Follow the Money: Picking Technology Winners and Losers
After 12 years of writing a monthly column for Enterprise Storage Forum, it’s time to move on.
A monthly column may not seem like a very big commitment, but I have always tried to bring readers the most cutting-edge thoughts and technology from the worlds of storage and high-performance computing (HPC). That takes time and thought and commitment of time (with one exception—an article on the death of my best friend and mentor that I wrote during a 90-minute plane ride).
I think I’ve largely succeeded in giving you the best current thinking about our industry, as evidenced by the dozens of articles that have gone viral in places like Slashdot, Reddit and Linux Today, but it seems like it’s time to move on before I start to repeat myself and bore us all to tears. My editors at Enterprise Storage Forum want me to keep writing, so I won’t rule out an occasional column if inspiration strikes. However, this will be my last regular column.
I want to leave you with a single thought about our industry and how to consistently pick technology winners and losers. This is one of the biggest lessons I’ve learned in my 34 years in the IT industry: follow the money.
The IT industry is based on technology innovation, and that costs money—lots of it. This was just becoming true when I started back in 1981 because until then much of technology innovation was funded by the U.S. government. But by the end of the 1980s, they had almost no impact. From the census to Social Security, the U.S. government needed technology to solve their problems, but the cost of funding development and the pace of change caused industry to take charge.
We recently saw IBM get out of the foundry business because of the company’s lack of return on investment. Most industry pundits say it takes $8 billion to $10 billion to fabricate a new chip, and it also requires you to have to have the right people and management to make it happen. Although money is critical, it doesn’t ensure successful teams. New storage technology is no different, and when the tablet and phone revolution of the last decade needed storage, the industry responded with investment in NAND technology that benefited both consumer and enterprise applications. I remember using NAND in the 1990s for an embedded project, but it was not until the smartphone revolution that NAND took off in terms of both volume and reduced price.
The money trail has affected all storage technologies we are using today and all technologies that we are going to be using in the future, including non-volatile technologies such as PCM, Memristor and carbon nanotube, if any of them make it in the market.
Example 1:Tape’s declining fortune
As many of you know, I have been a big supporter of tape technologies for archiving for almost three decades. I have fought back against those who prematurely declared it dead, including EMC in the 1990s. Even back in 2006, when the late Jim Gray made a seminal statement at the Storage Guru Gong Show, Tape is Dead, Disk is Tape, Flash is Disk, I contacted Jim about this and went to discuss it with him. In spring 2007, I had dinner with Jim at a restaurant in Minneapolis near where he was giving a talk and tried to convince him that he was wrong about tape. Henry Newman vs. Jim Gray did not turn out so well for me, and I even bought dinner. The fact that Jim would even have dinner with me was one of the truly eventful things in my career.
When I started to write this piece and started following the money, I decided to look at things without emotion and without past prejudices and beliefs—really look at what drives the industry regardless of what I want to happen. So when I looked at LTO media sales a few weeks ago, I decided to look at tape as part of this follow-the-money analysis, and I have to admit that Jim is starting to look right. The Santa Clara Consulting Group puts out data on quarterly media sales for LTO tape, and has the data from 2008 to today on their website. The table below shows quarterly sales since 2008:
In six years, LTO media sales have been cut in half. The drop in tape media sales is both a short-term and long-term issue for LTO which most believe is a majority of the tape market. In my opinion, enterprise tape sales depend on the LTO ecosystem for market access, library, media, drive development and, last but not least, for R&D and technology improvements. Although the sales of tape media do not represent the entire market, they do represent a very significant portion of the market, as the ratio of high-cost drives to media usual ranges from 500 to 1 to 200 to 1 in large sites. Even at a cost of $30,000 per drive, media costs are still usually far more than half the cost of a tape storage system.