Executive Briefing on Enterprise Storage

10 February 2006

The dynamic storage fabric

In the opening three months of 2003, in the midst of an economic slowdown, organisations as a whole increased their storage capacity by a stunning 49%, buying in that quarter an additional 175.6 petabytes of free space.

In any other industry that kind of growth in capacity would be regarded as wildly extravagant, even reckless. But not in storage, where disk drive makers have continued to find ways of packing more data into smaller spaces and to build drives for less money. That makes for a tough equation for vendors. Just to stand still, some vendors are finding that they must increase the capacity of their machines by 50% or more a year.

Moreover, in the past two years, customers have been making use of some of the storage overcapacity they bought in healthier and less-constrained economic times, and that has caused a deep recession in the sector that is only now ending. The notion of a recession in an era when applications such as email, data warehousing and call centre conversation capture are driving soaring storage requirements is yet another illogical twist.

As analyst Charlotte Rancourt of IDC puts it: "The growth in gigabyte per unit does not offset the unrelenting decline in dollar per gigabyte."

However, the changes in buying patterns have created something of a breathing space for customers and vendors alike, and both are taking advantage of that to embrace network storage. That is already turning out to be the next big wave of investment for customers, who value the structure it brings to storage management as well as the clear business benefits that it delivers.

The SAN advantage

The 30-year-old storage industry passed a major milestone in March 2003. For the first time ever, sales of network storage were higher than those for direct attached storage (DAS), the industry's stalwart. The shift from DAS to a networked topology is being undertaken with an eye on demonstrable business benefits. Research company IDC recently dug deep into the benefits one large fibre channel SAN - the Weather Channel - was seeing. Despite the inevitable upfront hardware, software and implementation costs, plus annual upgrades, additional management software tools and IT staff training, the Weather Channel has:

Reduced cost per terabytes stored as a result of a decrease in the total number of storage systems and a commensurate reduction in warranty costs and support costs;

Reduced cost for power and floor space;

Reduced IT staffing levels as a result of storage administrators being able to handle three to four times more storage capacity;

Increased staff productivity as a result of automation and centralised management, with IT staff able to spend more time on activities that contribute to the business rather than on low value tasks like configuration;

Increased access and availability to storage assets boosting user productivity as users have more reliable access to the information they need to do their jobs;

Achieved easier back-up as data can be copied to a non-production storage device on the SAN, effectively creating a staging area for 'serverless' back-up;

Attained the ability to provide storage capacity as a meterable, utility-like service.

As a result, the Weather Channel reported being able to grow its storage capacity by 33% while only adding 12 servers - half the number that previously would have been required under the DAS set-up. The bottom line: a saving of $1.2 million over four years.

Active storage resource management (SRM)

SRM provides capabilities for discovery, reporting, configuration, analysis and topology mapping across a storage infrastructure via a centralised console - a facility essential in any SAN environment.

'Active' SRM monitors and reports on the overall storage topology and implements the ability to take action - either through manual intervention or automatically - when certain pre-set policies or thresholds are reached.

System buying patterns

There is an interesting set of dynamics taking place in the disk systems sector, the traditional bedrock of the industry.

Both demand and prices are down, as evident in the 15% fall in revenues that vendors as a whole experienced in 2002. More recent figures, however, show the erosion slowing to single digits.

One of the reasons for the modest bounce back is that storage area networks (SANs) are now entering the 'tornado' phase of customer take-up. IDC estimates that while the storage industry as a whole shrunk last year, the SANs market grew by 14%. And during the past year, the proportion of overall revenues coming from network storage (both SANs and network attached storage or NAS) has gone from 48% to 53%, says IDC, leaving direct attached storage with 42%.

Three companies jockey for most of the leadership positions across the various segments. The overall disk storage systems market is led by Hewlett-Packard (HP) with a share of 26%, according to IDC's data for the first quarter of 2003, followed by IBM with 19.1% and EMC with 11.7%.

However, there are some notable companies outside the top three: Dell is making up ground fast, and with growth running at 37% it could conceivably unseat EMC in 2004.

When external disk systems are singled out, the fight is two-way: between HP and EMC. Since its acquisition of Compaq, HP has led the external systems market (with 19.5% compared to EMC's 17.4%), but when it comes to RAID systems, EMC is still ahead (with 19.2% versus HP's 18%).

In the boom area of network storage (both NAS and SANs) EMC leads with a 26.3% revenue share, but that is helped by the large numbers of NAS machines it sells. For pure SANs, it trails HP (27.9% versus 24.5%).

There is also a two-way fight in the NAS market, between Network Appliance, which has rebuilt its lead to 37.3%, and EMC, whose share has now fallen back to 33.7%.

Acquired knowledge

There are scores of storage industry start-ups seeking to plug some of the gaps in the fast-growing market for network storage systems.

In the area of storage resource management alone, companies such as AppIQ, Arkivio, InterSAN, Storability, TeraCloud and PowerQuest have emerged. And that has presented plenty of opportunity for larger vendors seeking to accelerate their network storage skills and product ramp up. The most active are EMC and Sun.

Buyer	Target	Activity
Selected storage acquisitions Aug 2002-Aug 2003
Adaptec	Eurologic Systems	Direct/net storage systems
Adaptec	Intel ICP Vortex	RAID protection systems
Brocade	Rhapsody Networks	Storage network switches
Cisco	Andiamo	SAN storage switches
EMC	Astrum Software	Storage resource mgmt s/w
EMC	Legato	Back-up software
EMC	Prisa Networks	SAN management s/w
IBM	TrelliSoft	Storage resource mgmt s/w
McData	Nishan Systems	IP storage switches
McData	Sanera Systems	SAN consolidation s/w
Storability	ProvisionSoft	Storage provisioning s/w
Sun	Pirus Networks	Storage networking s/w
Sun	Terraspring	Utility computing mgmt s/w

Software dimensions

Storage area networks (SANs) may have pushed software to the top of the sector agenda, but the real revenue powerhouse of storage still lies elsewhere. Organisations continued to spend the largest part of their storage budget on simply protecting their data. According to IDC, companies worldwide spent 45% of their storage software cash on back-up software (covering back-up, recovery, archiving, and related hierarchical storage management) in the first quarter of 2003.

In comparison, spend on storage resource management software (SRM) - a category that includes the related areas of device and SAN management, quota and resource management, policy and automation, virtualisation and volume management - accounted for 30% of the whole storage software market. The other major category - replication software - took 20% of the revenue pie. Although back-up still dominates, analysts suggest this will change. "[We] expect SRM to lead the pace for growth in storage software as customers adapt new policy management and automation tools," says Paul Mason of IDC.

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