In the photo above: Simon Brickett, head of data center managed services at Computacenter

The channel has long been under pressure from declining margins on traditional box-shifting activities. But a number of announcements have revealed that some channel players are casting their gaze at other more profitable activities, including the data center supply chain.

Distributor Tech Data Corp, for example, recently announced that it has expanded support for data center resellers, after it expanded its Advanced Infrastructure Solutions (AIS) division, which it launched three years ago to help channel partners sell data center products and services to businesses.

IT solutions provider Magirus also revealed it has become the first Cisco Specialty Data Center Distributor in Europe, and has launched a data center division. And another indication came from Ingram Micro, which has expanded its Data Center Solutions Portfolio and announced support for Cisco UCS.

Meanwhile, companies such as Computacenter have been involved in the data center sector for over a decade. It even has its own data center facilities and recently opened a certified Tier IV data center.

THE ANALYST VIEWPOINT
“The move by the channel into the data center supply chain has been going on for a number of years,” said Nick Mayes, senior analyst at PAC Consulting.

“There are two parts to the channel,” he added. “On the one hand, you have distributors such as Ingram Micro and Tech Data Corp, and these companies are under constant pressure as the margins from selling standard PCs and equipment keeps going down. So players such as these are looking to sell higher margin gear such as Cisco equipment. Distributors are being driven into this move by necessity, – because of margin pressures,” explained Mayes.

“On the other hand, you have companies such as Computacenter and SSC, which have both recently built their own Tier III or IV data centers, which are state of the art,” said Mayes. “These guys are also under intense margin pressure from just selling hardware, and so are actively looking to services to build up recurring revenue streams.

“These players are really making a commitment to build their own data center infrastructure. Computacenter, for example, acquired Digica a couple of year ago, as they realised that money from reselling equipment is really lumpy, but if you have your own data center, customers can be locked into three- or five-year deals, and this is the direction that a lot of companies are heading in.

“The trend of declining margins on hardware is a global trend,” said Mayes. “For example, Computacenter often works with an American company called Compucom on big service deals, as they are both looking to build up high-margin services.

“In continental Europe, I would certainly expect to see similar trends in Germany, Benelux and other mature markets, from channel companies adding data center capability, as well as resilience and support for data center equipment,” said Mayes.

CHANNEL INVESTMENTS
“Three years ago, Tech Data committed itself to developing a stronger data center practice by establishing its Advanced Infrastructure Solutions (AIS) division,” said Pete Peterson, Tech Data’s senior vice president and general manager of AIS. “We saw the growing trend of industry standard x86 architecture, coupled with emerging virtualisation solutions becoming the preferred platform for data centers of all size.

“There were significant cost savings and efficiencies to be gained through the deployment of these technologies and the migration away from proprietary mainframe world,” said Peterson. “AIS was chartered with building our solutions portfolio – servers, storage and virtualisation – and enabling data center resellers to build a profitable practice around these technologies.

“Since creating AIS, Tech Data has been aggressively recruiting new vendor partners, establishing new or expanded distribution agreements with leaders such as Brocade, Cisco, EMC, HP and IBM,” Peterson said. “We also put tremendous effort into building our virtualisation practice – now one of the broadest and strongest in the channel – with partners such as VMware, Double-Take, FalconStor and Vizioncore.”

INGRAM MICRO
Ken Bast, vice president of vendor management at Ingram Micro US, said: “For more than two years, our ITS division has offered dedicated field resources to help vendors, VARs and MSPs working with midmarket businesses maximise their ROI with data center technology. We also have two solution centers based in the US featuring data center solutions – Buffalo, NY and Santa Ana, California. And late last year we announced our addition of Cisco, EMC and VMWare’s new Vblock Virtualized Technology Solutions, offered through our Ingram Micro Cisco Business Unit.”

Meanwhile, Computacenter has perhaps one of the most mature offerings in the data center space. “This is not something we have done recently. We have been operating in this sector for about 13 years,” said Simon Brickett, head of data center managed service at Computacenter. “The Digica acquisition at the end of 2006 allowed us to acquire some data center facilities, as we wanted to offer a complete range.”

Brickett explained that Computacenter owns a Tier IV in Romford, Essex, which is a high-availability facility that is attractive to finance organisations, especially as it is close to the city of London. It also has lower-end Tier II data centers in Leeds and Nottingham, and has opened a Tier III-like standard data center in Manchester.

In addition, Computacenter leases a certain amount of collocation space in a number of collocation facilities in the southeast of England and in Germany.

So one would think that given this amount of investment in the sector, every channel operator would have a dedicated data center division. Indeed, most of the resellers were keen to stress their credentials here.

DEDICATED DIVISIONS
“The Advanced Infrastructure Solutions division is dedicated completely to supporting data center resellers in the US,” explained Peterson. “In Europe, Tech Data’s Azlan division provides similar solutions and specialised support for the data center market.

Mark Walker, Director, Converged Infrastructure, Azlan, said: “We have well established relationships with both Cisco and HP – in the server space, the high density space and as number one in networking for HP. HP’s data centre networking proposition is strong and as a distributor our opportunity is to leverage a strong market position that was based individual technology chunks (networking, server and storage) and map it onto HP’s convergence offering – including the core 3Com enterprise technology. With Cisco we are a Unified Computing System partner.”

REQUIRED DISCIPLINES
But what do these companies feel are the required disciplines for resellers looking to operate in the data center supply chain?

“That starts with a solid understanding of the key technologies shaping the data center today: servers, storage and virtualisation,” said Peterson. “And now, with the convergence of computing and high-end networking technologies, the data center is undergoing even more change and bringing new complexities.”

PRIMARY DISCIPLINES
“The primary technology disciplines include virtualisation, storage, security and networking,” said Bast. “The resellers also need to understand the power and cooling requirements, as well as application optimisation. Understanding professional and managed IT services, as well as systems integration, is also key.”

Brickett explained: “From the operational point of view, because we are running our customer’s infrastructure, we need traditional mainframe disciplines, such as rigorous change control, rigorous capacity planning, management of the data center – everything essentially short of the application layer.

“The disciplines for the data center themselves are that you need to understand how to drive your cost base through efficiencies, such as reducing carbon emissions, how you run your air cooling, as well as driving efficiency rates in other equipment,” he added.

“For example, people look for star ratings for their washing machines and fridges, and we look for star ratings in the UPS gear. It is all about reducing losses and driving efficient power usage effectiveness (PUE) in data centers.”

Of course, the data center sector is enjoying the benefits of new and emerging technologies.

CHANNEL MARKET DRIVERS
“It is going to be tough for some channel companies, however,” said Mayes. “You cannot go from selling PCs for 20 years, and then overnight reinvent yourself as a data center specialist. So we will see more acquisitions, with companies using acquisitions to acquire capabilities and expertise, which is a much quicker way of building up your capabilities in this sector.”

Peterson agreed. “Clearly, these are new and complex technologies that require skill and experience to properly deploy and manage,” he said. “That always equates to opportunity for resellers. It means margin-rich solutions sales, as well as strong professional services revenue. Additionally, all mission-critical applications are being run from the data center. There is no better position for a reseller to be in with their clients than in their data center gaining insight into their operations, which the competition cannot.

“Tech Data is committed to this market,” added Peterson. “The new solutions coming to the channel from leaders such as Brocade, HP and Cisco make this a very exciting time for data center resellers.”

For Ingram Micro US, Bast feels the key driver is the need to optimise and drive efficiency into the IT infrastructure. “Utilising industry-standard architectures within virtualised environments offers a cost-effective data center, while allowing the flexibility necessary to expand capacity. Also, we see the move to the cloud, X-as-a- Service or computing as utility as a driver for the data center value proposition.

“Overall, data center represents the majority spend within a large enterprise or midmarket IT department and is the brains, if you will, of the operations. In order to be valued and maintain their edge with these end users, VARs in this space must know the ins and outs of data center computing. If the VAR is responsible for securing the data, it is strategic to the customer and its value is greater,” said Bast.

Perhaps then the final word on the subject is best offered by Brickett, who offered a blunt assessment. “It is all about revenue, as boxshifting is a one-time hit,” he said.

Brickett believes that in future manufacturers will come to see this as a route to market for provision of their products and as a selling-on model. However, this is not something you can just jump into,” he warned. “You have to make a significant investment in facilities, skills and people.

Interestingly, Brickett believes that the colocation market will come under a lot of pressure from new emission legislation such as CRC (Carbon Reduction Commitment) over the next couple of years, “because they are working on thin margins anyway”.

Keywords: The channel, Distributor Tech Data Corp, data center supply chain, Advanced Infrastructure Solutions, Cisco Specialty Data Center Distributor, Computacenter, margin pressure, data center, Investment