budgets still exist, these departments may buy their own storage out of their own budgets. Security and storage standardization may go out the window as departments end up building their private islands of storage.

People seem to get protective of their own departments in a downturn.This may cause costs for the company to go up, but at the micro departmental level they can continue to spend if they are seen a a profit center, or revenue generating department. Most companies still view IT as a cost center and cost centers typically don’t get budget allocation increases in a downturn.

So the decision needs to be made. Who will determine how to pay for growing storage requirements? This may cause more organizations to outsource storage to put these costs in the Operational Expenditure category, instead of the Capital Expenditure category. Accurately allocating storage and infrastructure costs is going to be difficult when so many departments share the current storage infrastructure.

There will probably be some loud arguments about storage costs in boardrooms starting soon.

Since NetApp came out with their new blue staple look, I have gotten a few requests from people asking how I came up with the Zerowait name and our logo. I had already named the company Zerowait, because I did not like waiting for answers to anything and I expected that my customers would like a company name that expressed fast service and high availability also. The logo was designed by my friend Albert Zoellner after a few discussions with me. The logo took a couple of months more to come up with.

Partly due to the fact that I am a pilot, Albert wanted the logo to show speed and give an impression of a spinning propeller. So he made a green background and two swooshes to show speed, and pitched the company name at an angle over the green circle. The logo works – because people recognize the logo and seem to enjoy it on shirts, mugs, cars and everywhere else we can put it.

Over the last 18 years the Zerowait name and logo have become recognized in the high availability niche markets we work in. And recognition is what the logo is all about.

I think the important thing to remember about NetApp is that they make very reliable systems and Zerowait helps NetApp customers get more value out of them for our customers. I don’t think their new Logo is iconic in any way. Most people I speak with do not purchase high availability network equipment because of a logo but for performance and reliability reasons. But for the last week or so every NetApp customer discussion I have had has included a comment on their new Logo and an opinion of it.

So with our logo all you have to remember is that fast service is guaranteed.

Uncertainty in the economy is driving many companies to review their costs. Some are focusing on their high cost storage infrastructures, because when things go into recession many companies need to understand why their costs are so high, and where their money is going. Whether the USA is in an officially declared recession, or just a business slowdown, many large NetApp clients are currently experiencing hard times.

Storage is one of many areas within a corporate data infrastructure where costs can be contained. By reviewing the performance requirements of their applications, and creating tiers of storage and support services, IT professionals can contain their cost per TB of managed storage, and even reduce it. Analysts watching the storage industry who are cognizant of the ebb and flow of IT spending know there are short term ways and long term ways of controlling storage infrastructure costs. More than one analyst has noticed that troubles within the financial sector which NetApp’s CEO mentioned could have a big effect on NetApp’s growth over the next few quarters.

“The company is a leading maker of network storage systems, whose earnings have declined four of the past seven quarters because of poor internal execution.”

“Despite the upbeat sales guidance at the analyst meeting earlier this week, the stock was downgraded Wednesday at the brokerage Robert Baird. Given management’s guidance for a slow start to the new fiscal year, many investors are wary about management’s ability to meet its lofty sales growth target.”

“At the end of the day, I believe that readers should continue to avoid NetApp at current levels. Management is trying to transform the company in a difficult domestic economic environment, and I don’t believe that the company will be able to achieve its lofty fiscal 2009 targets.”

While the market is in flux might be a good time to take a strategic look at your storage vendors’ plans for the next few years. Are your vendors aligned with your company’s IT road map, plans, and tech refreshes? How will your vendors weather a sudden downturn in the marketplace? How will their new products benefit your company?

Recently there has been an uptick in our tuning business, many customers call us and ask our engineers to tune their filers to get better disk utilization, increase their storage capacity or tweak their filers to get more speed or output from them.

Zerowait’s engineering staff is recognized for helping customers get the most out of their filers. Often we help our customers meet and exceed their current requirements without forcing them to buy a new filer.

As more NetApp customers embrace name space and virtualization technologies, they find they suddenly need to find a way of increasing their storage capacity to meet the new capabilities of their storage infrastructure. Zerowait can help customers find the right settings and configurations to meet their new capacity requirements without breaking their budget, so increasing your storage capacity does not necessarily accelerate your storage infrastructure’s appetite for your budget dollars.

First they shuffle the players in their executive suite, now they come out with a new Logo. I wonder when they will change their corporate philosophy?

I certainly hope this re branding works better than the New Coke did. Quite frankly, I always like the spinning disk idea of the NetApp look, this new look of a staple has me confused. What do staples have to do with storage? Perhaps this is all part of a Lock In Strategy like Hal Varian would describe? Staples as an icon to show how good NetApp is at locking customers into their proprietary technologies?

Recently Xyratex has lost its unique position of being the sole provider of disk shelves to NetApp. This is because the newest SAS shelves are coming from Dothill . If I were in Xyratex’s position, I would be very worried about future sales and profits because NetApp seems to be using a second supplier, which is always a good way to keep a primary supplier in line on pricing. As any businessman understands – competitive pressures typically keep prices lower. This is why NetApp tries to Lock In customers into its proprietary OS and systems. Once locked in to NetApp, customers have a harder time getting competitive pricing unless they are willing to change their operating systems completely, which is also expensive.

In difficult economic times customers need to be able to play vendors against each other. For example, over the last few weeks we heard from a human rights organization in England that wanted to extend the life and maintain their R200’s for a few more years. Their NetApp salesperson initially told them that their only option was to do a system upgrade and that they could not expand their storage on their R200’s. They came to Zerowait and asked if we could help them, and indeed we could. So we quoted them storage for their R200’s and then their NetApp sales person had a revelation and found that NetApp could provide storage for their R200’s, as an added benefit NetApp could meet the Zerowait price. I guess this proves that competition exists even within the NetApp market niche, because this well known customer was able to get better pricing from NetApp by introducing a viable competitive solution.

Over the last couple of years NetApp has allowed IBM to resell its NAS units under the N-series label. However it seems that IBM resellers have to get approval to sell a deal from both the IBM channel manager and the NetApp channel manager. It would seem that arrangement cuts competition quite a bit, since it provides very little reason to compete on price since the same company controls the approval process in the end. Can you imagine the Congressional investigations that would occur if Ford or GM made every dealer register every sales opportunity for approval and Price Variance Requests? Would there be competition between dealerships in this scenario?

If I were a manager at Xyratex I would do everything I could to diversify my sales away from NetApp, which is taking too big a portion of their total sales and introducing competitive pressures within their partnership. Similarly if I were in an IBM salesperson’s shoes I would be bristling at the thought of a competitor controlling my sales opportunities. The arrangements between NetApp and IBM, and NetApp and its suppliers do not build long term loyalty amongst the vendor and customer, because they are all built on controlling the sale rather than on providing outstanding long term customer service.

Sometimes an insignificant article on the back pages of a newspaper can have big effects on world business.

Chinese trade with Europe is about to be revolutionised by the rebirth of the old overland silk route – this time via rail. An alliance of rail operators from the Pacific to the Baltic have just completed a trial run, moving cargo from China to the EU in just 15 days – under half the time it takes to ship containers. The first train, carrying electrical goods, clothes and ceramics from Beijing, arrived in Hamburg late last week, five days ahead of schedule.

Moving heavy inventory around the world is expensive, Fed Ex and UPS do a great job for us, but sometimes we move a lot of heavy equipment to different locations, and it can get complicated. The company that figures out how to get the Containers or Piggy Back cars from this train directly to the European docks with a Roll on Roll off solution, and then onto a fast freight ship to the USA or Canadian East Coast rail lines is going to make a fortune.

It will inevitably happen in one way or another, because time is money.

Sam Ervin was Senator from North Carolina when I was young. I clearly remember watching the Watergate hearings on TV after school, and listening to him speak. What a voice. According to two new books about him, he had a unique way of describing information flow in a bureaucracy.

“It has been my experience” Ervin offered privately, “that the madam of a whorehouse is seldom a virgin”

When the folks at the WSJ quote Gartner about companies preparing to tighten their belts on IT spending it piques my interest.

Gartner yesterday advised clients to cut their tech budgets – even if they haven’t been told to do so by their CEOs. In retrospect, the move seems inevitable. Research companies have been tripping over themselves to release forecasts that show slowing tech spending. Last week, we saw our first forecast that showed a spending decline. That money has to come from somewhere, or, in this case, has to not come from somewhere. The budget-cutting advisory is either the mathematical corollary to a spending slowdown or a self-fulfilling prophecy. In a press release, Gartner gave businesses six tips on how to make the cost cutting go smoothly:
1. Start now. Don’t wait for evidence of a recession to show up on your bottom line.
2. Put the best people you have on the cost-cutting team, and don’t let them resume their regular duties until the new budget is in place. Tie year-end bonuses to how much they save.
3. Don’t second guess earlier decisions. No one project is to blame for the current situation.
4. Get an auditor to make sure the cost cutting is reflected in the overall business’s budget.
5. Share your results with the rest of the company on a weekly basis. Cost cutting is an act of necessity; people want to know that you’re making progress.
6. Have the legal department help you figure out how to get out of onerous contracts.

So how does this relate to Zerowait’s business? Our business has been growing very steadily for the last few months as companies look for ways to cut their IT and specifically storage costs while retaining highly trained staff. Clearly the CEO’s CFO’s , CTO’s and CIO’s of the world are now preparing for harder times on the way. To stay within tighter budgets a decision may have to be made between staff and hardware support costs, but the C level executive’s all know that storage and storage requirements will continue to grow. Given the recessionary times, How would that Madam in Sam Ervin’s quote keep her business running? Good staff is hard to replace, would she cut back on building maintenance costs and marketing expenses and keep her staff ? She certainly knows what it takes to produce revenues : ) .