What's Selling In the Data Storage Market?
With EMC's (NYSE: EMC) SAN sales falling by about 20 percent and the rest of the data storage market also under pressure, observers could be forgiven for thinking that nothing is selling out there.
But there were bright spots even within EMC's report Celerra unified storage arrays, for example, continue to sell at a double-digit rate and other storage technologies have managed to catch on in the downturn either because they offer users a way to save on storage costs or they offer such a compelling value that users are willing to spend on them even in a tough economy.
Economic downturns can also be where dramatic change occurs and buying patterns shift often permanently. New darlings can emerge and seize the moment, displacing old faithfuls that are no longer regarded as current or cost-effective. And once changed by economic necessity, the new habits that emerge can become permanent.
The big winners, this time, appear to be flash technology and data deduplication, while some areas of the tape and Fibre Channel SAN markets are suffering. But even within those categories, there are specific areas which are thriving. And not surprisingly in the current environment, open source-based storage technologies are gaining ground as a cost-savings measure.
"What's selling well are items that are essential to keeping business running along with technologies that can help reduce costs, boost efficiency or productivity as opposed to discretionary or nice to have items," said Greg Schulz, StorageIO Group founder and senior analyst. "Dedupe, flash and virtual tape libraries are some obvious examples."
Solid sales for solid state
Schulz points to solid state drive (SSD, or flash technology) as having gained a lot of ground recently, particularly for read- and write-intensive applications as a way to boost performance and efficiency. This correlates well with what storage vendors are saying.
Jim Cates, senior director of storage development at Sun Microsystems (NASDAQ: JAVA), has noticed a big uptick in interest in SSDs.
"While people used to use striped disk for high IOPS, they are now tending toward SSD," said Cates. "The price of flash is low enough that they want to use it for high IOPS data instead of DRAM, which is cost-prohibitive."
Pat Wilkison, vice president of marketing and business development at SSD manufacturer STEC (NASDAQ: STEC), echoes this view. But even within the SSD segment, buyers have changed their ways. Instead of purchasing some small flash drives, they now want larger models in order to get the greatest capacity per dollar.
For example, STEC's ZeusIOPS product line features different versions for different needs. At one extreme is the highest Input/Output Operations per Second (IOPS) model, and at the other extreme is high capacity (40 percent more capacity, but still with decent IOPS). Thus STEC now offers 750GB products and is experiencing what it describes as meaningful demand for 1.5TB sizes, which will begin shipping in the fourth quarter.
"We have noticed a bias toward cost savings and an emerging market that doesn't need breakneck I/O but wants higher-capacity, as SSD is better than cache," said Wilkison. "Our high-capacity, lower I/O market has grown from 0 percent to 30 percent of total orders in recent months."
EMC was the first storage vendor to market with SSDs and has been pushing flash drives as a means of enhancing storage tiering. In the EMC vision, flash becomes the first tier, Fibre Channel disk is tier two and SATA becomes tier 3, a model that other vendors are also promoting.
Users look to a few SSD drives for the most heavily utilized data, then a small amount of FC drives for less utilized data, and low-cost, high-capacity SATA for the bulk of information. As that latter information isn't accessed too often or isn't mission-critical it can comfortably reside on bulk SATA drives.
"It's rare that they need more than a half-dozen to a dozen flash drives," said Ken Steinhardt, vice president and CTO of customer operations at EMC. "The last six months have seen an acceleration of the usage of flash for the first tier."
Deduping the way to profits
Steinhardt has also noticed a marked shift toward deduplication technology. The massive amount of duplicate data in any system make this technology a compelling value proposition, he said.
Just look at Data Domain (NASDAQ: DDUP), the dedupe pioneer that reported its quarterly results last night. Even in the worst economic slowdown since 1982, the company is still growing at a 30 percent to 40 percent rate, and the company boasted 11 million-dollar deals in the first quarter. Its shares were up 15 percent today on the news.
EMC is pushing dedupe on several fronts, as are a host of others. Quantum (NYSE: QTM), a dedupe partner for both EMC and Dell (NASDAQ: DELL), is heavily promoting the deduplication capabilities of its DXi series appliances, a strategy that is paying off. Comparing its December quarter results to those in the previous quarter, disk and software sales increased about 44 percent, while tape automation sales were roughly flat.
"Sale of Quantum's deduplication technology which goes to market both through our branded DXi products and through our OEMs was the biggest driver for the 44 percent increase in disk and software sales," said Steve Whitner, disk product marketing manager for Quantum. "During the last quarter, we also benefited from the rapid market adoption of the EMC Disk Library products that include Quantum's dedupe software."
Tape, Fibre Channel hang on
Quantum and EMC, of course, made their money on old-school storage platforms such as tape and Fibre Channel. While those fields are hurting to some degree, they certainly aren't all bad. Like mainframes in the 1990s, tape's demise exists mainly in the heads of competitors and pundits. Far from falling off the cliff, tape technology retains a strong user base.
"Tape continues to be leveraged for bulk data protection, backup and archiving," said Schulz.
Sun's Cates noted that declines in tape are being felt in small autoloaders and libraries with fewer than 50 cartridges. That market is being gobbled up by disk. On the other side of the coin, though, Sun is seeing some desire to upload large repositories onto tape as opposed to trying to manage it all on disk.
"We are also experiencing growth in consolidation opportunities moving several small libraries into one centralized unit, as it is more cost-efficient," said Cates. "In addition, we are seeing an uptick in enterprise storage systems in general."
Recent stats compiled by Dell'Oro Group confirm this. Fourth quarter 2008 Fibre Channel sales were overall about even with the prior quarter. Like every other sector of storage, though, there were stronger and weaker elements to the market. Fibre Channel switch sales rose, for example, primarily due to higher prices rather than volume of sales. Users are clearly buying into the latest generation of switches, with their new features available at a premium. This includes 8 Gbps Fibre Channel and Fibre Channel over Ethernet (FCoE).
In the fourth quarter, users began trials of Cisco's (NASDAQ: CSCO) Nexus 5000 switch with FCoE software and adapters from Emulex (NYSE: ELX) and QLogic (NASDAQ: QLGC), said Tam Dell'Oro, president of Dell'Oro Group.
On the downside, host bus adapter (HBA) numbers were down from both the previous quarter and the year-ago quarter. Dell'Oro believes this is a function of the significant declines reported in the server market.
"The Fibre Channel adapter market is not feeling the rewards of users migrating to the higher-priced, higher-featured products," Dell'Oro said. "Instead, this market is characterized by an increasing portion of lower-priced blade server adapters."
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