THE TRICKY BUSINESS OF MARKET COVERAGE

A Unicorn Threatens

The great migration to the cloud was already proving an intractable barbarian at the gate for traditional sellers of on-site hardware and systems in the enterprise technology market. But by 2014, overall industry revenues had taken a nose dive and a fierce market share battle was playing out between the market’s legacy powerhouses – IBM, HP, EMC, Hitachi, and NetApp.

Industry analyst IDC was reporting that overall storage industry revenues were down over $600 million from the previous year, and that the combined revenues of the legacy behemoths were down by over $750 million. So who was gaining ground in this tough market? 

Imagine the surprise when one of the biggest winners in storage solutions was a new start-up not even three years old. How was Pure Storage able to amass 1,100 juicy enterprise accounts and over $200 million of storage revenue in just it’s first three years in business? Turns out it wasn’t just their hot new products. 

Their routes-to-market distribution approach was also on fire.

Doubling Down on Selective Distribution

Pure Storage was gaining ground fast with fantastic flash-based storage that was significantly faster at running programs, easier to deploy, and lowered total cost of ownership. Even though the buzz of the market was one-stop converged infrastructure products, Pure Storage was winning big with best-in-class point solutions to customers’ pressing business problems.

But where excellent product was the engine of growth for Pure Storage, their carefully honed, selective use of channel partnerships was the gasoline the engine ran on. Conventional wisdom held that whoever had the biggest partner count would win, and it wasn’t unheard of to boast over 100,000 relationships.

Where it looked like the path to distribution success was playing the field, Pure Storage was talking marriage.

Partner Count a Double-Edged Sword

It turns out market coverage is a double-edged sword. Too little and revenue stalls. Too much, and resources spread thin, relationship bonds weaken, and channel conflict escalates. In fact, many a home-run product has been sunk by the fallout from partner counts gone amok.

As a new market entrant, Pure Storage elected to trade off big partner count for a much smaller number of carefully curated relationships. But getting engaged to partners wasn’t enough. Pure Storage wanted the fast-growth benefits that come from highly committed and evangelical advocates. That kind of closeness, they determined, would only come from tangible investment in these fledgling new relationships.

Here’s how David Hatfield, President of Pure Storage, summed up the situation on his company blog: “We know our customers often look to our partners as their trusted advisors to vet, test and implement innovative solutions and we recognize it is our job to help our partners achieve success in delivering these pre and post sales services. We also recognize that in order to get the global scale and reach that the market is looking for, we simply cannot go it alone”.

By the end of its third year, Pure Storage reported that 95% of its revenue was being done through a small, elite coalition of channel partners. And investments in making partners successful were tangible and significant.

Improving Channel Productivity at Legacy Companies

After a sluggish start to 2014, legacy storage products vendors mobilized their own efforts with Flash-based storage, and the industry ended the year on a growth spurt. According to industry watcher IDC, “once dominated by storage startups looking to carve out a niche with flash-optimized solutions, the promise of flash in the data center is driving traditional enterprise storage vendors to all get on board”

Distribution’s central role as the path to success in storage technology was also coming into focus for struggling legacy players. In an interview with Channelnomics, Vish Mulchand from HP Storage indicated that “channel partners are crucial in helping HP maintain business, [and] will continue to be an important enabler for us”. “Partners”, Mulchand continued, “are a treasured HP Storage asset”.

But it was equally clear that legacy players would need to focus less on channel partner count – coverage intensity – in favor of more productive relationships. As a senior distribution leader at IBM said, “we still have to find ways to build mindshare with our channel partners as they sell in the marketplace”