Data Storage Market in Transition

Data storage revenue numbers released earlier this month by market research company IDC comparing second quarter 2003 to second quarter 2002 were gloomy. IDC reported that sales of data storage systems, which IDC defines as storage products linked to three or more disk drives, fell 3.9 percent to $4.73 billion, down from $4.92 billion.

Earlier this summer, IDC reported equally dismal performance in the storage software arena, in which revenues dropped 9 percent in first quarter 2003 compared to fourth quarter 2002. Sales sank in backup and archiving, Storage Resource Management (SRM), and storage replication sectors. Storage replication took the biggest hit, dropping 11 percent to generate only $276 million in revenue, compared to $632 million for backup and archiving software and $417 million for SRM software.

Revenues varied significantly in different regions of the world. Sales in Asia and Japan were generally weak. The North American market, however, saw revenue climb for the second straight quarter.

Looking beyond the overall numbers, however, a more complex picture emerges. On the hardware side, although overall revenues for both Direct Attached Storage (DAS) and Networked Attached Storage (NAS) systems fell by 5 percent, sales of RAID-based storage systems dipped only 1.4 percent. Meanwhile, the Open Storage Area Network (SAN) market actually grew by 12 percent.

These recent sales numbers reflect that companies are turning to inexpensive disk arrays and, increasingly, to SAN and NAS solutions over expensive DAS alternatives. However, the ultimate promise of SAN and NAS devices has yet to be fully realized. Eventually, these devices will let companies manage their storage as one resource pool, resulting in increasing capacity and more efficient storage allocation across the enterprise. But that goal currently remains out of reach for most companies. Companies invested in SAN technology still have difficulty integrating and managing SAN solutions from different vendors as one network. Even many sophisticated IT shops operate "islands" of SANs, each running independently. Further complicating matters, new generations of network protocols associated with SANs (e.g., Internet SCSI--iSCSI) are rapidly developing.

The backup and archiving arena is also changing. Backup and archiving were once synonymous with tape drives and tape libraries. Backup infrastructures were relatively simple--large shops had the resources to mirror production data, then move that data to tape, whereas smaller shops simply moved data to tape according to a specific policy. Over the past 2 years, however, new backup and archiving technologies have emerged that highlight more rapid recovery, leading savvy storage administrators to rethink their entire backup and recovery process.

The net result is that the storage arena is in the middle of a significant transition. For many enterprises, the standard ways of managing storage are clearly inadequate. Few administrators believe that simply adding more large disk drives or large tape libraries is the best solution to their storage capacity challenges. Meanwhile, the technology underlying newer alternatives is still developing. Terms such as "storage virtualization" are easy to bandy about, but actually implementing an infrastructure that integrates SANs from multiple vendors or reworking the backup and recovery hierarchy remains a daunting task.

Nevertheless, storage is clearly moving in a new direction. As IT budgets firm up and the technology to support new solutions develops, the overall market should grow. And currently, it appears that the North American market will lead the way.

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