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MARCH 05, 2002
Microsoft's SAK Attack
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Microsoft Corp. (Nasdaq: MSFT - message board) and its server vendor partners are sneaking up on the big guns in the NAS market. By this time next year, Microsoft-based NAS products could represent more than half the market, in terms of units shipped, according to one analyst's estimate.
If Microsoft eventually captures the bulk of the market, it could seal today's dominant NAS suppliers -- EMC Corp. (NYSE: EMC - message board) and Network Appliance Inc. (Nasdaq: NTAP - message board) -- into a rarified niche from which they might never escape.
And, barring possible U.S. government intervention on the antitrust front (which doesn't look likely these days), Microsoft will succeed, analysts say.
"Microsoft will do to the NAS market exactly what it did to the browser market," says Steve Duplessie, senior analyst at the Enterprise Storage Group Inc. "The Microsoft NAS OS stuff will actually work and, as an added bonus, be damned good."
By the end of 2002, Duplessie predicts, Microsoft SAK-based NAS OS boxes will outnumber EMC and NetApp's products combined, in raw numbers shipped.
That's not bad for a relative newcomer. This struggling underdog only entered the NAS appliance software business in mid-2000, and started getting considerable traction after it shipped version 2.0 of its Server Appliance Kit (SAK) in April 2001. Based on the Windows 2000 operating system, Microsoft's SAK [ed.note: pardon the expression!] is, broadly, intended to let a server OEM partner develop any number of fixed-function, appliance-like devices. So far, though, the NAS version of the Server Appliance Kit has been the most popular among OEMs.
Server manufacturers now shipping SAK-based NAS appliances include (NYSE: IBM - message board), Dell Computer Corp. (Nasdaq: DELL - message board), Compaq Computer Corp. (NYSE: CPQ - message board), Hewlett-Packard Co. (NYSE: HWP - message board), IBM Corp., Maxtor Corp. (NYSE: MXO - message board), MTI Technology Corp. (Nasdaq: MTIC - message board), and NEC Electronics Inc. Microsoft, as it does with its other OS products, charges OEMs a per-copy royalty fee for systems it ships with the SAK software; but those licensing terms are very closely guarded.
Microsoft first decided to enter the NAS sector about two and a half years ago, when the segment really blossomed, says Zane Adam, lead product manager in Microsoft's Embedded Appliance Product Group.
"When we think the time is right, that's when we enter a market," he says. "NAS in particular plays into our competency: file serving and operating systems. We've been in that business for a long, long time. It's just an evolution of file servers, really."
Zane says Microsoft was responsible for a "paradigm shift" in NAS. He says products were very expensive when Microsoft partners first started shipping SAK-based appliances. Today, he says, a Windows-powered NAS appliance costs as little as 2 cents per megabyte, versus 15 or 17 cents a megabyte for EMC's or NetApp's.
"We've made NAS available to the masses," Zane says.
Brad Nisbet, senior research analyst at IDC, acknowledges that Microsoft is a force to be reckoned with in NAS. But, he says, Microsoft is only making inroads in the low end and middle tier of the market. Microsoft's SAK software was installed on about 20 percent of NAS systems shipped as of September 2001; however, IDC estimates that EMC and NetApp accounted for about 75 percent of the revenue in the NAS market in 2001 (43.5 percent for EMC and 32.5 percent for NetApp).
Furthermore, Nisbet says, Microsoft today cannot match the performance of the high-end players -- NetApp, EMC, Procom Technology Inc. (Nasdaq: PRCM - message board), Auspex Systems Inc. (Nasdaq: ASPX - message board) -- which have invested in proprietary operating systems to get the kind of performance and scaleability they need. Microsoft has made some progress in the midrange NAS market via multiple-device management and other features it recently added to the SAK. But, Nisbet says, "Microsoft is not there yet with the Server Appliance Kit on the high end."
Brett McAnally, senior product manager of Dell's PowerVault NAS line, says the Microsoft-based NAS products have been flying off the shelves, most often because they're less expensive than other NAS options. "This is part of a natural commoditization that's happening in the NAS space," he says.
Zane claims that Microsoft is continuing to eat up share with its low-cost play. "In the OEM opportunities I've seen, we have not lost out to NetApp or any other competitor."
But NetApp has downplayed competition from Microsoft-based NAS appliances. "NetApp's biggest advantage from the beginning is that we have a tight [operating system] kernel that's designed to do just this: high performance and simplicity," Tom Mendoza, NetApp's president, said on the company's most recent earnings call. "It's difficult to do what we do well and make a true appliance."
And EMC appears to be even less worried. Ken Steinhardt, EMC's director of technology analysis, says Microsoft not only isn't a competitor -- it's a potential partner in the NAS space. EMC, he says, can provide back-end storage for Microsoft-based appliances.
"If someone wants a robust, low-end NAS system, [the Microsoft SAK] would be a nice solution," he says. "But I don't see Microsoft in a competitive position at all."
It might be just a matter of a year or two before EMC and NetApp start seeing Microsoft-based NAS appliances showing up regularly in competitive bids. Microsoft is on a five- to six-month upgrade cycle for its SAK product line, and Zane says the Embedded Appliance Product Group is already formulating the next version of Windows-powered NAS.
"There are certain things we are adding to our next releases that we haven't seen anyone even think of," Zane says, declining to be more specific.
Separately from the current SAK product, Redmond is brewing up several other storage initiatives (see Microsoft's Stealth Storage Play). A Microsoft-marketed suite of storage management products, a possibility the company is considering, would make it an even more fearsome foe in the NAS arena.
Sure, NetApp and EMC will remain the heavy favorites for pure Unix environments, at least for the next year, says Duplessie. "But let's face it," he says. "The NT market is the place to be. Assuming the Microsoft stuff is good enough -- and it is -- why would a user fight city hall?"
— Todd Spangler, Senior Editor, Byte and Switch
byteandswitch.com
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Namaste!
Jim |
