April 28, 2003
(Storage Networking World)
Storage and storage networking vendors fared well during the last quarter of 2002. As a result, many users and financial analysts called me asking what those results meant.
Are things looking up for the storage industry? IDC has predicted that networking and storage will be the IT winners this year.
So as we roll along through 2003, what is happening to storage spending plans? What aspects of storage networking are IT shops spending on again? What do the recent trends in spending and growth say about storage networking for the remainder of the year? Are users really starting to spend again?
Trends of 2002
Looking back over the past 21 months, a number of trends are apparent. First, while the overall effects of Sept. 11 are still being felt in the form of a major economic downturn, the effect on the storage industry has followed its own divergent path. Initially, the key storage impact of 9/11 was a wake-up call to management on the importance of disaster recovery, backup and security. As a result, storage spending was not immediately hit in thefashion of other areas of the economy.
Instead, disaster recovery spending jumped up the priority list, and the storage industry prospered briefly. While other budget areas were slashed, storage spending initially remained somewhat unscathed, while disaster recovery planning (and thus spending) remained a top priority.
Over time, as the economy stayed slow, storage budgets were slashed along with the rest. Cost justification became much tougher than before, and in general, the only purchases that made the cut were the absolute essentials. As hardware failed, devices were replaced. Additional hardware for critical storage growth was also approved. Some essential storage software even squeezed through.
Overall, however, management clamped down on any unnecessary data storage, and growth was limited to what was absolutely needed to keep up with critical demands. Most users who had not yet moved to a storage networking approach put their SAN plans on hold, due to the cost of entry.
Users who had already made the move to SANs continued with whatever level of growth was required to meet essential demands. In many cases, though, growth flattened as headroom was used up. Unfortunately, in an effort to ensure that SANs would meet their high-availability, high-performance objectives, some initial implementations were over-engineered with excessive switches/directors. In this over-inflated environment, redundancy was built on top of redundancy.
As cost justification got harder and budgets got tighter, however, users began to look more closely at what was critical for their installations, and initial gross overbuying became less of a factor.
SANs grow despite the economy
Despite the unrelenting economic downturn, worldwide sales of SAN switches grew 15% year over year to $954 million in 2002, according to a report from the Dell'Oro Group. Much of that growth was due to upgrades from 1G to 2G Fibre Channel switches. Dell'Oro Group predicts that number will hit $1.1 billion this year.
Of course, one of the key cost justifications for SANs has been reducing the total cost of ownership (TCO) through improved manageability and better resource utilization. This justification has allowed the current level of growth to continue and has also allowed SAN adoption rates to keep growing, albeit more slowly. Consolidation into existing SANs provided justification for many of the hardware purchases that were approved.
High-end users, in particular, continued to upgrade, and sales of director-class Fibre Channel products were up 48% year over year to $418 million, according to the Dell'Oro Group. Overall, 58% of the storage purchased in 2002 was SAN storage, according to Soundview.
Budget constraints easing
Over the past nine months, the IT economy has started to loosen, although most IT managers still see the remainder of 2003 as a tough year. At the beginning of the year, storage lagged behind other areas, which pushed it down on the budgetary priority list.
Now, however, storage budget constraints are beginning to ease. Slower to get hit, then slower to recover, storage spending is moving back up. Is this a temporary improvement or a permanent recovery?
Based on conversations with IT management, it seems likely that this could be the beginning of a long-term recovery (though the impact of war with Iraq makes any predictions difficult). The tight budgets of the past year put tremendous pressure on storage staffs to stretch the resources they had and have created a substantial latent demand. As the purse strings loosen up, where are users starting to spend their newfound discretionary money?
According to IT management, storage networking is still a high priority, and for those with existing Fibre Channel SANs, growth is continuing. Users are actively doing more consolidation, putting more devices on SANs and adding more HBA switch ports and storage. Certainly, high-end enterprise customers are continuing their growth along these lines.
Many users who haven't gone to storage networks are now taking a look at their futures, with IP storage and SAN/NAS convergence playing key roles in their decisions. For those who can now spend even a little, these alternatives provide interesting options, and they should see significant growth over 2003.
Whither automation and management software?
Another interesting area for smart spending is automation and management software. Users looking for ways to do more with less can find numerous software solutions offered in this arena.
The storage software space last year saw a long run of acquisitions. IBM bought TrelliSoft (StorageAlert), gaining storage resource management (SRM) functionality that will fit nicely with Tivoli storage management. Veritas purchased Precise/WQuinn, bringing it storage resource management for Windows, along with NTP for reporting. These capabilities will be a good addition to the company's SANPoint Control offering. EMC acquired Prisa (VisualSAN). Sun added Terraspring to its software mix, bringing in an IT infrastructure management tool.
Though storage software dropped in priority after its post 9/11 spike, it is now making a comeback. Storage-area management (SAM), SRM, data management and virtualization, quota/asset management and backup/disaster recovery (again) are now moving into the spotlight for IT management.
Doing more with less staff will put a strong focus on automated provisioning and policy-based management. The good news here is that the tools in this area have come a long way and are starting to provide the features necessary to make a significant difference.
By the same token, doing more with less in terms of hardware means improving utilization of storage and storage networking devices. The good news here is that SRM tools and storage networking performance tools have improved and now feature broader device support and more intuitive interfaces. Overall, storage networking management software is evolving into a more mature market, following the pattern of network management as more sophisticated tools emerge.
Only time will tell where the remainder of the year will take us in storage, but there are certainly signs of hope. Budgets seem to be easing, and strong solutions are continuing to emerge in both software and hardware. For their part, users are succeeding at cost justification based on the benefits of consolidation, improved utilization and increased manageability. In terms of storage networking, 2003 is looking up.
Barb Goldworm is an independent analyst and consultant with more than 20 years experience in the computer industry in systems and storage management, in various technical, marketing, industry analyst and senior management positions with IBM, StorageTek, Novell, Enterprise Management Associates and other successful startup ventures. She has been a frequent speaker at industry conferences worldwide for more than 10 years and was the creator and track chairwoman for the Networld+Interop track on Networked Storage. She can be reached at barbgoldworm@earthlink.net.