January 29, 2001 8:23am
Bucking a trend in IT sales
By Sonia R. Lelii eWEEK
In a high-tech world that has seen once-highflying
dot-coms crash and burn, e-commerce stumble, and
PC sales slow down, storage seems primed to continue
its strong march this year.
Recent analysts' reports indicate that storage sales will
continue to rise despite a predicted overall slowdown in
IT spending.
Last week, storage giant EMC Corp. announced strong
quarterly earnings, a 49 percent increase in the fourth
quarter of last year. EMC recently had its first customer
to buy a petabyte of storage capacity.
IT managers are trying to balance the demand for more
storage with a call to tighten budgets. Cutting back on
data storage, they say, is akin to not taking out the
trash—it's going to keep piling up, whether you like it or
not.
"The simple act of ordering groceries or sending out an
e-mail creates more digital information every moment,
every day," said Michael Ruettgers, chairman of the
board for EMC, in Hopkinton, Mass. "If it is created
digitally, then it has to be stored digitally."
Take Sprint Corp.'s storage growth. Four years ago, the
telecommunications company managed about 11 tera
bytes of distributed storage. This year, its IT managers
will handle 80 terabytes. They had about 28 terabytes
of mainframe storage in 1998, and that will increase to
50 terabytes by the end of this year.
Revenues from worldwide sales of external disk storage
systems are expected to grow from $24.6 billion last
year to $29.3 billion this year, and from 2002 to 2004,
revenues are expected to rise from $33.8 billion to
$45.2 billion, according to preliminary reports from
International Data Corp., of Framingham, Mass.
And while a November report from Merrill Lynch & Co.,
in New York, predicts a slowdown in overall IT spending
this year, it also says spending for direct-attached
storage, storage area networks and network-attached
storage will grow.
EMC, the top worldwide external disk storage supplier,
built about 250 of its new IP47000 midrange storage
devices and sold every one last month.
"They now have a huge backlog going into this year,"
said Carl Greiner, an analyst with Meta Group Inc., in
Stamford, Conn.
But IT managers at such companies as Sprint and
Rohm and Haas Co. say they are being asked to
reduce their budgets, even as they continue to buy
more storage capacity. Sprint's answer is simple:
consolidation.
"Overall, it appears that a lot of large companies are
doing more of this," said Dan McCloud, senior manager
of enterprise platform spending for Sprint, in Overland,
Kan. "They are moving down that road ... to lower IT
costs because they can't afford to just pay and pay.
The idea is to use storage more efficiently."
Rohm and Haas has not yet finalized its overall IT
budget for this year. The Philadelphia-based company
made a multimillion-dollar purchase for hardware last
year, so its spending this year will be reduced.
"We are cutting our budget pretty significantly," said
Steve Davis, the company's manager of server
infrastructure testing. "On the distributed [storage] side,
we are treading carefully. Our spending in that area will
not be significant. Generally, everything is under
scrutiny. Like others, our company has been battling in
the stock market."
But things are different for Hugh Hale, senior manager
of IS at BlueCross BlueShield of Tennessee Inc. "We
are planning to spend more than we did last year," Hale
said. "If you take a look at our overall budget, it is
growing quite considerably."
There are two reasons, Hale said. The company is
upgrading its operating system from Windows NT to
Windows 2000, and it is buying more disk space to
meet the expanding volume of business. The company
is expecting to grow 30 percent to 35 percent in its disk
drive capacity this year.
"The old-line, brick-and-mortar companies, they will be
spending. All of those companies will be growing," Hale
said.
Vendors are expecting a good 2001. EMC and Compaq
Computer Corp., of Houston, the top two storage
vendors, are both sending positive vibes about revenue
growth in storage—although for different reasons. Thus
far, EMC executives continue to affirm it will be a $12
billion company this year.
Mark Lewis, vice president and general manager of
Compaq's Storage Enterprise Group, acknowledges the
overall anxiety regarding the economy has caused
companies to re-evaluate their budgets.
Lewis said companies are focusing more on
consolidation with an eye toward more savings, a plus
for Compaq's lower-cost solutions.
"We see a big year for storage consolidation," said
Lewis, in New Orleans. "But customers want more
value. That will enter more into the equation. That bodes
well for us. We don't see any indication we will have a
hard time in storage."
Dell Computer Corp., of Round Rock, Texas, also is
hoping to capitalize on possible belt-tightening.
Last week, Dell, which ranks sixth in revenues for
worldwide disk storage systems, announced it will no
longer resell EMC's Clariion midrange storage
controller. Instead, it will sell its own new PowerVault
660F controller, which will be 30 percent to 40 percent
less expensive than the Clariion product.
"It's hard for me to predict what the economy will do
next year," said Bruce Kornfeld, Dell's director of
PowerVault storage marketing. "We have not noticed a
slowdown. Our storage business has grown 70 percent,
year over year, in the last two quarters." |
