HP (NYSE: HPQ) today became the second major storage vendor to make a big move into the iSCSI market this year, with a $360 million acquisition of LeftHand Networks (see Fortune 500 Firm Ditches Fibre Channel for iSCSI).
The move follows Dell’s (NASDAQ: DELL) $1.4 billion acquisition of EqualLogic earlier this year and adds HP’s name to the list of vendors chasing the fast-growing IP storage market.
Lee Johns, HP’s director of marketing for entry storage, said the move is aimed at mid-market companies that need a storage solution to match server virtualization deployments.
HP also bought the company for its “very responsive software stack,” its architecture, and an existing OEM relationship with HP ProLiant servers, said Johns.
“It’s the perfect architecture to leverage our existing investments,” he said.
Johns said he doesn’t see FCoE’s arrival in a few years as having much of an effect on the iSCSI market. FCoE will help enterprises unify their fabrics, while iSCSI offers mid-market businesses without Fibre Channel infrastructures a more cost-effective way of adopting block-based storage networks.
“There’s very little reason why someone deploying iSCSI in their environment would suddenly switch to FCoE,” he said. “There’s a long, robust market for iSCSI, but that doesn’t mean we won’t see a strong market for FCoE.”
Analysts generally agreed with Johns’ assessment.
Bob Laliberte of Enterprise Strategy Group cited ESG research that found that iSCSI and Fibre Channel have the most growth potential among organizations adopting server virtualization, while the NAS market is already largely saturated among such users.
FCoE, Laliberte said, “will take hold as a top of rack switch which will then separate LAN and FC traffic. It will take longer for end-end-end solutions to take hold. … Customers need to deploy solutions today to support rapidly growing server virtualization environments. In particular, the mid-size businesses, with limited resources and capital, view iSCSI as an alternative to FC or NAS.”
Ray Lucchesi of Silverton Consulting noted that iSCSI vendors “are probably best prepared to take on the FCoE market space.”
“iSCSI markets exist outside of FCoE and will for a long time to come continue to be cheaper than FCoE hardware,” said Lucchesi. “iSCSI markets are starting to take off and open new and growing opportunities that did not exist because of the low price and ease of deployment of this storage.”
So after EqualLogic and LeftHand, who’s left?
ESG analyst Terri McClure cited SANRAD, StoneFly, Compellent, FalconStor and smaller players like Wasabi, Intransa and DotHill — and noted that more consolidation could come once market conditions improve.
“This is a great deal for both HP and LeftHand,” said McClure “LeftHand has a really robust feature set but needed to expand sales bandwidth. HP gets a fully-baked, clustered mid-tier storage solution. There is a big shift to clustered storage going on because it provides linear scalability, granular scale and inherent high availability. Kudos to LeftHand for making this deal in a really tough market.”
Jayson Noland of R.W. Baird said the deal is “a strategically important investment in HP’s lagging storage portfolio and a strong step in the right direction.” He added that the price tag is “much more reasonable than the EqualLogic premium.”
LeftHand has about 3,000 customers, said Johns, roughly the number that EqualLogic had before Dell acquired the company. Johns said he expects HP’s global sales channel to greatly expand LeftHand’s market, which has been largely confined to North America and Europe. The deal is expected to close within two months.
Not surprisingly, Dell came out with its own statement on the deal.
“If you look at what customers really want in this type of storage architecture, it’s intelligent performance optimization, growing performance and capacity at the same time … and ease-of-use,” said Dell spokesman David Graves. “We believe EqualLogic is the industry leader for this.”