Stories of the Year: Storage
By Sonia R. Lelii, VARBusiness
5:30 PM EST Thurs., Dec. 20, 2001
It may not have been the year for storage but it definitely was the year of the SAN. Like most technology sectors, the storage industry was hit by the brutal economic slowdown. Nothing exemplified that more than EMC's $1billion loss this past third quarter--its first in 12 years. Research firm International Data Corp. is forecasting an overall 18 percent revenue drop for 2001, from $31.2 billion to $25.5 billion. But there was a bright spot to the IDC report: open-system SANs grew 12 percent. At the same time, the Sept. 11 terrorist attacks put a new focus on disaster recovery and business continuance.
Consequently, vendors have tried to adjust their business models to navigate these turbulent times. Sun Microsystems finally acknowledged storage's importance when they signed a reseller deal with Hitachi Data Systems this summer--giving VARs the needed sales power to go up against the likes of EMC. Moreover, EMC made Dell Computer its largest partner by signing them on to resell the midrange Clariion storage product. No doubt, the storage field has gotten more crowded this past year, so competition is heating up.
1. EMC's Fall From Grace
The Hopkinton, Mass.-based company 10 years ago had the vision. It stole the market from IBM, which failed to see the role storage would play with the rise of the Internet. But, today, high-flying EMC is a more humbled company no thanks to its $1 billion third-quarter loss. Now, to save the future of the company, it is focusing on evolving into a software company, as noted with the release of its Automatic Information Storage (AutoIS). It even extended an olive branch to rival Compaq Computer when it agreed to exchange a API for its enterprise Symmetrix disk array. But EMC still has some rocky times ahead. CEO Joseph Tucci says he wants to offset the costs of its direct sales force by relying more on partners and the channel. The difficulty will be changing EMC's "do-it-alone, win-at-all costs" culture.
2. Storage Revenue Slides in 2002
IDC says that the storage industry has taken an unprecedented revenue hit this year. A slowdown in IT spending, the bust in the dot com and telecommunications boom are some of the factors that contributed to the expected 18 percent decline. But in the midst of this downturn, storage heavyweights EMC and Compaq Computer continue to fight it out for leadership. With $4.4 billion in revenue, Compaq seems to have regained the title as leader in worldwide storage systems revenue for both internal and external storage. EMC is still number one in external storage, with $3.8 billion in revenues--down from the $5.6 billion in 2000.
3. Sun Gives Storage Its Due
This is the year Sun agreed that storage was more than a feature of the server. One of its most notable acquisitions occurred this year when it purchased HighGround Systems, developer of Storage Resource Manager software. More importantly, this summer Sun signed a deal with Hitachi Data Systems to resell its enterprise server Lightning 9900. Resellers say this finally puts them on an even playing field so they have a fighting chance to make a sale when coming up against the likes of EMC. And Sun executives say the company will continue to put money in both storage software and hardware research and development. Mark Canepa, Sun's executive vice president of storage products, says virtualization will be a key in the next few months, the one technology that will set vendors apart from each other.
"We are pouring a lot of energy and engineering making our data layer go beyond Snapshot and network replication," Canepa says.
4. Virtualization Takes Center Stage
Analysts and vendors agree 2001 is the year virtualization took center stage. The idea that intelligent software can convert physical disk capacity into a logical pool is the kind of tool that can sidestep the major headache of interoperability. Companies like DataCore, Falconstor, StorageApps (which recently was acquired by Hewlett-Packard) and Viacom have developed virtualization products that could make heterogeneous hardware and platforms easier to manage.
"Virtualization hardly had any references in 2000," says Arun Taneja, an analyst at Milford, Mass.-based Enterprise Storage Group. "But in 2001, we have had six vendors come out of the woodwork. The buzz around virtualization has been created in 2001. But the real payoff has yet to be seen. In 2002, virtualization will actually be deployed in mission critical environments."
5. IP Storage: Hype and Reality
This new protocol technology got a lot of press attention this year, especially considering the iSCSI standard has not been completed yet.
"By definition, everything on the market now is pre-standard and no one in their right mind will deploy pre-standard products in their mission critical environments," says Taneja. "They may test them out but they won't bank their business on it."
The primary reason for creating SANs was to give block-data storage its own high-speed network--one that delivered data fast and efficiently and securely. But Fibre Channel is costly, so companies such as IBM, Nishan Systems and Adaptec are working to bring storage data back on the IP network. But thus far, some resellers say many customers are not biting yet. Taneja agrees that it will be some time before IT managers trust IP with their mission-critical data.
"Frankly, I would put it further behind in implementation," he says.
6. IT Managers' Growing Confidence with SANs
SAN's adoption increased 5.8 percent in 2001, mostly in open-system SANs. That was a bright spot in IDC's report, which highlighted that the overall storage market had declined by 18 percent. IDC attributes this decline to the decrease in direct attached storage. Not surprising, since more and more IT managers wish to remove most of the storage from the server and consolidate it in a centralized location.
7. EMC and Dell Sign Reseller Deal On Midrange Product
2001 saw EMC enter into the kind of partnerships it once would never have considered. They signed a multimillion-dollar deal to co-brand the midrange Clariion storage disk array with the "EMC-Dell" label. EMC picked up Clariion from its $1.1 billion merger with Data General, the last of the pioneering mini-computer companies. The hope is that Dell can do for Clariion what EMC's high-powered salesforce failed to--build up EMC's midrange product line against Compaq Computer.
8. Imation Takes On DLT Giant
Imation filed a $450 million antitrust lawsuit against Quantum this year, in what could be a long and protracted legal battle between the DLT market leader and one of its manufacturers. Imation is accusing Quantum of stonewalling the certification process to approve Imation's DLT cartridges. Imation executives say Quantum asked them to suspend its attempts to get certified and, in response, they would get Imation's source suppliers to reduce their costs. Quantum contends Imation filed a lawsuit as a diversion tactic because its cartridges continued to fail certification testing.
9. Terrorism Puts Disaster Recovery at the Forefront
Sept. 11 alerted many CEOs to a fact many financial institutions already knew: taking a backburner approach to investing in data protection only makes your company more vulnerable. The terrorist attacks turned technologies such as data replication, high-availability clustering and tape backup into top priorities for businesses that, in the past, may not have consideredthem a top priority. Companies like Morgan Stanley Dean Witter proved a valuable lesson for others. Although it was the largest tenant at the World Trade Center, Morgan Stanley suffered no essential data loss when the towers were hit. In fact, within minutes after the airline crashed 20 floors above its server farm, the company's backup network at a nearby warehouse was up and running.
10. HP and Compaq Merger Could Create a New Storage Giant
Should this mega-merger go through, it will turn Hewlett-Packard into the number one storage vendor. This an achievement that has been beyond HP's grasp in the past largely because of the company's inability to keep a tight focus on its mission. Compaq, however, has done a better job of conveying its mission. Moreover, the economic downturn has given many IT managers reason to give Compaq's midrange storage products--which one reseller called "storage-lite"--a second look. But how the two storage divisions will merge, and which products will be moved to the forefront, is still up in the air. |
