DATA CENTERS

  • 08/10/2010
    11:23 AM
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Breaking Down Vendor Strategy In New Markets

As manufacturers get larger, they sometimes begin to look at other adjacent markets that they can get into to leverage their current market position. One example might be a SAN array manufacturer deciding to sell a disk-to-disk backup solution or developing a new feature for their existing solution, such as adding deduplication. How they decide to accomplish this task and how committed they are may directly impact the customer.
As manufacturers get larger, they sometimes begin to look at other adjacent markets that they can get into to leverage their current market position. One example might be a SAN array manufacturer deciding to sell a disk-to-disk backup solution or developing a new feature for their existing solution, such as adding deduplication. How they decide to accomplish this task and how committed they are may directly impact the customer.

When trying to bring new products to market, manufacturers have four options. They can make it, they can buy it, they can OEM it or they can resell it. It is what they do with each of these processes that determines if they are truly adding value and are committed to the new direction, or if they are attempting to get a temporary revenue boost.

If the manufacturer makes the product, they are investing their own R&D into the process. The resulting product is their own, and it generally has some unique capabilities that make it worth consideration in the market. The challenge with making it is the time it takes to move from idea to actual product. If a manufacturer feels that the market will pass them by because of the time it takes to build a product on their own, or if they don't have the resources or internal expertise to develop the product, they will look at the other options.

When it comes to buying a technology, a purchase does not mean that the manufacturer will be adding value. The manufacturer is making a statement that this market is important by spending money to either get into the market or enhance their position in a market. The trick with buying a technology is integrating the new company into the manufacturer's organization. It is also interesting to see how far the manufacturer will go with the acquisition. Will they simply try to access a new market or will they take the technology and enhance their existing products, or will they do both? The further the manufacturer takes the product, typically the more value they will add, the more committed they are. This hopefully leads to higher returns on investment.

OEMing a product typically means that the manufacturer is going to make a serious commitment to a technology, probably brand it themselves and sell the technology as if it were their own. While not the same level of commitment as the first two options, it is fairly significant. As is the case with a purchase, it is what they do with the OEM relationship that demonstrates the value that the manufacturer is prepared to bring to the relationship. Many will take the product and either directly enhance it, directly enhance theirs or develop a special connection between the two products. This does take investment and commitment on the part of the manufacturer .


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