October 02, 2000, Issue: 806
Section: SPECIAL REPORT
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Storage Drives -- The E-business explosion has left companies drowning in their own data. Customers are finding more storage products at better prices as the market shifts away from mainframes.
PAULA KLEIN, MARTIN J. GARVEY, PAUL MCDOUGALL, AND TERI ROBINSON
Data storage is no longer a stepchild to more-interesting technologies and more-pressing IT priorities. Demand is increasing dramatically-in some cases doubling or more-and never has competition among vendors been more fierce. It's a boom market, with prices falling to pennies per megabyte and billions of dollars at stake. Established vendors such as EMC, IBM, and Storage Technology are threatened by upstarts and rivals from the server and networking markets-Cisco, Compaq, Dell, and Network Appliance-who are trying to reap some of the rewards.
Some familiar technology trends are still important-bigger disk drives in smaller housing, super-dense chips, and software. But storage is no longer a mainframe-oriented industry that hawks disk-drive spindles and boxes as auxiliaries to bigger-ticket technology. Vendors are shifting to distributed architectures characterized by storage area networks, network-attached storage, and IP-based software solutions.
It's a buyer's market, with customers enjoying price, service, and selection advantages. But there's a catch: Too many companies are feeling the crunch of managing these complex storage environments without adequate staff or tools. Their storage needs are outpacing their ability to afford, manage, and support such growth. What to do?
In this report, we help you sort out the crowded field with an exclusive InformationWeek Research survey of 385 IT professionals who rank the leading storage hardware vendors in 10 categories. We also visited market leader EMC to discuss its strategy for maintaining its influence in the months ahead.
In addition, we examine the value of storage service providers and service-level agreements at a time when in-house storage demands are stretching resources thin. Also in this issue, you'll find an evaluation of storage area network offerings (p. 95) and a story on desktop storage (p. 144).
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Since Worldwide Financial Services took its traditional brick-and-mortar mortgage business to the Web last November, its revenue hasn't increased significantly. "We haven't seen a whole lot more in terms of volume," says Pat Hinman, CIO of the $25 million Southfield, Mich., company, now known as Loangiant.com. But data volume has shot through the roof-Hinman estimates it has increased by 60%. And Loangiant.com isn't alone in trying to manage a burgeoning data load. Many companies are being inundated with data from both the Web and traditional sources.
One barometer of that data deluge is the increasing demand for storage, the hardware and software components that hold all those significant bits and bytes. According to a survey just released by InformationWeek Research, more than half of businesses estimate their storage capacity is growing between 25% and 50% annually. Another 5% put annual growth at a dizzying 101% or more.
The increasing dependence on storage systems led InformationWeek Research to ask IT executives to evaluate their storage vendors, a group growing in impact and importance to enterprise IT architectures, if only based on the huge expenditures involved. Almost half of the 385 respondents to the survey, conducted last month, spend more than $200,000 annually on storage solutions; for 15%, spending has reached the $1 million mark; for 6%, more than $5 million. As a percentage, large companies spend the most, with 41% popping a cool million on storage solutions each year.
InformationWeek Research asked IT professionals to rate nine storage vendors-Compaq, Dell Computer, EMC, Hewlett-Packard, IBM, Network Appliance, Seagate Technology, Storage Technology, and Sun Microsystems-in a variety of product and service categories. In overall customer satisfaction, respondents ranked EMC highest, but Compaq, Dell, and IBM were close behind. Compaq ranked at the top in overall product value, IBM in global expertise, and Dell tied with EMC in after-sale service.
That may help explain why Loangiant.com chose a storage-area network from Dell, which is also Loangiant's server vendor. "It seemed like the safest place for the data," says CIO Hinman. At Dell's request, Loangiant.com IT officials visited the computer maker's Application Service Center prior to its November launch to check out a SAN scheme customized to Loangiant.com's specifications. A relative newcomer to the market, Dell staked a claim to nonproprietary enterprise storage with its purchase of ConvergeNet Technologies Inc. last year.
"Everything worked beyond our expectations," says Hinman, who decided practically on the spot to go with Dell's offerings. Loangiant.com has since purchased two Dell 650 F systems, which house command modules for the system, each with an attached 630 F unit for additional drive space. At least for now, Loangiant.com has a firmer grip on its data storage-and to Hinman, that's worth every penny of the $900,000 spent on the storage system, half on the SAN, the rest on Microsoft SQL Server and other Microsoft software.
In many ways, Loangiant.com typifies companies with exploding E-commerce traffic. By opening their businesses to the Web, these companies have also opened the data floodgates. Loangiant.com, which has 150 employees, converts about 10% of the leads it gets over the Internet into loans, each of which requires 600 data fields per completed form. And, as Hinman found, data begets data. "The data coming in is being stored and analyzed," which generates even more data, he says. Indeed, survey respondents cite the increase in customer data as the biggest driver behind their storage purchases.
Along with other companies, Loangiant.com is helping drive the storage industry boom that last year represented $13.5 billion in sales, a 35% increase from the year before, according to Dataquest. The market-research firm expects storage sales to top $17.4 billion this year. And heavy demand is likely to continue, considering a Meta Group prediction that by 2004, companies will have to manage 10 times as much data as they do today.
All that adds up to a greater dependence on storage technology as a critical IT element, and on storage vendors as technology partners. What makes a good storage vendor? In the InformationWeek Research survey, IT managers rated reliability (92%), performance (86%), scalability (76%), and low cost (74%) as top priorities. Least important are delivery, best-of-breed technology, customized systems, and customer referrals (see chart, p. 70).
Enter EMC. Among survey respondents, EMC was rated the highest in five categories: product reliability, service-level guarantees, product innovation, inter-operability, and service. It didn't rank as well in ease of administration or strategic understanding.
With $9 billion in sales, 30% of the RAID storage market, and a decade-long track record that's built loyalty among a sizable population of the world's largest companies, EMC is clearly the thought leader in the storage arena. One reason is its sharp focus: EMC only does storage, unlike competitors such as HP, IBM, or Sun. Beyond that, EMC works hard to ensure its reliability, support, and service are the platinum standard; it has more than 4,000 employees in the service area alone-and that number will increase, company executives say (see story, p. 72).
Verisign Global Registry Service, formerly Network Solutions, has experienced that effort first-hand. "We're a Sun shop, but Sun's storage just wasn't cutting it," says Aristotle Balogh, VP of engineering with the Herndon, Va., company, which registers all .com, .org, and .edu names on the Internet. The URL registration service processes 27 million transactions a day. "We want a storage partner that understands the mission-critical nature of our business," says Balogh. "One corrupted record can take a company off the Internet or take a site down."
Verisign uses EMC's high-end Symmetrix systems primarily. In addition to performance, data integrity, and disaster recovery capabilities, Balogh especially likes EMC's customer service. "I've seen them rally when we had a problem and totally change their support procedures to accommodate us-a single customer," he says.
EMC's competitors hope new products will raise their profiles among potential customers. HP has made a renewed effort to gain enterprise storage customers in the past year, says David Scott, director of business strategy for the company's enterprise storage group. The introduction of HP's XP 512 storage system this summer gives businesses a new option for three of their top requirements: performance, scalability, and cost. The product's "cross bar" architecture delivers two-to-three times the performance of EMC's Symmetrix or IBM's Shark, Scott claims, and its scalability up to 37 terabytes puts it ahead of both of those competitors. "We offer significant cost benefits over EMC," Scott boasts.
Network Appliance, which leads in the network-attached storage market, is making a name as a viable alternative to direct-attached vendors such as EMC. Mark Santora, senior VP of marketing, says the company expects greater sales and visibility now that it has introduced a new high-end system (see story, p. 58).
Vendors are also forming alliances to fill in gaps in their products and services, offer more bang for the storage buck, and make themselves more attractive to a wider audience. IBM and Compaq sealed a cross-marketing pact in July, followed a week later by Hewlett-Packard's announcement that it would support Sun Solaris servers. HP is also developing on network-based storage hardware designed to work with a wide variety of popular software.
Together, IBM and Compaq derived $2.5 billion in revenue from storage last year and their alliance lets them market fuller product lines to a greater base of customers. Under the agreement, Compaq will sell Shark, IBM's high-end storage system, and IBM gets to market Compaq's StorageWorks line, which will help it sell storage to the lower end of the market. "Compaq clearly had a product [StorageWorks] in a space where we haven't had much success," says Mike Harrison, IBM's director of storage alliances. "Shark starts at 500 gigabytes and there's tremendous opportunity below 500 gigabytes."
During the last decade, EMC has steadily eroded IBM's share of the external storage market, and IBM is eager to stop the slide and regain ground. Last week, IBM Global Services added hosted storage and storage-management services to its portfolio of On-Demand IT services. IBM hopes that getting these services from one vendor will appeal to IT departments managing increasingly complex storage systems. So far, customer acceptance of storage service providers has been lukewarm (see story p. 84).
Even with more than $160 billion in market capitalization, EMC may not be able to count on customer loyalty-or even its aggressive in-house development efforts-to carry it through a rapidly changing market. Compaq, IBM, and HP are also betting that users in the more-dynamic, dot-com-driven storage market will be put off by EMC's proprietary approach to storage architecture.
But EMC isn't sitting still. The company inked a significant deal with EDS earlier this year aimed at providing managed storage services for companies moving into E-commerce. Data warehouse vendor SAS Institute Inc. is working with EMC to integrate EMC's Enterprise Storage with SAS's data-analysis applications for customer-relationship management. Moreover, EMC will keep building out its service and technology partnership program and it won't rule out acquisitions to build its arsenal.
Demonstrating its depth, EMC is investing $2.5 billion in research and development over the next two years and $1 billion in interoperability testing. It all adds up to customer confidence in EMC. Clorox Co. is in the process of consolidating Unix and Windows NT data, and the company looked at Compaq as a potential storage provider for the project. But after eight years as an EMC customer for its mainframe storage, "we have a proven track record with EMC," says Don Chesbrough, a network operations engineer at Clorox, in Pleasanton, Calif. So Clorox is using EMC storage for the consolidation. "Right now, EMC is the best show in town for us," he says.
Reliability, not brand loyalty, is what Julie Egnarski, information systems administrator at Northstar Print Group in Watertown, Wis., cares about most. "The whole point is to know that something is there and that it's retrievable," says Egnarski. She backs up Northstar's employee-generated data-including payroll and inventory information-on 4 mm magnetic tape. She uses Dell hardware for storage, but is giving her ArcServe backup software from Computer Associates the boot. "Sometimes it will back up data, sometimes it won't, so it's gone," says Egnarski. Northstar is switching to Backup Exec from Veritas. "Storage has to be reliable 100% of the time," she says.
For the most part, respondents are satisfied with the reliability, service-level guarantees, and overall product value of their storage vendors. But products fall short when it comes to expertise and management. Survey respondents ranked administration (35%) and lack of in-house expertise (41%) high on the list of challenges they face. Still, the high cost of storage solutions represents the biggest challenge companies face in executing storage strategies, according to the survey (see chart, p. 64).
It's not surprising that administration gets poor grades, says Mike Karp, director of storage management services for the Hurwitz Group, a consulting firm. "This stuff can be a real bear to administer," he says. "You can't make it work if the administrative interface is second-rate. Customers need easy-to-administer performance, not just performance." In addition, Karp says, there's no question that users lack expertise in many storage systems. "A lot of difficulty is that the technology is extremely complex," he says. "The vendors don't know how to deliver it in simplified fashion" (see story, p. 64).
Also driving the need for storage is the growing volume of critical data making its way onto the network, according to the InformationWeek Research survey. Least important, surprisingly, were ERP and multimedia applications.
"I'm running mirrored drives-it's like having both a belt and suspenders," says Mike Hollander, director of information resources at Pacific Communications Group, a 5-year-old public relations firm with 25 employees in Los Angeles. That strategy also doubles the company's data volume. Although it's a relatively small company, Pacific Communications Group takes its storage seriously. "We have a database of 8,000 media people alone, and we back it up every night to stay current," says Hollander.
The round-the-clock nature of online business generates a continuous feed of data into a company's databases and puts pressure on businesses. "There's a 24-by-7 mentality at work. You don't want to be awakened at three in the morning because your service goes down," says Randall Sagrillo, director of marketing for Internet storage at Sun Microsystems. In InformationWeek Research's survey, Sun fared well in responsiveness and product innovation. It scored lower in the areas of product reliability, interoperability, and product value.
Sun says it puts a strong emphasis on continuous real-time delivery in its storage offerings-exactly what customers like BlueLight.com, an online discount retail site, want. As a dot-com, business-to-consumer company, BlueLight gets a constant stream of customers interacting with the site, says Gufran Ahmed, VP of engineering at the company, which uses Sun's StorEdge 5200. Besides operational data, BlueLight.com-jointly owned by K-Mart and Softbank-has to fulfill orders and store customer and product data.
The rapid migration to storage-area networks, network-attached storage, and IP-based solutions has taken some in the industry by surprise. The InformationWeek Research survey found that nearly two-thirds of respondents are using network-attached storage or storage devices and appliances attached to a data network. Fully 44%, including companies such as Loangiant.com, are using SANs-whole networks dedicated to storage that interface with a company's data network. In larger companies, networked solutions are even more popular: 66% use network-attached storage, while 58% have bought into SANs.
All this growth translates to big opportunities for vendors. Nearly $12 billion-or about half of the $27.5 billion in disk-array sales projected for 2002-will go to purchasing arrays to attach to SANs, according to Peripheral Concepts.
Seagate acquired SAN vendor Xiotech Corp. early in the year, and it also announced a strategic relationship with Cobalt Networks Inc. Seagate will sell Cobalt NAS boxes with storage-specific applications and software embedded on them, says Brian Dexheimer, executive VP of worldwide sales, marketing, and product line management.
Lesser-known vendors and startups such as Nishan Systems, Pirus Networks, and ServerVault are vying for business, as are large, venerable players from other industries including networking giants Cisco Systems, Lucent Technologies, and Nortel Networks.
Cisco is particularly aggressive in seeking a big share of the network storage market. Its partnership and development with Brocade Communications-which makes SilkWorm switches for SANs based on Fibre Channel technology-positions Cisco with the interconnect piece of the SAN puzzle. Also, its $450 million stock-swap purchase of NuSpeed Internet Systems in late July gives Cisco access to a commercially viable version of iSCSI, the IEEE's Internet SCSI protocol. NuSpeed has already built software and drivers to support iSCSI and Cisco plans a standalone offering. These moves may give Cisco a leg up on competitors that are attempting to translate the protocol into viable product offerings.
Interoperability of storage technology remains a hot topic. While Clorox is willing to embrace EMC's product line and reputation, companies such as Loangiant.com are leery of attempts to force them into a canned storage strategy. "Every company's Internet implementation is different," which makes for different storage needs, says Hinman. Dell's willingness to customize Loangiant.com's storage solution to its specific needs was very attractive. Hinman says the solution fits into the software that Loangiant.com uses on its back-end systems and the HTML used on the front end.
Among the survey findings, more than half (57%) the respondents say interoperability is among their most important criteria for selecting a storage system. But they're only moderately satisfied with vendor performance in this area. EMC ranked highest, but even its customers say the company could do better.
Charles Tremblay, central systems support manager at specialty chemical manufacturer W.R. Grace & Co., says storage systems from different manufacturers need to work with each other. "Until standards get cleaned up, people have to go with a vendor-centric solution, which may be good for vendors but not for the users," says Tremblay. Grace spends $200,000 to $300,000 annually on storage disk drives, including the four EMC Symmetrix systems used by his department. "It's getting better, but it's not where we'd like to see it," he says.
Customers of other vendors face interoperability issues as well. Tom Beach, a senior researcher at automotive systems value-added reseller ADP Dealer Services in Hoffman Estates, Ill., oversees storage components in the turnkey information systems his company sells to auto dealers. Beach notes that as long as interoperability remains an issue, he doesn't have much choice. "Because we use the Alpha servers, we don't really have the option of going into the open market for a storage sub-system," he says. Like many of his peers, Beach says data integrity is top on his list in selecting storage components. "Everything else is a distant second," he says.
Automotive dealers are among the most aggressive adopters of CRM as they look to fend off threats from online auto merchants. But in their effort to keep better track of customers' vehicle preferences, service records, and transaction histories, dealerships are forced to handle and store more data than ever.
ADP Dealer Services offers its customers Compaq Alpha servers with the Compaq StorageWorks RA 3000 as an attached storage option. Beach says Compaq, which scored very high in InformationWeek Research's rank-ings of overall user satisfaction, also ranks high in terms of product reliability, product value, and ease of use. "They're helping to set the standard," he says.
Despite all the options, users still face plenty of challenges in their storage environments. In all, 64% of respondents to the survey say their top challenge is the high cost of storage. While "the dollar-per-megabyte cost continues to go down, the aggregate drives are where companies continue to make their margins," says Yankee Group analyst William Hurley. That might explain why Eric Herzog, VP of marketing for IBM Mylex, a maker of storage management solutions, sees users buying less-expensive servers, disk drives, and RAID controllers. "Our No. 1-selling RAID controller is a one-channel SCSI product," he says. Five years ago, it was a more expensive three-channel unit. While he concedes that the single-channel model has improved over the years, the main reason for its growth in popularity is its lower price tag, he says.
Premium pricing has left EMC open to criticism in the past, and in a market where commodity vendors are stepping in, it may become an even bigger issue. BlueLight .com's Ahmed, for example, acknowledges that EMC's Symmetrix offerings are the clear performance leader, but the company's pricing, which he says is consistently 25% to 30% higher than competitors, made him turn to Sun and others. Sun is "not a clear performance leader, but from a cost perspective, they come out ahead," says Ahmed. BlueLight.com will likely upgrade to Sun's new T3 Enterprise Array, designed as a high-end offering that gives users nearly 1 terabyte of data storage. The product promises to be scalable and Sun has built in support for a variety of operating systems, including AIX, HP-UX, Solaris, and Windows NT.
For smaller companies such as BlueLight.com and Pacific Communications Group, spending on storage could mean foregoing other investments. For instance, Hollander says he'd rather use more of his company's budget on employee raises than additional servers to be used in a storage scheme. As a solution, he's looking to SANs, which he believes will be a cheaper-and more reliable-storage initiative once a few issues such as management complexities are resolved.
Where storage is a top priority, however, price is usually less of a concern. Milton Silva-Craig, general manager of ASP services at General Electric's medical systems division in Milwaukee, is too busy providing support for multiple terabytes of clinical information, and dealing with health-care industry regulations, to shop widely for a low-cost storage supplier. "High availability is critical when you move to a digital environment," he says. "We need a very robust implementation." His company pays a premium for EMC, but the service is worth it. "We have 30 customers on board and if a drive goes bad and [everything] shuts down, my business will go under."
The New York office of Verizon Communications, formerly Bell Atlantic, faces cost challenges of a different kind as it copes with rapid storage growth. A member of the engineering department at the carrier says that like many of the survey respondents (64%) high storage costs are a problem for his group. Although he's on the front line of a business where data is growing rapidly, he lacks funds to keep up with that growth.
Verizon spends approximately $3 million to $5 million annually on storage for the group, but it's still not enough to allow the company's engineers to cut back on the number of disks they attach to their workstations. In the engineering group, capacity is stretched thin because of all the files, E-mail, and customer-record databases. "We have to keep volumes and volumes of past history in databases we bring up when we add new equipment for customers," he says. Because there's not enough capacity, every three months the group either stores information on disks or eliminates it. The storage servers are so full that engineers are putting files on their hard drives or on disks attached to engineers' workstations. The department looks like a disk farm, he says. Storage service providers may be an option, he adds.
Obviously, IT departments can't afford to expand their storage staffs at the same rate as demand-and if they could, there simply aren't enough knowledgeable IT pros out there to fill the slots. "Data storage may grow 14-fold," says Phil Goodwin, business manager at Computer Associates' Storage Solutions, but companies "aren't going to have 14 times the people to handle it."
Some, no doubt, will turn to storage service providers such as ServerVault, which serve as outsourcers for storage needs because of people shortages. But many are still wary of service providers, with only 13% of survey respondents saying they currently use third-parties for storage. However, 19% expect to use them to host or manage storage systems in the future.
What's scary isn't the 25% to 50% increase in storage demand-it's the disparity in that increase and Moore's Law, says Hurwitz Group's Karp. Moore's Law says processing power doubles every 18 months and the cost drops in half every 18 months. That means "we process data at a faster rate than we're able to store it," he says. E-mail volume is doubling every eight to nine months and much of that's being stored as well, he says. Managers not only have to store all this data, but manage it as well. "The IT manager is worried about both storing data and finding new staff," says Karp. "And good staff is hard to come by."
Data volume keeps growing unabated, and as IT managers are quick to point out, it's hard work man-aging it all. That's all the more reason that storage vendors may want to concentrate hard on issues such as ease of administration, responsiveness, and after-sale service. There's certainly room for improvement. -with additional reporting by Karyl Scott
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The Upshot
The storage market is booming as companies require more capacity for their data. An InformationWeek Research survey found:
- EMC has the highest customer-satisfaction scores across key buying criteria. Compaq, Dell, and IBM are close behind.
- Almost half of the respondents spend more than $200,000 annually on storage and more than 20% spend more than $1 million annually. Of large companies, 41% spend $1 million annually.
- More than half of those surveyed estimate storage capacity growing at an annual rate of 25% to 50%; 5% estimate it will grow at more than 100% annually.
- The driving need behind storage demand is an increase in customer data and increasingly critical data on the network. The biggest storage challenges are costs, administration, and lack of expertise.
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