Never enough - the storage market heats up

Competition in the storage market is intensifying as organisations come to the realisation that the storage infrastructures that have served them so well in the past, will no longer cope with the demands placed upon them by the new economy.

It has been predicted that the storage market will be worth approximately $38bn (£26.8bn) per year within the next few years, with companies allocating up to 75% of their IT hardware budgets for storage. However, this figure does not just cover the cost of hardware and software, but often also includes professional services. Most large organisations, encountering storage problems, are realising that the old solution of adding storage devices directly to servers does not provide the most efficient use of storage devices. In fact, there is a high percentage of storage capacity that is never utilised in a direct attached storage environment.

For organisations with direct attached storage, the solution to the storage problem typically requires the redesign of the storage infrastructure, which is a major undertaking. Organisations rarely have the skills in-house needed for such a large project, which is where many of the storage vendors are able to provide differentiation by offering professional services.

It is a reflection of the complexity of storage architectures, and the wide diversity of equipment required, that no single vendor currently manufactures all of the elements required. Vendors therefore specialise in certain aspects of the storage infrastructure. For example, Brocade manufactures switches, and QLogic makes fibre channel and Small Computer System Interface (SCSI) host bus adapters. The majority of vendors deploy a best-of-breed approach, using a selection

It is an indication of the current value of the storage market that many of the multiple product companies are deriving a significant percentage of their revenue from storage. Source: Butler Group

of their own and third-party hardware and software, and add value through the design and implementation of storage architectures, as well as the integration of the various components.

New entrants into the marketplace
There are two distinct groups of vendors, which are new to the storage market. The first of these are established companies that are diversifying their range of products into the storage market. For example, they may manufacture servers that they believe could form

Although the death knell of direct attached storage is being sounded with increasing regularity, Butler Group believes that for many smaller companies this will continue to be the best storage option. Source: Butler Group

an integral part of a Storage Area Network (SAN), or they might be Original Equipment Manufacturers (OEMs) of a piece of hardware or software from another vendor.

The Second group of vendors are new start-ups that have to offer a single product that fits into the storage category, for example, a software solution to manage a storage network. Again, these companies could enter into partnerships to offer a wider variety of storage appliances.

A company that fits into the first category is Dell. Dell provides a very good example of a company that has diversified its product range into storage and has experienced very rapid growth in this area, quickly establishing itself as a major player. Dell is still associated to many as the company that has, to a large extent, developed the direct selling model. Originally marketing PCs via the telephone, the company made a very successful transition to the Internet.

However, the slowdown in the sales of PCs has led the company to diversify, first into the server market, and then into storage. Within little more that a year of the company establishing its Storage division, it has achieved the status of a $1bn storage business.

Dell's product range includes solutions for SANs as well as Network Attached Storage (NAS). It also includes professional services, and the company can fully specify and implement a SAN. It has partnerships with leading vendors to provide the parts of the infrastructure that it cannot manufacture itself.

New entrants to the marketplace include DataCore. It was established in 1998, and released its first product, SANsymphony, at the beginning of 2000. SANsymphony is a software tool that simplifies the management of SANs. One of the drawbacks to early implementations of SANs was a requirement for proprietary components, both in terms of hardware, and the software required to support and manage them. This often resulted in a requirement for several software tools to support different parts of the SAN, hardly an exploitation of the benefits of a consolidated storage architecture.

DataCore saw a gap in the market for a tool that managed a variety of different hardware manufacturer's products and operating systems, and SANsymphony was the result. One of the defining features of SANsymphony is that it supports open standards, enabling it to manage a variety of different hardware components as a single entity.

Although there are now a number of similar management tools emerging, DataCore was certainly one of the first (if not the first) to market, and it has enjoyed a period of very little competition as major vendors begin to play catch-up. However, it is a sad reflection on the nature of business that many organisations prefer to stick with major vendors, rather than take a risk on a relatively unknown company. Despite this, DataCore is already making inroads into the enterprise market.

Butler Group believes that new vendors entering an extremely competitive area like storage have an uphill battle to compete with larger, well-established vendors. It hopes that companies such as DataCore, that have beaten major vendors to market with products that enhance storage infrastructures, can establish their own position in the marketplace.

Current state of play amongst the major vendors
There are a number of major players in the storage market. Some, such as EMC and Veritas, are associated predominantly with storage, while others, such as IBM, Compaq, Hewlett-Packard (HP), Sun, and Dell, offer a much wider range of products and services and are not thought of as simply being storage vendors.

It is an indication of the current value of the storage market that many of these multiple product companies are deriving a significant percentage of their revenues from storage. Apart from the companies mentioned above, other major vendors include: Unisys, Tivoli, BMC, Fujitsu/Siemens, Network Appliance and StorageTek. These companies offer a variety of products and services, ranging from the provision of a small portion of a storage infrastructure to a full implementation.

It is widely acknowledged that the market leader is EMC, although IBM claims itself to be the leading storage vendor on its own Web site. There are so many criteria that can be used to measure success that Butler Group believes such metrics to be largely meaningless. For example, one company that operates in the very high-end of the marketplace may claim to be the leading vendor, based on the value of sales. However, if the typical cost of a sale runs into millions of pounds or dollars, it may actually have a very low volume of customers.

Another vendor may claim the top spot on the basis of units sold, but it may be addressing the low-end of the market, and may achieve millions of low-cost sales. Market share is another way of determining position, but this may be difficult to calculate in heterogeneous environments, where an organisation will undoubtedly have products from multiple vendors. Value of sales, or indeed volume, may also include OEM products, or hardware and software sold on behalf of a third-party, as well as the sale of professional services, which further clouds the issue.

Based on this type of criteria, Butler Group feels that it is very difficult to come up with a definitive, ordered list of vendors.

Regardless of market perception as to the positioning of vendors in the marketplace, Butler Group does feel that it is significant that EMC, which has always been associated with the high-end of the storage market, has produced an entry-level NAS device to compete with companies, such as Network Appliance. Butler Group believes that this is a true indication of the intense competition in the storage market and the fact that no company is taking its position within that market for granted.

Alliances and partnerships
Another indication of this intense rivalry is the fact that Compaq and IBM, two of the largest competitors in the storage frame, have joined forces against the bigger threat of EMC, by entering an agreement whereby they resell each other's hardware and software. The two companies have invested $1bn to ensure that their products work together. This interoperability, Butler Group believes, may be the most significant aspect of the deal, as it goes part way to providing standardisation within the storage industry.

In a more recent move, Veritas Software, Hitachi Ltd., and Hitachi Data Systems have formed a Global Storage Management Agreement to ensure the co-ordinated integration and testing of their respective storage solutions to provide interoperability between components. This aims to provide open-systems solutions using a standards-based approach. The agreement involves Hitachi offering a wide-range of Veritas Software and professional services.

Hitachi Data Systems had earlier formed a partnership with HP, enabling HP to sell its high-end storage server, after HP abandoned a partnership with EMC.

It is certainly true that as competition intensifies in a particular market sector, companies tend to diversify their product range to address a larger section of the marketplace. This is what is currently happening among the storage vendors.

The leading storage vendors offer a range and diversity of storage products. The most contested area is that of server production, with companies such as EMC, Compaq, Dell, IBM, and Sun battling it out for supremacy.

Many of these vendors, as already mentioned, are offering end-to-end solutions from the pre-sales specification of a storage system to after sales support. Companies that offer such a service include IBM, Unisys, Fujitsu/Siemens and Dell.

As already mentioned, no single vendor can currently manufacture the entire infrastructure required for a storage subsystem. Several vendors claim to offer a total solution, but this is achieved through partnerships and alliances. Sometimes third-party products are re-badged and offered by a vendor under an OEM agreement, making it appear that the vendor has actually manufactured much more of the total solution than it actually has.

Organisations in general are moving towards one-stop-shopping, as IT resources become increasingly stretched. IT personnel no longer have the time to investigate and price-up all of the products from a number of vendors that provide components for a particular solution. They would prefer to purchase all of their requirements from a single source. By entering into partnerships, vendors are able to offer a total solution based on different components from a variety of vendors, which is a step closer to the concept of true one-stop-shopping.

Confusion in the marketplace for the buyer can be caused by this approach, as different vendors often select the same partners. For example, Brocade manufactures a high percentage of the fibre switches deployed in SANs. Therefore, many of the vendors that form alliances select Brocade as a partner. This can make it difficult for potential customers to differentiate between vendors' solutions.

In fact the storage market is becoming like a minefield, with any number of options available. There is probably very little to choose between vendors of particular components, and this is recognised in the fact that vendors are being forced to dig deep to add value to their products, and differentiate themselves from competitors. One way of achieving this is by offering professional services, including consultancy, implementation, training and ongoing support.

The role of professional services
The IT skills shortage has extended to storage. Storage management, on a basic level - daily back-ups and archiving provision - is not something that requires a high level of specialist skill. However, because a major storage implementation is an event that is not going to be undertaken very often, it is not an area that IT staff are likely to have any experience or expertise in. Many organisations would not know where to start when it comes to determining storage requirements.

Most storage vendors provide professional services that include designing storage architectures, but this will normally be based on the hardware and software provided by the vendor. How can an organisation receive independent advice?

There are a number of vendors, including Fujitsu/Siemens, which specialise in the provision of professional services and offer a combination of best-of-breed and "own-branded" products. Although they will not be totally independent, they will probably offer solutions from a number of vendors that they know are fully interoperable, enabling them to specify the most appropriate solution for individual customers. Companies will employ storage specialists who are able to design and implement storage solutions for customers.

Because much of their revenue is derived from the design and implementation of the storage solution, rather than the sale of hardware, they are more likely to redeploy as much of the current infrastructure as possible.

One of the areas in which this type of vendor is able to provide added value is through testing of the components that it offers to ensure compatibility. This can be a major problem for a company attempting to "go it alone". It may select what it believes to be the best components for each element of its storage architecture but it has no guarantee that component A from vendor X will work properly with component B from vendor Y. It is in this area that Butler Group believes that companies offering a best-of-breed approach, along with professional services, are able to differentiate themselves from pure product vendors.

This need to ensure compatibility between components is a reflection on the fact that the storage industry as a whole has not yet created standards that can be agreed upon throughout the industry. IBM and EMC are currently arguing over standards, with each company belonging to rival bodies working towards common standards for SANs. Alliances between specific companies, such as VERITAS and Hitachi, and IBM and Compaq, are running a risk of creating competing standards for specific parts of SANs. What Butler Group believes is necessary are industry-wide standards.

It is Butler Group's opinion that unless the major storage vendors start communicating with each other, there is a risk of the industry dividing into a number of factions, with each developing its own standards. If this happens, customers will find themselves having to decide which storage route to go down. Whichever faction finally won, the battle would determine which set of standards became the de facto standard for the storage industry, forcing other vendors to comply or find that their products did not interoperate with other vendors' offerings.

Many vendors offering professional services will be able to provide a variety of storage options, including SANs, NAS, and direct attached storage, where this is appropriate. However, for most enterprises implementing a new storage infrastructure a SAN will be the most suitable option.

Training and ongoing support is also often offered as part of professional services. Training enables an organisation's own staff to maintain the system, and ongoing support provides a single point of contact, should any part of the infrastructure fail.

The future of storage
Most enterprise storage systems currently being implemented are SANs, and the major storage vendors see this as the way forward, a belief that is fully endorsed by Butler Group. New technologies are increasing the options open to companies in the implementation of more advanced storage systems, and developments over the next few years will invariably increase the choices. They are also likely to increase the complexity of such systems, rendering it even more unlikely that organisations will be able to implement their own storage infrastructures. Butler Group therefore sees a much more prominent role for consultants and vendors offering professional services.

In spite of the fact that organisations are beginning to address their storage issues, there are still many companies that do not see the need to make any changes to the way their data is stored, until their existing systems start to fail. At this stage it may already be too late to take action, as any disruption to the availability of data in a 24/7 environment can be catastrophic, ultimately resulting in the failure of the business.

Butler Group therefore believes that a large part of the role of vendors offering professional services, now and in the future, should be an educational one, alerting organisations of the consequences of inaction.

Although the death knell of direct attached storage is being sounded with increasing regularity, Butler Group believes that for many smaller companies this will continue to be the best storage option. As storage devices, such as hard discs, continue to become smaller in physical size and cheaper in price, yet larger in capacity, a single PC or server will be able to store ever-increasing volumes of data. However, a challenge to direct attached storage may not come from SANs or NAS, but from data-hosting companies.

A result of mergers and acquisitions has been a proliferation of heterogeneous environments. As much of the traditional storage has been of the direct attached variety, this has created distributed storage architectures. One of the drivers behind the implementation of new storage architectures has been the desire to consolidate these "islands" of storage. Butler Group sees this as a growing trend as companies centralise their storage at a single location.

The convergence of wireless devices and computer technology is providing new mobile opportunities for organisations, but a headache for IT departments concerned with access to data. Although Wireless Application Protocol (WAP)-enabled devices currently only offer limited Web functionality, due largely to the small screen size of a mobile phone and basic numerical keypad, future Web-enabled devices are likely to overcome these problems. Once "always-on" technology is introduced, the possibility exists for more feature-rich applications becoming available for use on a mobile device. For this type of application to be of any use to an organisation it will be necessary to be able to store data within the organisation. This requires special attention as it introduces additional security issues.

The skills shortage may result in some organisations deciding that they simply do not have the resources needed to manage their own storage requirements. Butler Group expects to see a growth in the number of companies using data-hosting or storage management services in the future.

Alternative storage models
Data-hosting vendors could provide a threat to the more traditional product and service storage vendors, if a large percentage of organisations decide to travel down this route. Butler Group believes that business-critical data should not be outsourced, as the loss of control over data could result in the failure of the company. Nevertheless, for some organisations, this provides the best solution, particularly companies using the services of an Application Service Provider (ASP) or Web-hosting service.

One of the advantages of the data hosting model - and also one of its disadvantages - is the fact that the data is generally located on the host's site, normally utilising hardware and software owned by the host. This means that the customer does not have to invest in an expensive storage infrastructure but, on the other hand, it cannot suddenly take its data back in-house, should problems occur with the data-hosting service.

A less drastic option is managed storage, whereby the storage infrastructure is generally owned by and located on the customer's site, and managed by the service provider. As part of the service, 24/7 monitoring can sometimes be provided. A company that offers this type of service is Storability. Most of its management functions are performed remotely from one of its monitoring centres. The company also offers storage system design and implementation services. It is often called in when a company is struggling to manage its often overloaded, typically direct attached storage infrastructure. Its first task is to stabilise the existing infrastructure, often achieved by redeploying existing assets. The next stage of an implementation demonstrates how a company offering such services can operate.

All of the hardware and software necessary for a new storage architecture implementation is fully specified by Storability - down to the part numbers of items required - but is purchased by the customer. This way, existing relationships with storage vendors can be retained.

In this area, Storability believes that it offers a major differentiator between itself and its competitors as it claims to be independent, although not unbiased. This statement may appear to be ambiguous, but by "not unbiased", Storability means that it has a list of storage vendors that it recommends, which is based on components that the company knows will integrate with other components.

By "independent", the company refers to the fact that from its list of suppliers, it can select the components that it believes to be the best option for each project.

Following implementation, Storability can provide full storage management, which is carried out remotely, using "bleeding-edge" technology. Back-ups and disaster recovery copies can be scheduled, and the hardware and software continually monitored on a 24/7 basis, allowing potential problems to be anticipated before they impact on the performance of the company.

For companies unable to maintain their own data, the storage management option provides a real alternative to the data-hosting model. It may prove to be more expensive in the short-term, as a new storage infrastructure may be required to meet the demands of the new economy, but in the longer-term the company has the security of knowing that it has ownership and control of its own data at all times.

Conclusion
There is little doubt that the storage market is currently booming. Years of neglect have forced organisations to take action to ensure that they have the storage infrastructures in place that will support the proliferation of data created by e-business. This in turn is increasing the revenues that can be earned from storage.
With these vast amounts of money to play for, Butler Group believes that no single storage vendor has an unassailable lead, and that any of the leading storage vendors could emerge as the overall winner in the battle for supremacy of the storage sector. For example EMC, regarded by most (with the possible exception of IBM) to be the market leader, had revenues of $8.87bn in its fiscal year 2000. Butler Group does not feel this to be an unattainable lead, especially as Dell aims to be one of the top five storage vendors within the next few years. The company believes that, to achieve this, it needs to turn over around $5bn on storage-related products and services.

Access to data is vital in the modern economy and how that data is stored determines, to a large extent, how readily it can be accessed. Unfortunately, organisations have been rather slow to recognise this fact, and many are now paying the price for their reticence.

About Butler Group Research And Advisory Services
This Concept Paper is reproduced from Butler Group's Research and Advisory Service. For more information on this and other technology focused services, contact Mike James on +44 (0) 1482 586149, e-mail mike.james@butlergroup.com or visit www.butlergroup.com/ras/