SolidFire’s Mark Conley Opens Up About the NetApp Acquisition and What It Says About the Channel

NetApp’s December 2015 acquisition of SolidFire is still fresh, and the two companies are still figuring out how to best leverage each other’s assets and resources. NetApp (NTAP), the large legacy systems manufacturer, has an extensive product line, a large partner ecosystem and plenty of personnel to share.

Kris Blackmon, Head of Channel Communities

June 9, 2016

15 Min Read
SolidFire’s Mark Conley Opens Up About the NetApp Acquisition and What It Says About the Channel

NetApp’s December 2015 acquisition of SolidFire is still fresh, and the two companies are still figuring out how to best leverage each other’s assets and resources. NetApp (NTAP), the large legacy systems manufacturer, has an extensive product line, a large partner ecosystem and plenty of personnel to share. SolidFire, the young storage solutions provider that places a premium focus on software over hardware, adds cloud-capable, all-flash capabilities to NetApp’s portfolio.

On paper, it’s a win-win for both companies. But what does the acquisition say about the state of the channel? And what’s the impact of integrating two separate channel programs going to have on NetApp and SolidFire partners?

The VAR Guy sat down with Mark Conley, worldwide channel sales director for SolidFire, to talk about what each company brings to the table, Conley’s predictions for the partners and the ways in which channel history repeats itself.

TVG: You’ve been in tech since the late 80s with companies such as Novell and Sun Microsystems. How has the channel changed?

MC: I’ve been in tech since I was born, I think. I grew up in Champagne, Illinois, and went to the University of Illinois. There was this computer shop that opened up that was selling these amazing microcomputers like Osbornes. I literally applied there three times before I finally got a job there in sales, part-time, while I was going to school. So I’ve been in tech since I was 21, 22-years old.

TVG: What lessons can today’s partners take from the past?

MC: It’s about the most tumultuous time that I can remember. That sounds cliché, because people always want to say that, I suppose. But I was talking with a colleague of mine that just went to work for Dell, and we both agreed that there’s more big change that’s going to drive even bigger change right now than ever before.

If you look back to the beginning of when I started in tech, there were these things called service bureaus. They were companies that would buy minicomputers, like IBM System/38 and things like that, and rent out time on those systems to people who wanted to run their billing or accounting systems. That’s really the definition of a service provider, so the service provider business models have been around for a long time. They go in cyclical waves: they’ll be popular for awhile, then they’ll retreat in favor of on-premise systems, then they’ll rise in favor again. Back in the dot-com boom of the late 90s and early 2000s, the idea of building service providers was a really big thing. It’s not like this is the first time we’ve ever seen this.

But this time it’s a lot more disruptive because there’s a much broader usage of software-as-a-service kind of systems. That’s really hurting a lot of manufacturers, and it’s hurting resellers as well. The ones that are succeeding are those that have figured out how to provide integration services for customers who want to have a portion of their compute power be housed on a service providers’ servers and storage. Folks that are teaming up with Amazon, folks that are teaming up with us to integrate Amazon, those are the folks that are still making money.

The fact is that there’s so many startups that began five years ago or so, especially in storage, including SolidFire. We were born out of a need to revolutionize the storage industry—as were a lot of other storage companies. But what’s happened in those five years is that the big guys, like NetApp and EMC and HP and IBM, they’ve woken up and said “hey, we may have missed the innovation train then, but there’s another train coming and we better get on it.” Taking NetApp as an example, they saw a need and they really started to invest in innovation in their own product line. Then they bought SolidFire. I think it’s going to be really tough for the smaller startups to make a living these days because budgets are tighter with end users, competition is much, much stronger and venture capital is more expensive from an equity standpoint these days.

TVG: In these previous eras you mentioned when the service provider model was so popular, what was the biggest mistake you watched partners make as they tried to make the switch?

MC: I’ll use the one in the late 90s and 2000s. There really wasn’t a problem between service providers and resellers because their markets were very different. Service providers weren’t selling software-as-a-service. They were renting time on systems, providing managed servers and managed storage. But resellers were selling equipment to them. The MSP business model wasn’t overly sophisticated, and it wasn’t dominated by big companies. It was dominated by a lot of regional and smaller companies that were building data centers and colocation centers. Resellers were more than happy to sell massive amounts of Sun Microsystems gear and EMC gear and NetApp gear. They made a pretty good living off of that. The margins were a little stronger, too.

The way the competition situation is today—if you’re Caterpillar, let’s say—you’ve got a new application you want to bring online to allow dealers to better access service parts for their repair efforts. If that system needs to be housed at the dealership location, then they’re going to buy that gear from a great big reseller that has logistics capabilities that can ship it to 2,600 locations around the world. If they’re going to centralize it back in Peoria or wherever Caterpillar is, then they’re still going to work with a pretty big systems integrator/reseller to buy that gear and put it in their data center.

But if they’re going to have any portion or the whole of that application reside on someone else’s servers, in someone else’s data centers, in a software-as-a-service type of system, they’re going to turn to one of those big providers and they’re going to “buy” the systems from that service provider. In most cases like that, the reseller is going to be locked out. It’s competition that they’ve never seen before. It’s new to everybody.


TVG: We’re seeing an increase in M&A activity in tech as we’re watching the IPO market drastically slow. What are the opportunities and challenges in this market for solution providers trying to navigate that transition?

MC: It’s challenging. It’s scary. There are lots of different kinds of service providers out there. When we were a SolidFire standalone, we were looking for people who were forward-thinking, people who were willing to take a bit of a risk, and maybe people who were aligned with a bigger storage provider. Those people were great for us to bring in the fort because we could focus a lot of energy on them, we could get a lot of mindshare, and they could get a lot of nice revenue and profit from the transaction.

The problem is for those folks who haven’t aligned themselves with a bigger manufacturer, it’s going to be tough. The rate of IPOs last year was the smallest it’s been in 20 years. The VC money is a lot more dear to these startups. So they’re going to be cutting their prices to get business, and they’re going to go back to their solution provider and say, hey, instead of making twenty points on this deal, I need you to make fifteen or ten or five. That’s going to be tough for them. For me—and of course this is self-serving—a smart service provider, solutions provider or reseller that’s in storage should be looking more seriously at the bigger manufacturers because we’ve got to stay in power to be able to survive this capital winter that’s going on.

I think the smart integrators need to take a really hard look at their vendor partners and decide whether the current macroeconomic climate is going to support those partners. We think—I think—that the startups are going to have a really tough time in the next 18 months. We’re going to see a lot of M&A activity. I think we’re going to see M&A activity with vendors, but because it’s going to squeeze the VAR margins, we may see more of that at the reseller level as well.

TVG: In regards to your own acquisition, what were the specific challenges you were trying to mitigate by getting bought out?

MC: Think about the business model that SolidFire had before. We had a collection of resellers, and we were always looking for more/better ones. A big part of the channel manager’s job—and our channel organization’s job—was identifying and recruiting new channel partners, and building stronger relationships with the ones worth investing in that we already had. A lot of that horsepower and calories were burned finding the people and getting them interested. It’s not easy to understand new technology. It takes patience. It takes a lot of time. That was a big part of the calories that we spent before. 

Now, we’ve got access to the best solutions integrators, the best resellers, in the world. If I call Chad Deal at Sirius in Chicago, he’s going to take my call. Six months ago or so, that might not have been the case. So we’ve got people’s ears almost right away, and it’s a really great thing. It cuts down on the SolidFire awareness effort in a big way because of that.

TVG: Let’s talk about the integration of the SolidFire and NetApp channel partner programs. What’s been easy and what’s been challenging?

MC: The part that’s been easy, Kris, is that when we designed our partner programs at SolidFire, we had a lot of influence from NetApp and other organizations that had channel programs that were very similar to NetApp. So when we built it, if you closed one eye and looked at it from a distance, it would look a lot like NetApp’s program to begin with. We had four levels of authorization tiers that were based on increasing amounts of commitment, capability with a product and revenue. NetApp had the exact same thing. We had a pretty “big boy” program for our size. We had rebates based on net new account wins, rebates based on higher technical capabilities [and] earned MDF. So as a result, when the integration of the programs came, it was pretty easy.

The tough part is always the personnel part. The people. How do you get things done? How do you leverage the bigger NetApp? What does this job do in the future versus what it did in the past? Is this person we’re going to be asking to do that job best able to do it? That’s always the tricky part. When you’re dealing with people and their careers, you can’t think of it in strictly empirical and objective terms. You’ve got to take that into consideration. It can get emotional.


TVG: What elements will you each be stealing from the other’s program?

MC: The thing we’re stealing from NetApp? We thought we had the best implementation of Salesforce in the world. We use Salesforce to track our activities with our partners and to really do a good job in managing our relationships with our partners. But the more I find out about the systems that NetApp uses and has at their disposal…wow. I can go in and say, let me see the top five resellers with NetApp over the last two quarters. Let me see the incentives we’ve given them for net new accounts. Let me see what kind of training gaps we have with any of those people. Let me see their pipeline and compare that to their trailing two quarters worth of revenue. The systems are just really great.  So what SolidFire gets from NetApp is intelligence that’s going to allow us to do a better job.

What NetApp gets from SolidFire is this degree of velocity that’s hard for a bigger company to get. As a result, we’ve been very careful about not integrating the systems right away…we have a product portfolio that really is two SKUs and has the simplicity of it. When we quote out a SolidFire system, there are four different sizes of drive, and then there’s support that goes along with it. So basically you say, how many nodes do you need, how big a node do you need and what kind of support do you want? That’s all that goes into a quote. The quoting system is really easy. With NetApp, they’ve got a massive product line, they’ve got a lot of complexity in the systems, and you’ve got to be a pretty intelligent person and know a lot about their product line to be able to do a really good quote.

TVG: Speaking of pricing, you’ve introduced some creative pricing models recently. What was the impetus for this, and why is it a good thing for your channel partners?

MC: We’re not a hardware company. The idea of SolidFire was born out of Dave Wright, our CEO’s frustration with trying to deploy storage systems while he worked at Rackspace. The traditional systems that are out there just don’t deploy easily and deploy well for service providers. So he built a storage operating system that had never been done before. Doing so, he said, “I’m not going to build this specific around hardware and drives that I need to build myself. I’m going to build it around industry-standard hardware.” So he chose, initially, a Dell server with flash drives on it. He put a special, specific MDRAM card into it, and it was basically off-the-shelf Dell servers.

When the time came to shake up the market, we said we really don’t need to be trying to sell Dell servers at such a premium price. So why don’t we take them as what they are—a commodity—and put the value in software where it really is? That was the idea behind it. And why it’s good for resellers? The product is sold based on capacity licenses. It’s called the Enterprise Capacity License Program. Because it’s sold on capacity and the list price is adjusted downward based on increasing capacity, the “discounting” is kind of built into the business model. Resellers who are expected by their customers to give discounts on increasing levels of commitment really don’t need to change their margins dramatically because the discounting is already built into the program. Time will tell, but we think it’s going to help them retain more of their margins. 

TVG: What’s the impact of this integration with NetApp on partners, specifically partners who have been with SolidFire a long time? Who’s going to get left behind? Who’s going to thrive?

MC: NetApp has a lot more partners than SolidFire, so when we looked at merging the two populations together, we said, who in the SolidFire portfolio fits into the NetApp portfolio? We had several hundred SolidFire resellers at the merger. And when you look at those several hundred, we were pleasantly surprised to see that just under half of them were already NetApp partners. It’s going to be easy for those people. It’s going to be good for those people, because they know NetApp and they’re used to trading business with NetApp, but they also know SolidFire and how that business model works. Those people are going to be able to pick and choose more freely and more intelligently than the other folks. Plus, they don’t have to learn a bunch of new systems.

The folks that are NetApp partners but not SolidFire partners that NetApp covets and cherishes and wants to build a relationship with, it’s a matter of hand-to-hand combat with those people, to say, “Let me tell you about SolidFire. Let me help you understand how it’s supported. Let me show you how to generate leads on it.” That’s pretty easy.

Then there’s the population of people who were SolidFire partners and not NetApp partners. That can really be bifurcated into two groups. [There are] those that have had revenue with SolidFire, who have a current pipeline with SolidFire, and those are the people we want to invite into the NetApp program and say, “Let’s teach you about the broader NetApp product line and what it means to you and how we can help you grow your business.”

The other folks, it was probably a passing relationship. It was the wrong time at the wrong place. We’ll give those people the option of coming into the NetApp fold, but we’re not overly confident that it’s going to mean anything to them—or to us.

TVG: What are the emerging trends for programs you think we’re going to be seeing more of in, say, the next 18 to 24 months? Is the MDF craze a passing trend? Are the days of emphasis on certifications behind us? What’s going to become most important to partners?

MC: I don’t think the traditional ways of measuring partner commitment and competency like certifications are going to be as important. I don’t think they’ll go away, but I know they’re not as important to us as they used to be. What I see is an awful lot of is flexibility.

What people don’t get about the channel is that success isn’t thinking about the channel in a holistic fashion. It isn’t about thinking about it as one big, amorphous group. Every channel is different. Every location is different. Every channel partner, every individual is different…I always tell salespeople to understand the motivation of the person you’re talking to. What do they want out of this transaction? If you understand that, you can adjust your solution to help satisfy what they want out of the transaction.

I’ll give you an example. We’ve got a partner in Chicago that has really done well over the past 18 months with NetApp and grown their business, and yet we think we’re on the verge of an even bigger growth spurt with them. But it’s going to take an investment… What they really don’t want is abundant head count. But what they really do want is reimbursement for lab systems to help them build out their own managed service business. So those are the kind of things that vendors like us have to be really flexible and open-minded to be able to recognize and take advantage of.



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About the Author(s)

Kris Blackmon

Head of Channel Communities, Zift Solutions

Kris Blackmon is head of channel communities at Zift Solutions. She previously worked as chief channel officer at JS Group, and as senior content director at Informa Tech and project director of the MSP 501er Community. Blackmon is chair of CompTIA's Channel Development Advisory Council and operates KB Consulting. You may follow her on LinkedIn and @zift on X.

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