Bill Roth, Ulitzer Editor-at-Large

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5 Reasons We Don't Negotiate...and 3 Tips if You Must

Yesterday I had an enjoyable discussion with Andrew Reichman of Forester research.  At least in my limited experience with Andrew, he’s an analyst who actually uses his perspective to, well, analyze the industry.  He’s thoughtful, has opinions, and in our conversation he definitely called them as he sees them.

One point he tweeted about yesterday is that Nexenta does *not* negotiate pricing.  For that matter, we don’t negotiate partner terms either.  Both our pricing and our partner program are published on the web.

If you do not know enterprise storage, that may sound fairly conventional in today’s internet-enabled transparent markets.  However - in enterprise storage having a published price list that you stick to is,as Andrew reminded me,revolutionary.

Legacy vendors business models, compensation strategies, and corporate cultures are based on having one stated price and another that customers actually pay. Almost every deal is a negotiation.  While the results help to create record profits for legacy vendors, they also, over time, generate bad blood on the part of customers.  The situation in this market reminds me a lot of my time beating AT&T in the mid 90s.  They had analysts convinced that they had one of the world’s most valuable brands and that they were going to leverage their excellent customer relationships to grow their business into TV and wireless; on the ground we knew that was absolutely #rap, AT&T was literally buying customers by sending them checks to return to their service.  A few years later the old AT&T was on life-support, forced to sell their cable and wireless assets and eventually themselves to SBC.  Why?  Because AT&T customers learned that they were being ripped off! They all had friends that had left and then received$100 checks and massively lower pricing to return.

You hear the same sorts of stories about legacy storage today; legacy vendors are building negative brand equity almost as fast as they are building their record-setting margins.  All you’ve got to do for them to take you seriously is to buy some NexentaStor and suddenly the price drops 80%. That means that you could have paid 4x as much as another customer.  Of course the vendor does not expect to charge you 80% off forever; you can only get that pricing if they intend to soak you via costs for additional shelves or additional licenses or otherwise in the future.

So, why doesn’t Nexenta negotiate?

We do not believe in transparency simply out of a desire to bring better business practices to a booming part of the IT market.  We also think that constant one off negotiations with customers is bad business because:

1.  You lose the trust of your customers.

2.  You inevitably see customers as sources of cash as opposed to partners that you must make successful in order to grow; this can reinforce the wrong culture which will eventually lead you off track.  We have no choice but to succeed with our customers at Nexenta.  Our model does not work otherwise.  So it is not a surprise that we are maniacally focused on total product quality and customer success.

3.  The channel won’t trust you.  Which channel partners can get a legacy vendor to drop their prices to their customers?  Well, it depends on who you know.  Legacy channel partners end up spending as much time selling their importance to the legacy vendor, in order to get discounts and special deals, than they are selling to customers.

4.  Ditto regarding sales teams.  Who gets to give away the first system in order to reap the rewards of a locked in customer later on?  Again, legacy sales teams waste time selling internally to be a favored team as opposed to being relentlessly focused on customer success.

5.  Longer sales cycles.  This may be the most obvious one.  Negotiation takes time.  We don’t negotiate so we save time.  Given the almost overwhelming interest in our mission of “enterprise class storage for everyone”, time is our enemy.  We want to fish or cut bait right now.  If you are not ready to get better, faster, more open, with tighter data integrity and lower power consumption and massively lower TCO storage now that’s fine.  We expect you may be more interested after you next wrestle with your storage vendor over costs as you try to keep up with 50-75% storage growth.

While we don’t negotiate - most storage buyers do, because they must.

Here are a few tips for negotiating with your legacy vendor:

1.  Insist on 80%+ discounts. Tell them you heard of someone else that received that discount.  And if you’ve just closed a deal with one, ask them to credit you the difference on future purchases.  Any easy way to get those discounts is to buy a NexentaStor for at least some of your storage.

2.  Once you get that discount, get it in writing that this discount level will apply for the next 5+ years.  Remember, storage does not go away.  At the end of your 5 year ROI model, you are still vulnerable to price gouging.

3.  Building on point 3, build into your ROI model the cost of migrating away from your legacy vendor.  A good rule of thumb we use is that a project will take 2-3 people 90 days per 50TB.  It depends hugely on use cases; for example, second tier may be much easier than primary tier.  Use your own numbers and do the math.  Otherwise you are not being responsible.  After all, you will need to do a copy at some point, whether it is because your legacy vendor kills off their older storage lines or because they are purchased or because you finally decide to escape from vendor lock in.

There is a better way.  Imagine a future in which you actually knew what you’d pay for storage in a few years *and* you could expand your storage usage without fear of being gouged.  That future is available today.  Email sales at nexenta.com today to see how we and our partners can help you.

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Bill Roth is a Silicon Valley veteran with over 20 years in the industry. He has played numerous product marketing, product management and engineering roles at companies like BEA, Sun, Morgan Stanley, and EBay Enterprise. He was recently named one of the World's 30 Most Influential Cloud Bloggers.