Watkins walks – can Seagate fly?

by Robin Harris on Tuesday, 13 January, 2009

He was pushed
Seagate’s Bill Watkins, CEO since 2004, apparently lost the confidence of the Seagate board and was replaced by former CEO and current Chairman Stephen Luczo. Why?

Not Watkins’ sometimes bizarre public statements: that would’ve gotten him the boot years ago. A slow reaction to the worst recession since the 1930s forced the issue.

The bigger problem
In the short-term global demand for disk drives is down. But managing production cuts is easy compared to Seagate’s real problem: creating new product demand.

That is Seagate’s long-term challenge. The turmoil created by the rapid rise of flash and cluster-based storage means there will be more changes in storage in the next 5 years than in the last 15.

Suggestions for the new CEO
Every company faces tension between the “business as usual” guys and the forces of change. At Seagate inertia has overwhelmed innovation for too long.

The confusion around flash strategy is one symptom. The inability to sell the Integrated Storage Element, now a Xiotech product, is another.

Seagate needs to climb down from the minimum 1 million unit order mentality and open itself to investing in a variety of small businesses that may grow large. Even those that don’t will be educational.

A few ideas:

  • 10K SATA drives. WD has built a successful consumer franchise with their Velociraptor 10K SATA drives. But system vendors won’t touch it without a second source of supply. How hard is it to put a SATA interface on the Savvio 10K SAS drives?
  • Cold archive disk. Disk is the new tape — so why not make a business out of it? In less than a year Seagate could have an archive drive that would meet consumer needs for long-term personal data storage. Long-lfe lubricant, reduced RPM, a nifty USB docking station and a 7 year archive life and within three years you’d be selling tens of millions of drives into a new segment.
  • Get serious about flash. This has two elements: reducing disadvantages in speed and durability — see 10K SATA drives above – while continuing capacity growth; and rethinking flash-based storage. Use flash’s unique capabilities. Seagate needs a flash skunk works/biz dev team with the charter to incubate new concepts.
  • Get serious about the home. Seagate may never become a system supplier to the home — although it could — but it certainly can become a leading supplier of storage components for the home. The cold archive disk is just one idea.
  • Do a root cause analysis on the ISE failure. Xiotech is turning the ISE into a real business where Seagate failed. That’s just wrong. Why couldn’t Seagate market a Superdisk that doesn’t compete with existing customers? Understand that problem and you will position Seagate for more decades of success.

The StorageMojo take
The nimble, innovative Seagate of years past has lost its mojo. Focused on million drive orders the company has ignored tectonic shifts in the storage market.

The good news is that digital storage demand is on a long-term growth trend. Disk drives aren’t buggy whips – the company’s best days are ahead of it.

Investing in new products while cutting production of old ones is painful. But the alternative is worse.

I hope Seagate’s new management will rise to the occasion. Seagate people are looking for leadership who will challenge their creativity and unmatched technological depth.

Courteous comments welcome, of course. Especially from Seagaters, of course!

{ 11 comments… read them below or add one }

Chuck McManis January 13, 2009 at 1:02 pm

Good morning Mr. Harris, your mission, should you decide to accept it, is to create a new market for storage. This disk will destruct in 10 .. 9 .. poof!

I wonder if you are looking for change in the wrong place here Robin. A huge chunk of Seagate’s business is to OEMs and ODMs so they should (in theory) be listening to those folks about what they would like to do, but your exhortations (which are spot on for new opportunities) should probably land in the inboxes of the folks who deliver and service the end user products.

Look at the NetApp S series. Here was a box that might have made it into the home with NetApp RAID/WAFL goodness if NetApp could have figured out a way to let consumers plug in their own disks of their own capacities. Instead you’ve got the DrRobo or the ReadyNAS trying for that market.

Another product, something like just the time control properties of a digital video recorder (DVR) (Tivo patent sharks not withstanding) where you replace that time shifting marvel, the VHS VCR with an inexpensive DVR for all the folks who don’t have cable/satellite etc. But where is JVC or Panasonic in that space?

Where is the Apple “media box” that sits in your home and syncs automatically to the iTunes store for everyone in the house, can play new music ala Pandora and even a retiree could operate?

The next 10 years will find storage appearing in places it has never been (like processors did in the 90’s) and yes Seagate could get serious there, buy a flash company (SanDisk would be a good choice) and continue as the premier source of storage “widgets” to the ODM / OEM community. They have to be careful about trying to move up the value chain (which is an easier way to increase profit than improving operations) because doing so threatens the very innovators who are going to discover the next big demand for storage gizmos.

Bottom line, Seagate could win by re-dedicating itself to being the the top supplier of storage components to the OEM/ODM community and innovoating around ways to do that more cost effectively than their competitors. If they do that they have to get serious about Flash as well rather than trying to keep it out of the market.

–Chuck

Anonymous Coward January 13, 2009 at 1:16 pm

Does Seagate need to participate in the solid state storage market to thrive, or is it enough to continue incrementally improving spinning disks for the next few years? Naively extrapolating from the (exponential) improvements and cost reductions in NAND Flash and HDD suggests that HDD will remain the volume leader for years to come, but what about profitability? Also, exponential curves are extremely difficult to extrapolate — what if HDD is marginalized (to lower tiers of storage and near-line back-up) faster than obvious?

Next question: if Seagate must succeed as some kind of solid state storage technology provider, can they do it without manufacturing scale? I don’t personally see how Seagate could compete successfully (=profitably) against the Intel-Microns and Samsungs of the world in a traditional semiconductor-based solid state technology like NAND Flash. The value-add in controller architecture is real but slim and fleeting, surely not enough to compensate for lack of manufacturing ownership and scale. Anybody put numbers and statistics to an analysis like this?

No wonder Seagate has a confused SSD strategy. I don’t know anything about Seagate’s inner workings, but I have to wonder if this was a major thorn of disagreement between the executive team and the board.

Tony January 13, 2009 at 2:50 pm

I’d say the HDD industry has been more profitable than NAND flash – right now, only Samsung is making money, and even they are hurting. And fab costs go up exponentially, too – it’s not a surprise that so few companies make NAND.

It’ll be interesting to see which market tanks more this year, NAND flash or HDD. My money is on NAND flash – overall semiconductor is already tanking at >20% sales decline.

Seagate already does sell direct to consumer, e.g. FreeAgent, Maxtor One Touch.

As long as the demand for storage capacity increases, HDDs should do fine (due to its capacity lead over NAND flash). If demand starts to level off, then I’d be really concerned.

marc farley January 13, 2009 at 3:05 pm

You might get your wish Robin. Steve Luczo is a deal maker, not an ops person. He was the golden haired one who executed the Seagate software acquisitions of 12 years ago. I don’t think he has the patience to deal with manufacturing issues – he seems himself as operating on a higher level.

His last go-round at Seagate ended with the sale of the software assets to Veritas and then taking the company private. It will be interesting to see how this turns out.

Joe Kraska January 16, 2009 at 8:05 am

Robin,

Like a number of forecasters, I’ve done the calculations on when flash will beat 15K and 7200RPM drives, etc, on $/GB and other metrics. 15K is soon, 7200RPM not so soon. With flash excelling so rapidly, I’ve wondered why the vendors aren’t focusing on creating a new class of enterprise drive: the enterprise hybrid. This is a 5400 or 7200RPM drive, crafted expressly for density and power conservation, coupled with a flash drive (ala the laptop, but for enterprise purposes). The flash-hybrid aspects of the drive would be to increase r/w IOPS: a giant MRU cache, if you will. I ought to only need a few GB of flash to be able to achieve significant performance benefits. This would be a drive with tier-1 workload properties, but tier-2 densities.

I would think the win here would be enormous: it would create a margin segment out of the low margin drives, something the manufacturers are going to be desperately needing when the 15K drives go buh-bye. Which they will: very soon now.

Joe Kraska
San Diego CA
USA

Rich Seiling January 16, 2009 at 3:14 pm

A Cold Archive Disk is just what the digital photography market needs. This is a huge user segment that has no idea how to archive their precious moments for a lifetime. Even most pro photographers are not aware of the difficulties of archiving their digital photographs.

I want a drive that I can put my photo on and put in a safety deposit box for ten years and still be able to access my photos with a minimal error rate.

Of course there are more applications than digital photography, and the manufacturers who jump on this idea will create a whole new market segment.

Why on earth do I want to buy AIT-5 tapes at $45 per 400GB when a HD is cheaper and I don’t need a $6000 library to read it and make it useful for backup?

The average photographer doesn’t need 100MB/s throughput, they need security, longevity, and robustness.

Capacity isn’t even that big an issue as most home users are only shooting 10-20GB of family photos a year. You could be selling them one drive every year for their archive needs.

Gary Davis January 16, 2009 at 7:32 pm

I think there is merit in all five points. There is one other thing Seagate needs to do. They need to backfill with a highly capable ops guy. I would say the desperately need to do that if they hope to get on with any of the points you make.

Steve Jones January 19, 2009 at 4:06 am

The fact that nobody has yet published a full-scale, audited TPC’C’ with flash is interesting, but there are a few reasons why this might be the case. First TPC’C’ is ridiculously heavy on disk I/Os per transaction to the point where it bears no resemblence to any production loads that I’m aware of. However, what it is not very sensitive to is I/O latency – it’s largely a matter of just scaling up IOP capabilities. In consequence, the cheapest way of providng this is to use huge arrays of JBOD set-ups and short-stroking the devices. In these configurations the vast majority of the disk space is unused, and providing you don’t mind the footprint and energy consumption, then that’s OK, but it wouldn’t be acceptable in most large data centres I’m aware of. As far as the death of 15K drives – we are seeing a move to 2.5″ units to tackle the IOP issue, but as yet these are only available in 10K and there are real questions over whether we’ll see 15K on these smaller disks due to heat issues. At the moment the vendors are promiting these smaller disks on getting more IOPs in a given unit of space, but the native latency actually gets worse.

In a lot of real-world workloads, IOPs don’t get any near the ridiculous levels of flat-out TPC’C’ I/O levels. However, latency does tend to be a really serious issue as many such workloads have limited multi-threading capabilities (whilst TPC’C’ scales very well with multi-threading). It’s for these reasons that arrays with write caching can make big differences on performance – it’s not total IOPs, it’s latency that limits throughput on many real-world applications.

Physical disks have latency limits that are very unlikely to be fundamentally improved, and caching can only go so far as it gets into laws of diminishing returns. What is required is a major breakthrough to deal with latency issues, especially on random reads (it’s often easier to deal with latency on writes through NV caching and write-back).

Many published benchmarks have this problem – they major on total throughput on heavily multi-threaded workloads rather than performance on thread-bound applications.

BB January 21, 2009 at 11:21 am

Applications for home archive would need to be more data-intensive than photos to be suitable for a cold archive disk. As Rich stated above, a family may shoot 10-20GB of photos per year. A much better solution for that would be the SanDisk SD Worm Card — which would be much more compact, much less expensive, more reliable, and have a much longer archive life (rated at 100 yrs).

http://www.sandisk.com/Corporate/PressRoom/PressReleases/PressRelease.aspx?ID=4353

Robin Harris January 21, 2009 at 1:01 pm

All, a lot of good comments. Some thoughts:

-Seagate isn’t alone: nurturing innovation inside a large company is a general problem that companies get wrong more often than right. It is the nature of Seagate’s errors that suggests there is a systemic corporate culture/cognition issue specific to Seagate. It would be fun to work with them on it. In the meantime, small companies remain a fruitful source of innovation – thank goodness!

– will flash SSDs ever be profitable? Good question. The flash manufacturers are running a process factory in an industry with significant seasonal demand – which SSDs hope to correct. The skills needed to develop and market flash SSDs may be dissimilar enough so that we end up with something like the disk/array split – where disk vendors aren’t in the array business – and flash vendors aren’t in the SSD business.

-There are at least 2 areas of innovation open to drive vendors who don’t want to compete with their customers: new kinds of disks – Cold Archive Disk; and packaging disks into “super disks” – the Xiotech ISE. That little Xiotech is able to sell the latter when big Seagate couldn’t/wouldn’t is why it appears Seagate has some systemic problem.

– no audited SSD TPC numbers? Interesting. What is the problem?

– SanDisk did a press release on the SD Worm card, but they aren’t selling them on the company store. How about an update SanDisk?

Robin

Blake Irvin January 26, 2009 at 2:09 pm

Joe K,
Are you referring perhaps to the Fishworks project at Sun? I hear they fit the flash/hd hybrid bill pretty well.

– Blake

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