WD acquires Skyera: whoa!

by Robin Harris on Thursday, 18 December, 2014

The Skyera acquisition could signal a sea change in the relationship between storage device and system makers. It is overdue.

Traditionally, device makers avoided competing with their customers. This is what it made Seagate’s acquisition of Xiotech (now X-IO years ago so surprising.

StorageMojo was critical of Seagate’s Xiotech acquisition because there were large and profitable intermediate steps that Seagate could’ve taken – which they belatedly have – rather than diving into the array business. Ultimately Xiotech didn’t work out for Seagate.

Are things are different today?
Competing with customers is much less of an issue today because:

  1. There are only 4 3 hard drive vendors.
  2. Most system OEMs are moving to flash and SSDs are fast as they can anyway.
  3. Intel/Micron and Samsung are dominating enterprise SSD sales, so Seagate and WD have little business to lose.

Today, unlike the past, there’s a clear, low-risk path for WD, Seagate, and Toshiba to move into the storage system arena. In fact, given Intel’s and Samsung’s SSD success, there’s a positive reason to move soon if they want to play any role in future enterprise storage.

Downsides
Every silver lining has a cloud. And in the case of WD and Seagate, the problem is that they are component vendors, not system vendors.

Their executive teams have to wrap their heads around software, service and support to build a viable systems business. It took HP – originally a test equipment company – a couple of decades to develop a strong systems engineering perspective and that came from acquisitions, not internally.

WD and Seagate don’t have decades.

The StorageMojo take
The storage systems business needs new blood. The old enterprise model is dying and the new model will have much lower margins for mainstream storage (see The 30% solution).

WD and Seagate have a tremendous opportunity – Seagate’s Kinetic initiative is quite promising – if they navigate the complex issues required to build a systems business. While it would be difficult I’d like to see them try.

Courteous comments welcome, of course.

{ 9 comments… read them below or add one }

Howard Marks December 18, 2014 at 4:51 pm

Robin,

There are only 3 drive companies. Seagate, Toshiba and WD the only way I can see to get to 4 is to count HGST as a separate company. Sure WD is running them at arms length but the cash to buy Skyera came from the WD bank account not HGSTs and the Chinese will have to end the arms length thing soon (2016 at the latest)

Gabriel Chapman December 18, 2014 at 9:44 pm

I just dont see the component manufacturers making the transition to storage appliance sales in a meaningful fashion. Nor do I believe they could compete with the established sales teams entrenched at the major storage players.

I’d be surprised if Skyera had over 100 paying customers. Frankly their claims were never validated by any legitimate 3rd party resources, and Sky Eagle was/is 2 years late to market.

The future of flash could very well be a DIMM based model, but there are caveats associated with that approach as well. The spinning rust manufacturers are hedging bets, that’s what I see this as.

Yaron Haviv December 19, 2014 at 6:42 am

Robin,

A key change is large cloud providers, they won’t buy systems from EMC or NetApp, and use commodity based hardware.

Skyera is not yet another system vendor with SuperMicro chassis, 2.5″ drives, and Linux, but promise higher density through a proprietary flash form factor, and controller, can be a nice offering for guys looking at high density (cloud, DoD, HPC), those don’t tend to buy from system OEMs.

Seagate kinetic is quite similar, it is designed for the cloud, or as a backend to object or NoSQL solutions, those are also not going to use OEM storage systems.

Yaron

Robin Harris December 19, 2014 at 11:26 am

Howard,

You’re right, Howard. The fact that I still see Samsung branded hard drives – which are owned and built by Seagate – fooled me. Thanks for the correction.

And your point makes my argument stronger: if all 3 drive vendors started shipping systems, what, exactly, could legacy vendors do about it? PC vendors don’t care and neither do the Internet scale providers.

Robin

Daniel December 19, 2014 at 12:47 pm

Western Digital through the JDA with Intel has a 45% share of the Enterprise SAS SSD market, so Western is already a leading player and has been established in the market since 2008. It’s unclear whether Western bought Skyera for the system itself or for the controller / IP, but time will tell on that front. They clearly have ambitions to move up the value stack, but that’s easier said than done. Selling HDDs to the procurement guy at HP is a much different conversation than selling a system to the infrastructure guys at hypersacle providers.

TimC December 22, 2014 at 9:45 am

Acquired? The link you posted says they were one of the participants in the Series B funding.

Lou December 29, 2014 at 5:09 pm

The problem with Skyera is that a bunch of hardware guys decided to come together to make something cool. Unfortunately, cool isn’t enough. Their products lacked basic availability features (non disruptive upgrades, non disruptive hardware replacemet, etc.). Also, any storage vendor that sells data reduction as an add-on later clearly never engineered for it and will have problems delivering.

So, yes, it is cool that you can cram that much flash in 1U and that you can put it on the back of a humvee. Unfortunately, what I need are the software features that say PureStorage or Xtremio provide and not a ‘gee-whiz’ box I can show off. In some ways if you look at Pure and Xtremio, you’ll see that once again smart software is going to end up being more useful than custom hardware.

With the WD acquisition, I don’t know that they are going to learn that lesson.

John (@Lost_Signal) January 1, 2015 at 12:58 pm

I’m not sure if I’d point to XtremeIO as the example of software features.

(Disruptive upgrades for Skyera are one thing, data destructive upgrades for XtremeIO are even worse).

I understand someone at Gartner was drunk and put them in the MQ for their road map, but I’m confused why we keep talking about a immature platform like it defines the AFA market…

sundarms January 5, 2015 at 11:22 am

Robin, It looks more like a firesale to me. From what I hear, Skyera did not have much cash during the final days and WD took over the company. The employees are not happy as none saw any money. It is tough to be in SSD market now as I guess it is pretty much saturated (if only focussed on hardware). The IP comes from the software that goes with the hardware just like PureStorage. Any more insight on this sale ?

Leave a Comment

Previous post:

Next post: