Storage upstarts are tipping the vendor scales

Posted:: 00:00 11 Sep 2006

There's a delicate balance of power among storage vendors, but small tech upstarts might tip the scales.

In the storage systems space, there have been only a handful of players -- EMC, Hitachi Data Systems (HDS) and IBM -- that have truly controlled the high-end enterprise array market.

These vendors fight over billions of your dollars every year; much more than that if you count all of the ancillary stuff surrounding the hardware. If a vendor can get the "core," it can usually find other spots within the enterprise to sell the rest of its wares.

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For years, EMC, HDS and IBM have been battling each other inside the core. They steal shares from each other when possible and, over time, we've seen big, slow shifts. In 1988, I think IBM had approximately 98% of the market until EMC took advantage of Big Blue's lack of focus and became the market leader by changing the battle. EMC made storage a separate decision from the server, which tripped up IBM because once a customer evaluated storage independently, IBM's technology was inferior. IBM took a long time to react with technology and, more importantly, a business focus on a market it took for granted. HDS has always been seen as the company with the greatest technology, but it gets knocked for being too nice. All three vendors are looking strong, but the stakes have never been higher.

These three have figured out that leveraging the "win" in the core is the competitive advantage. That means they've been developing noncore offerings, buying up companies, and frantically ensuring they have the offerings and business focus to take advantage of their opportunities.

There have been other companies that have fought for the less prestigious, less influential, but much greater dollar market in the midrange space. Along the way, the more successful of these companies have tried in vain to crack the core. And none has tried harder than Network Appliance (NetApp).

NetApp has been the most consistently successful company in the last 15 years. EMC has been the bigger cheese, with bigger numbers and sometimes bigger problems. NetApp wants a piece of the core, and EMC wants the revenue and profits NetApp consistently generates outside the core. Neither has been successful, but they both make money.

Now it's going to get really interesting. NetApp, in an OEM deal with Topio, has a well-timed way to steal core storage. NetApp has changed its strategy from replacing EMC to enabling customers to move or replicate nontransactional data on more expensive core storage to its own systems. Whittling away at EMC's business is a smart strategy. In addition, NetApp's OEM deal with IBM gives IBM the same potential benefits and NetApp a much greater reach.

Through its own relationship with Ibrix, EMC has been making headway into some of NetApp's biggest accounts, such as Pixar Animation Studios and Yahoo. Suddenly, a little tech company has enabled the much bigger EMC to do what it hasn't been able to do. Another little player, Signiant, did a deal with a big oil company to ensure its remote rigs moved their data immediately and didn't suffer another Katrina-type catastrophe -- and dragged an order for 25 TB of EMC disks along with it. Talk about a freebie!

These opportunities exist because the market has moved on. The requirements aren't the same, so the solutions have to change. The difference now is that the little guys have the opportunity to participate among the giants, and the door to opportunity has never been open wider.

This column by Mr. Duplessie first appeared in Storage's September 2006 issue.

About the author:

Steve Duplessie is the founder and senior analyst for the Enterprise Strategy Group in Milford, Mass.

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