Storage Services Faces Bright Future

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Led by outsourcing and managed hosting, spending for storage services is improving and will top $30 billion by 2007 worldwide, according to a new report from the Dataquest unit of high-tech research outfit Gartner.

The $30 billion tab is encouraging. According to report author and Gartner analyst Adam Couture, the storage services market was worth about $21 billion in 2002, which “was down from previous years, but it grew modestly in 2003 and will grow more substantially thereafter.”

Couture wrote the market will be led by usual mainstays IBM , HP and EMC , which has tacked on additional services over the last few years after spending most of its life as a hardware company.

After posting revenues of $4.7 billion in 2003, Big Blue wields a commanding 21 percent of the storage services market, while EMC and HP hold 6 percent each and posted same year sales of $1.2 and $1 billion, respectively.

StorageTek is fourth, with 4 percent on revenues of $826 million, while Sun Microsystems ($395 million) and Dell ($386 million) garner 2 percent. Hitachi Data Systems chimes in with 1 percent on sales of $306 million.

Couture discussed the current and future role of storage services in his report.

“Storage services are becoming increasingly important to storage hardware and software vendors and resellers, as well as to the ever-expanding cadre of service providers, including MSPs, consulting companies and traditional outsourcing companies,” he said, noting that vendors are expecting service to contribute at least 25 percent revenue in the coming years.

Looking forward, hardware support is expected to be the single largest storage service revenue generator despite the fact that this segment was hit hardest of all the niches in the storage market by reduced spending after the dot-com bubble burst.

“Users are becoming comfortable with the concept of engaging external service providers to monitor and manage their storage infrastructure or to outsource it entirely,” Couture said. “Hardware vendors without managed service offerings for their own products run the risk of having future purchasing decisions placed in the hands of service providers, not end users.”

Meanwhile, average storage prices have dropped considerably, even though the need for more terabytes increases every year. This is a direct result of new compliance regulations that force companies to retain data files for longer periods of time.

Couture concludes that IBM will keep its storage services revenue lead in 2004 because of the increasing importance of storage services to its strong outsourcing and hosting businesses. He noted that HP and EMC will continue to compete for second or third place, unless a major acquisition tilts the balance in either company’s favor.

Article courtesy of

Clint Boulton
Clint Boulton
Clint Boulton is an Enterprise Storage Forum contributor and a senior writer for covering IT leadership, the CIO role, and digital transformation.

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