Dell Computer started a revolution in the low- and mid-range server market, undercutting rivals through supply chain efficiencies and selling directly to customers. It is now doing the same for storage.

As the company’s build-to-order storage devices have reset entry-level and mid-range prices in the sector, sales of Dell’s standalone storage systems have surged by more than 70%,

putting them on an annual revenue run rate of $1 billion. In fact the company says that external storage products now account for 55% of Dell’s total storage sales.

Behind that is a two-pronged strategy. The base is the company’s PowerVault family of storage devices, supporting networked and direct attached storage, tape backup and SCSI storage largely for Windows environments. In particular, its network attached storage systems, which typically sit within departments, have sold well to small- to medium-sized businesses.

But the second part of Dell’s strategy shows greater ambition. To make inroads into enterprise storage, the company has forged partnerships with several high-end storage systems and software vendors, enabling it to start offering the building blocks for storage area networks (SANs).

Most important is the company’s reseller agreement with disk array giant EMC. Since late 2001, Dell has been offering EMC’s Clariion mid-range products under a five-year co-branding agreement.

But while these systems are built to EMC’s designs, Dell has been able to leverage its renowned supply chain efficiencies when sourcing and assembling components, and so cut the cost of Clariion systems by as much as 60%. The resulting price squeeze has put significant pressure on its mid-range storage rivals including Hewlett-Packard and Sun Microsystems.

Dell rounds out that enterprise storage attack through further agreements, most notably through partnerships with the major vendors of storage management software EMC, Veritas and Computer Associates.

As that shows, Dell may not own all the pieces of the enterprise storage puzzle but its business model means it can put these together for savvy customers at a lower cost.