Ask not for whom the enterprise bellwether tolls ….. so what are the storage vendors going through right now?

One-man-looking-at-anotherin-a-crowd-white-border-190x156Demand for storage is increasing rapidly, yet the big storage businesses seem to be in worse shape than ever. In a previous blog I discussed why (I think) it is happening: a number of concurrent technology transitions; competitive forces from traditionally non-storage market entrants; and an increased rate of change.

So what are the major storage vendors going through right now? Here are just five effects …..

  1. product transitions not going to plan
  2. discounting “surprises”: and not nice ones either
  3. persistent failure to meet financial targets
  4. internal blame game: the competition always seems to be doing better
  5. lots of questions and no-one with any answers

Sound familiar?

Ask not for whom the enterprise bellwether tolls ….. so what is going on with storage?

One-man-looking-at-anotherin-a-crowd-white-border-190x156Demand for storage is increasing rapidly, yet the big storage businesses seem to be in worse shape than ever. Why is that?

Firstly new technology is causing turmoil which the traditional players aren’t managing well. Virtualization, the reduction in cost of SSDs as well the realization that NLSAS may have something to offer – particularly in combination with SSDs – and the development of public cloud (as effectively a new channel), has created a myriad of opportunities for smaller, more nimble players throughout the supply chain.

Secondly, competitive forces. These opportunities for storage start-ups is also rather ironically fueled by those sluggish majors who are prepared to pay well over the odds to acquire the best/most fashionable/sexiest start-ups to bolster their gapped-out portfolios. And then there’s the arrival of Dell as a major player with the acquisition of Compellent to bolster its EqualLogic acquisition and organically developed PowerVault line. This more than anything probably struck fear and panic into the sector as a whole with Dell’s superior supply chain, unique reach into SMB, and probable presumed tolerance of lower margins – and thus lower prices – than the traditional storage majors.

Thirdly, the rate of change in storage has increased dramatically. Instead of their being (like) one major product announcement and one significant price action per year, since 2010 there have been multiple product announcements and price actions per year. I think that this this has been a pre-emptive strike by the majors – getting their retaliation in first – in anticipation of further heat from both Dell and those pesky, attention grabbing start-ups.

Paul Alcorn writes about the whole problem – albeit more at the component rather than the solution level – in Tom’s IT Pro: The Week In Storage: If We Are Running Out Of Storage, Why Can’t They Sell It?

But his punchline is worth pondering: “The changing sales mix from client HDDs to high-capacity enterprise HDDs is hurting the profits of the larger HDD vendors. SSD vendors should be reaping the rewards of the exploding SSD market, but surprisingly in the midst of the data deluge, some of the flash storage vendors apparently could not sell a cup of ice water in the desert.”

I would expand his punchline beyond flash storage vendors, and include the storage majors in that group too.

So what are the major storage vendors going through right now?

 

Ask not for whom the enterprise bellwether tolls ….. it tolls loudest for large storage businesses

 

One-man-looking-at-anotherin-a-crowd-white-border-190x156

Intel Data Center Group’s Year-over-year revenue growth also works as a good benchmark for large, enterprise storage companies. I’ve used this chart before:

 

 

 

Intel as Enterprise Bellwether for Storage 1 960x720Even though compute isn’t storage, compute does produce the data that storage needs to store.

Intel as Enterprise Bellwether for Storage 2 960x720

 

 

 

 

So as we overlay Intel DCG on top of this picture, you can start to see the more extreme gyrations that storage has been going through, at least compared to Enterprise as a whole. In the early part of this decade, EMC Storage and NetApp product both outgrew Intel DCG over a sustained period. However that all went to hell in a basket very quickly during 2012. Not coincidentally this was when Dell was integrating Compellent (acquired in 2011) and dissolving its reseller arrangement with EMC leaving it with a rather nice portfolio of PowerVault, EqualLogic & Compellent to name but a few …..

Intel as Enterprise Bellwether for Storage 4 960x720

Since then, all the enterprise storage players have performed very poorly, not only in absolute terms, but even more so relative to Intel DCG. And the key one to watch for is the gap between Intel DCG’s growth and that of EMC since mid-2014:

Intel as Enterprise Bellwether for Storage 5 960x720

 

 

From mid-2014, Intel DCG outperformed EMC by a consistent 1500bps for 6 consecutive quarters. No wonder EMC agreed to be put out of its misery by Dell ……..

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