NetApp Channel Chief Explains How Partners Can Earn 20% Selling Its Hardware

Despite the growing demand for storage, hardware providers blamed a squeeze on pricing and macroeconomic headwinds for falling short on the revenue front in November.

As the month was closing out, Pure Storage warned that it expects sales in its fiscal fourth quarter to fall from original forecasts of $511 million to a range between $484 million and $496 million. Pure’s larger rival, NetApp, also missed revenue expectations, albeit slightly, reporting $1.37 billion, down from a projected $1.38 billion. NetApp also lowered its forecast for the current quarter and expects an 8% decline in annual year-over-year revenue.

NetApp’s Chris Lamborn earlier this fall at the company’s Insight event.

The headwinds for NetApp come as the company is rolling out its new Keystone program, a new way for customers to procure NetApp hardware and for partners to sell it. Revealed at the recent NetApp Insights 2019 conference in Las Vegas, Keystone now lets customers procure NetApp’s on-premises storage solutions as a service and pay monthly or annual subscription fees. Customers can subscribe to NetApp’s various solutions without taking title or leasing the equipment, while partners can offer their own managed services or use resell those provided by NetApp.

NetApp’s global channel chief, Chris Lamborn, sat down with Channel Futures to explain how the Keystone program will help partners sell its hardware as a service without taking title to the gear — and earn 20% margin doing so.

Channel Futures: Is Keystone an option or change to the way NetApp is offering subscription-based storage?

Chris Lamborn: Keystone is a way of looking at the overall engagement that a customer needs with a Cadillac experience. It provides a way to easily choose a performance tier, choose a storage variety and choose what a customer wants, and the partner can either manage the environment themselves, or resell NetApp managed services within that. So we’re really providing that same cloud-like experience whether it’s public or private, or a combination of the two.

CF: How does Keystone different from an ‘as-a-service’ model from NetApp on Demand?

CL: We’ve taken the best out of NetApp OnDemand and the best out of our other financial solutions and poured them into Keystone consumption. If you think about what customers are looking for, they need it to be a true service that doesn’t conflict with any new financial legislation. They need to have a minimum term of 12 months, but they don’t want to have any ownership of the capital and with Keystone and they don’t, NetApp owns it all. And customers want service choices and that’s why we believe putting these tiered performance levels in was critical. So that means that a customer can identify the right tier and a partner can sell it to them from Keystone. And we still build in 20% margin.

CF: When you say it’s built-in, is that in all scenarios?

CL: The way I look at it is like the cell phone data plans. You buy your 10-gig plan, you pay your 40 bucks, or whatever it costs, a month, every month, and if you use 12 gig one month, they’ll charge you for the extra two. And that’s the principle that we’re trying to give which is that flexibility. Customers and partners don’t find this an easy transition. We know it’s a change of mindset. Salespeople find it hard to change, customers are finding it hard to understand it. So, the decision we made is that at launch and at least for the next six months, is we’re running this as …