Claus Egge, Martin Hingley

Dot Hill Highlights Q1 2010

  • Has previously produced OEM disk array and controller products and software for Dell, Fujitsu, HP, NetApp, Sun and others
  • Has supplied over 350k arrays in its 10 year history
  • Has managed the loss of its large and highly profitable Sun business effectively over the last year
  • Currently makes the P2000 product for HP
  • Is diversifying by targeting second tier systems and telecoms suppliers
  • Is looking to expand its business through channels significantly from its current 5% level
  • Is increasing its focus on storage software
  • Is moving towards offering virtual storage through its Cloverleaf acquisition

Dot Hill took to the road in Europe during March 2010, to raise the profile of the company and its business. We (Martin and Claus) talked to them in separate meetings, but decided to write this together, pooling our analysis.

OEM companies in the storage sector are traditionally somewhat reticent about potentially stepping on its OEM clients’ toes. But there is often an obligation for a publicly listed company to blow its own trumpet. Its recent history has seen it making losses but throughout its 10 year history the company has supplied the world with more than 350,000 arrays.

Producing disk arrays that other vendors choose to re-badge has been the company’s core activity but its business has been dependent on a small number of OEM customers in particular Sun. While the latest results show declining losses and improved margin, Dot Hill is also aiming at widening its business model.

If you’re a CIO you may not know Dot Hill as a supplier, but still be using its products. As a supplier of entry level RAID and SAN controllers and systems up until now it has mainly produced offerings under OEM contracts for major systems suppliers. For instance:

  • Fujitsu Technology Solutions (FTS or rather Fujitsu Siemens before the name change) marketed the Dot Hill made FibreCat SX, which has now been replaced by its own Eternus products
  • Dell offered its S100 and S300 RAID controllers on its PowerEdge T110
  • HP still uses the company’s product as its MSA 2000 and P2000 ‘Array System Remote Snap Software’ – making Dot Hill the supplier of all of its entry level RAID software.

However the company’s biggest contract was with Sun, which at one time represented 80% of its revenues with Dot Hill produces SANnet II and ST-3000. A view of Dot Hill’s revenue by major OEM and channel is shown in

Dot Hill Seeks To Expand Its Channel Business

Dot Hill’s Sun business declined by 60% in 2009, so managing an overall decline of 14% to $234 million was a major achievement. Indirect channels accounted for only 5% of revenues in the year, with the UK’s Hammer and US Promark the biggest two.

Dot Hill’s focus on the channel manifested itself in September 2009 with the launch of a formal channel partner program. It has employed 8 people at the HQ and regional level in its program, designates its partners as Gold, Silver and Authorised through certification and has launched a new Partner Portal.

To avoid the conflict of competing with its OEM offerings, channels currently offering HP’s MSA2000 won’t qualify as Dot Hill partners in their own right.

It is also continuing to build its OEM business by targeting second tier players and Telecoms companies, to which it can supply NEBS compliant products.

An Increased Focus On Storage Software

Dot Hill is articulating a greater focus on software both in terms of commercialising its Intellectual Property (IP) as well as adding value to its customers. This emphasis makes sense since IT professionals are accustomed to install add-ons in order to meet data protection schemes. And more importantly customers are willing to pay for robust solutions.

The Cloverleaf Acquisition Adds Virtual Storage

Dot Hill completed its acquisition in January of Cloverleaf, which had been struggling to ramp up its own business in data centre storage virtualisation with the iSN product. Although the acquisition is relatively new, the expectations are for Dot Hill to widen the iSN family with new versions aimed at SMB customers.

Some Conclusions – Dot Hill Needs To Expand OEM, Software And Channel Business

Dot Hill is clearly under pressure to deliver returns in a market segment where most of its storage competitors have enjoyed sustained profitability. That the company has managed to turn itself around in a recessionary climate deserves praise.

A multi-pronged corporate strategy is necessary to emphasise that this business is about channel and software as well as its established model as an OEM supplier of disk arrays. OEM customers clearly need to feel confident that their supplier refrains from any attempt to compete with them. But the OEM customers conversely do not enjoy worrying about the viability of their supplier’s business model. Therefore a Dot Hill based on a diversified sound strategy benefits both parties in the OEM supplier/customer equation.

A revitalised channel model is also healthy for Dot Hill as long it sustains the existing OEM model. It helps the company connect with IT customers, thus benefiting Dot Hill’s software initiatives and the iSN product development, independently of what OEM prospects may or may not articulate. That customer engagement is indirect via channel partners is however manageable.

The sales cycle for storage virtualisation is admittedly not swift, but this segment is far from saturated and certain customers have a clear desire to virtualise their storage. To this end Dot Hill should exploit its specialist channel partners to aid its product development and not least to refine its joint messages. In parallel, Dot Hill needs to work with its OEMs to develop the iSN IP into solutions attractive to these customers.

We will be watching the company with interest in coming months to see how it achieves its aims.

Are you a storage VAR? Have you considered reselling Dot Hill products? If so, please let us know by commenting on this article.

This blog post has been cross-published with Martin Hingley of ITCandor. Martin’s website is http://martinhingley.wordpress.com/