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.