Storage Infrastructure Bulks Up, Gets Smarter

The most recent numbers from market researcher IDC shows that the overall storage market has reached a turning point. In the past, many companies resolved storage challenges in one of two ways. Either they threw hardware at the problem--buying more and larger storage devices--or they implemented software to more efficiently use their existing resources. Generally speaking, companies used the former approach in the late 1990s, but have preferred the latter approach for the past several years.

Today, however, companies are both adding to their core storage infrastructures and working hard to better use their resources in place. In terms of the core infrastructure, worldwide vendor revenues for external disk storage systems grew 6.5 percent to $3.5 billion in first quarter 2004 compared with first quarter 2003. Total disk storage revenues grew 3.5 percent year-over-year in the first quarter.

Although those growth numbers might seem modest, they reflect a significant increase in storage capacity. According to IDC, vendors shipped 247 petabytes of storage in first quarter 2004, a jump of nearly 40 percent over the preceding year. (A petabyte is approximately 1000 terabytes.) Obviously, capacity growth far exceeded revenue growth. Nevertheless, storage vendors seem to have avoided the fate that befell mainframe computer manufacturers, who for years watched their revenues plunge even as their platforms' processing power skyrocketed.

HP continues to hold the lead in the overall storage system arena, while EMC grabbed the market share lead for external storage systems on the strength of 26 percent year-over-year growth. EMC now claims a 20.2 percent share of the external-disk market compared to HP's 18 percent. IBM, Hitachi, and Sun Microsystems round out the top five positions in the external-disk-storage market. However, Dell and Network Appliance (NetApp) both turned in very impressive performances, growing 21.5 percent and 22.3 percent, respectively.

External RAID continued to be the dominant technology by far in the external-storage market, accounting for more than 90 percent of the external-disk storage systems sold. Revenues for external RAID grew 8.9 percent. Meanwhile, networked disk storage systems--a category that includes Network Attached Storage (NAS), Open Storage Area Network (SAN), and Internet SCSI (iSCSI) SAN--grew a healthy 17.5 percent, with Open SAN driving much of that growth. iSCSI SAN remains at less than 1 percent of the market but is growing rapidly--iSCSI SAN revenues jumped 40 percent quarter over quarter.

EMC remains the overall market leader in networked storage. HP is the co-leader in Open SAN, while NetApp is neck-and-neck with EMC in the NAS arena and leads the iSCSI SAN segment.

According to IDC analysts, the move from internal, direct-attached storage to networked solutions continues in all segments of the market as companies large and small try to simplify and rationalize their storage infrastructures. The revenue gains generated by storage software sales clearly support that perception; according to IDC, the worldwide storage software market grew 23.3 percent year-over-year in first quarter 2004.

Interestingly, every segment of the storage-software market posted strong gains. Revenues generated by Storage Resource Management (SRM) software jumped a robust 32.2 percent compared to first quarter 2003. Backup- and archiving-software revenues, which represent the largest segment of the market, climbed 22 percent. Storage-replication and file-systems software both recorded double-digit gains as well, growing 18.1 percent and 12.4 percent year over year, respectively.

As with hardware, EMC captured the top spot in storage software, increasing its market share from 27.4 percent to 30.1 percent. Those numbers reflect the impact of EMC's acquisition of LEGATO Software last year. The market shares of the other top players in the storage software field--VERITAS Software, Computer Associates (CA), IBM, and HP--remained stable, fluctuating less than half a percentage point.

These numbers send two messages. The first is that companies no longer have the luxury of either building out their storage infrastructures or working to bring their infrastructures under better control--they must do both. Enterprises are investing in management software that can lead to more efficient resource utilization and improving their backup and recovery arrangements at the same time they're adding capacity to their systems.

Second, although industry pundits have long opined that systems vendors such as HP, IBM, and Sun Microsystems would eventually dominate the storage market, that hasn't happened. To date, through an adept series of acquisitions and product development, EMC has successfully defended its top spot in both the hardware and software arenas.

Finally, a note of clarification about Windows Storage Server 2003, which I wrote about in my June 14, 2004, column, "Microsoft's Storage Strategy: The Big Picture" (click the URL below). Microsoft officials tell me that Windows Storage Server holds 50 percent of the overall NAS market at this point. Also, Windows Storage Server is available only through OEM partners. ISVs, of course, write applications that run on top of Windows Storage Server.

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