It's all about storage productivity
I cannot sufficiently stress this point as it is the key to understanding the entire storage business. Data storage demand is growing at a pace which makes the Internet seem tame by comparison. Dealing with the never-ending avalanche of data is the central problem facing IT managers today. The problem is that the productivity of IT personnel is straining to keep pace with this relentless growth. Anything which can ease the pressure on IT staffing is cost-justified and will pay for itself almost immediately. This is why EMC can get away with its pricing structure--EMC's prices are not the dominant cost factor for large-scale data management. (Aside: This is also the core reason why EMC is such a great long-term investment.)
Outsourcing data management is going to be an enormous business over the next decade because only the largest corporations will have the IT staffing luxury of keeping their data "in house". Realize, too, that not all data is created equal. True, there will always be highly sensitive data that no corporation would entrust to anyone else, but the vast majority of "routine" business data (e.g., SI's message boards) are perfect candidates for outsourcing. Beyond this, since strong encryption will be universally deployed for ecommerce anyway, routine encryption of "offsite" data will be a given.
I'm personally looking forward to the StorageNetworks IPO since I believe they will be very successful. But this will not be at the expense of EMC. While Barron's and others in the press will often try to construct conflict where there is none, the real message is that the reason why so many people are getting into the storage business is because it is such a fabulous growth area. Growth in storage demand, like death and taxes, is one of those "inevitables" that one can bank on with supreme confidence. Remember that all companies grow by growing into their markets. Show me a market whose needs can be filled by a single company and I'll show you a dull market indeed. The storage market is the fastest growing market on the planet and will remain so for the foreseeable future. In practical terms, this means that there is plenty of room for many players in this space besides EMC.
On a more practical note, it is worth remembering that the bits have to physically reside somewhere and the company that owns the bits has enormous effective "account leverage" (another EMC secret). It's one of the reasons why I prefer EMC to VRTS long term, even though both companies have obviously performed very well over the past many years.
|
