Yes, Virginia, the storage industry will survive the crisis
Economists and business leaders generally agree that the current, as yet unofficial, recession will be the worst we have seen since the Great Depression. The credit bubble has popped and we are facing global de-leveraging that will take years to unwind.
De-leveraging is fancy term for “a lot less money rolling around.” The computer industry started after the Great Depression so this will be the worst times we’ve ever seen.
How bad will it get for storage?
Storage is a special case. Disk drives underlie everything we do and they show no sign of slowing their capacity increases and price drops.
Data growth rates are a little less certain – contracting businesses produce less data – but the economic advantages of online data continue to grow as cost per gigabyte drops. Even in the financial sector someone is going to have to unravel all of those credit derivative swaps and synthetic securities that the “rocket scientists” – heckuva job, guys! – developed.
Where will this impact IT operations? Right in the heart of the array business.
A little smarter, a lot cheaper
Assume 80% of all business data is unstructured. And suppose 80% of that data is stored on storage arrays that are optimized for transactional data.
If RAID arrays average $6/GB today and cluster storage averages $2/GB we can begin to estimate the potential impact. In a perfect world 64% – 80% of 80% – of all corporate data could be migrated from high cost storage arrays to much lower cost storage clusters.
If the storage array business is a $21 billion a year today that means there is roughly a total available market of $13 billion of IT spend that could go to storage clusters. If storage clusters are 1/3 the price of storage arrays that suggests a total storage cluster business of $4 billion a year.
That ignores, of course, the traditional impact of sharply lower storage costs: a rapid increase in the amount of data stored. Online and easily searched data is much more valuable than data is stored on paper or tape. A first-order guess is that in today’s market there is the potential for an $8 billion a year storage cluster IT spend.
That’s the theory, anyway. The reality is that most IT professionals will not give up the storage arrays they know and love without a fight. But the economic pressure will be unrelenting.
Winners and losers
This won’t be a rapid process. The early not-very-good storage arrays came out in 1990 and took 8 years before sales reached 50% of the capacity of enterprise storage. The economic advantages of cluster storage are greater and the pressure to contain costs much stronger today. It will be 6 years before half of all enterprise storage capacity sales are in storage clusters.
The winners will be those companies that embrace and extend the capability of storage clusters the soonest. Among large companies HP and EMC appear to have the lead. Among the small companies several will be purchased while others will continue to grow as independent entities.
The losers? IBM appears to have no discernible strategy. NetApp is bogged down in its efforts to integrate the GX global namespace with the contradictory requirements of its traditional Data OnTap code base.
Sun has good building blocks but will fail if they lead with Lustre. HDS will wait until the market is defined to start moving – but that may be too late. This is a software play in more ways than one.
Smaller companies in the array business have a steep learning curve with cluster storage. Expect most of them to fade over time. There will be opportunities for OEM suppliers to the mid-tier vendors.
The StorageMojo take
The age of the raid array is coming to an end. They won’t disappear anymore than mainframes have. But they will become much less common. The array business will see single-digit sales drops and general long-term stagnation. The storage cluster business will show robust growth.
The race for storage cluster dominance is still young. There are many variables where newcomers and existing players can find or fumble important advantages. Can storage clusters be effectively productized? Or will integration requirements favor service-oriented companies? How will flash be best integrated into storage clusters? How will the SMB market be cracked?
The economic crisis does not create new trends. It accelerates existing ones. IT professionals should not underestimate the power and impact of the current crisis on once sacrosanct IT budgets.
IT likes to talk about “business partnership.” Now is the time for action. Show the CFO that you know how to do more with less and you’ll be a partner. Insistence on business as usual is the wide road to a pink slip.
Courteous comments welcome, of course. Disclosure: I’ve recently done some work for HP on their announced but not-quite-shipping Extreme Data Storage 9100. I was impressed.