Long ago in the Mesozoic mainframe era of monolithic domination of the market by a single vendor, the vendor had enormous power over the customer. That power was exercised in a variety of ways, including manipulation of pricing, control over product delivery, availability of technical resources, and accessibility to upper management. Any customer whose vendor loyalty was questionable (i.e. a customer with the audacity to evaluate a product from a competitor) would become a potential target.
Connections at the top between customer executives and vendor executives were often so well-wired (at the golf course and other venues) that a naïve IT administrator who attempted to save his company money by sourcing from a competitor of the incumbent vendor could be fired on the spot. The old adage you can’t get fired for buying IBM also meant that you could get fired for buying anything else.
Thankfully, those days are long gone, and customers now insist that their supplying vendors abide by open systems. In the storage networking space, even customers who traditionally single source their storage products are constantly pressuring their vendors to embrace open standards and open interoperability.
Politics, however, are driven by deeper economic interests, and the basic economics of ongoing market competition repeatedly surface in new and sometimes strange political alignments. Although there are large players in today’s storage market, no single vendor has had the pervasive presence and power to steer the market in its own direction.
But now Cisco has entered the storage networking arena. It is probably more accurate to say that Cisco has been forced into storage networking by basic economics. Any vendor who saturates an individual market, as Cisco has with conventional IP networking, must find new market areas or face the prospect of flat quarter-to-quarter growth and declining share value.
Storage networking has created an entirely new market space with sustainable, long-term growth opportunity. Although Cisco has not been a pioneer in SAN technology and so far lacks market penetration in storage, its sheer size and dominance of mainstream networks positions it to become a significant player.
The 800-Pound Gorilla Crashes the Storage Scene
So what happens when the number one vendor of mainstream networking steps into a market already occupied by other successful vendors? On the surface we can expect a fair amount of fireworks and shifting vendor alliances, while in the subterranean depths we can expect to hear the rumble from massive collisions of capital. Cisco’s market capitalization is powers of ten greater than most traditional storage companies, and this mass of capital has enabled it to pour significant resources into creating SAN products.
Its economic clout has also enabled Cisco to begin influencing the SAN market, evidenced by its fast track qualification with some major storage vendors and OEM agreements. These alliances are marriages of convenience, though, not of true love. Potential domestic disputes include virtualization, which the storage manufacturers would like to tie more closely to their arrays and which Cisco would like to position in the fabric.
Then there's the uncertainly as to whether Cisco, through acquisition, will itself become a storage vendor or be content to compete for the SAN interconnect. Major storage suppliers cannot ignore Cisco’s presence in mainstream networking, but divorce papers are inevitably being drawn up just in case Cisco oversteps its bounds.
Massive market capitalization is also a useful tool for simply buying market share. Although it may not seem like good business practice to slash prices on new products, give products away, or pull out competitor’s products at remaining book value simply to get your own installed, losing a few hundred thousand dollars up front is sometimes a suitable means to secure additional millions in real sales down the road.
And even if a customer really likes the features and functions of her current SAN vendors, it’s hard to say no to the vendor who is offering its product for free. Still, while this is an available tactic in the 16-port switch arena, it's doubtful that even a Cisco can afford to buy out a significant installed base of director-class switches in the data centers.
The entry of a traditional networking vendor into the SAN market is impacting the political spheres of influence within IT shops as well. For decades, storage managers have made their own decisions about product requirements and vendor selection. Insulated from the broader corporate IT networking hierarchy and volume discount structures for routers and network switches, storage managers have been the recognized and unchallenged experts on SAN sourcing.
Now, however, the networking vendor who has never taken the storage manager to lunch is making recommendations to upper management on which Cisco SAN switch would be best to replace the incumbent Fibre Channel vendor. The purchasing manager, seeing all the money that can be saved through the existing volume discounts for network gear, is elated. Well before the 9th hole, the regime change of vendors is complete, with the storage manager receiving the news well after the fact. This scenario is, of course, an exaggeration — it may actually take more than 9 holes to close the deal.
The Dynamics of Change Are in the Air
As an uninvited guest to the already crowded SAN party, the entry of Cisco is already causing confusion and consternation among hardware vendors, just as Microsoft’s storage entry potentially threatens software vendors. Comments have ranged from Cisco is validating the SAN market (which was already quite viable and needed no external validation) to Cisco doesn’t understand storage networking (when in fact it only needs to know how to market storage networking).
Although Cisco did fail to make any significant headway with the NuSpeed iSCSI line, the Andiamo investment has at least produced a workable Fibre Channel fabric. As other vendors have shown repeatedly, it doesn’t take the best speeds and feeds or bells and whistles to win market share.
As anyone who has tried to market storage knows, however, storage has little resemblance to traditional data communications. Storage is a much more conservative marketplace with longer sales cycles and due diligence on products. In the end, customers must safeguard their data assets with technologies that have established trust and reliability in the market. This naturally favors established SAN vendors with proven track records in storage and whose customers are less vulnerable to aggressive marketing. Still, the changing dynamics of the storage market will undoubtedly force all vendors to be more creative in providing robust and affordable SAN solutions.