thanks to someone on yahoo
July 9, 2001
Ashok Kumar, CFA, 650-838-1414, akumar@pjc.com
Out Of Wonderland: Network Storage Industry Struggles With Reality
--It is now evident that network storage industry is not opaque to an
economic downturn.
--Hype of the storage network industry exceeds its current capabilities.
--Currently neither SAN nor NAS products provide better performance or
reliability over legacy SCSI technology.
--The second generation of storage networking products must make good on
the failed promises of the first generation for the industry to get back on
track.
--We do not believe that any of the storage networking stocks (BRCD #, EMLX
#, NTAP #, QLGC #) warrant their inflated valuations on uncertain earnings
estimates.
Not that long ago companies selling network storage products were making
claims that the network storage business was a boom industry that was a
safe haven from economic downturns and that storage purchases were not
discretionary. Everybody knows by now that this was not a very accurate
assessment and that network storage companies get to suffer like everybody
else when the markets slow their purchases. The question then is whether or
not the network storage industry will get its bearings, get back in the
saddle, and ride to glory again.
At the core of this issue is how much value network storage products add to
the world of computing. While there is no question that storage is an
essential component of computer systems, it is not clear how powerful the
pull is for network storage as an independent purchase.
As it is with most other technologies, the hype of storage networking
products exceeds its current capabilities. The fact that there are two
classes of products (SAN and NAS) does not help the markets' understanding.
SAN products provide capacity scaling, NAS products do not, NAS products
provide administrative/installation benefits, SAN products do not. But more
important than their differences are their similarities compared to SCSI
storage technology. Neither SAN nor NAS offer broad performance benefits
over SCSI today and neither provides better reliability. Network storage
promises to combine scalability, availability, reliability, manageability,
and performance someday as key value adds, but for most customers today
these are yet unfulfilled promises and it seems that the technology still
has considerable development ahead for the broad market to realize these
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PJ Ashok Kumar downgrage - part 2
by: jnpr12000 07/09/01 09:05 am
Msg: 57975 of 57991
In an economic slump such as the one we are currently experiencing,
customers have delayed implementing new applications and systems until they
can be completely justified. It is by now quite clear that delays in
implementing applications and servers has a direct impact on storage units
sales - new systems need new storage. But what about existing systems?
Their storage capacity needs increase, but as they do, there is little
question that customers are increasingly concerned about how to manage
storage more effectively for such critical areas as system availability and
data access.
From an IT perspective, one of the benefits of the current economic slump
is that new deployments have slowed enough to allow more time to be spent
managing current systems, and their storage. Part of the projected growth
in storage was (and still is) tied to the lack of administrative resources
available to manage it. The thinking is that if nobody has time to manage
storage, it is possible to throw more capacity at the problem to avoid a
catastrophe. Six months ago IT organizations did not have time to manage
storage growth. Today, customers can spend a lot more time on it. The
problems of managing data and storage are enormous and the silver lining in
today's situation for network storage companies is that the broad market is
being re-acquainted with those problems and the potential for solving them
with new technology.
This opens the door to a second generation of storage networking products
that can make good on the failed promises of first generation products. The
question for the network storage industry is when those products are
expected to move past the hype and into real benefits that can be attained
by the broad market. Cost will have to be one of the driving benefits, not
just cost of ownership, but the cost of the hard goods too. This reality
will be very painful to the companies who have lived off award-winning
margins. The days of wine and roses for network storage are over -- the
industry is at the beginning of new and larger technology and business
challenges. |
