Companies Buy Lots of Disk Storage--At Cheap Prices--in Q2

Published: September 13, 2010

by Timothy Prickett Morgan

The faltering economy hit the storage market almost as hard as it hit the server racket, but both have recovered to reasonable levels as 2010 has progressed. According to the latest numbers coming out of IT market researcher IDC, the appetite for internal and external disk storage rebounded in the second quarter. Storage didn't bounce as high as servers did in the quarter, but then again, storage was not hit as hard during the Great Recession last year, either.

The IDC box counters believe that companies consumed some 3,645 petabytes of disk capacity across both internal disk arrays tucked under the skins of servers and external arrays of all shapes, sizes, and types. That is a 54.6 percent growth rate over capacity shipped, and with de-duping, thin provisioning, and other features that are increasingly available on midrange and high-end arrays, the actual effective capacity growth rate is probably a lot higher. (It is hard to say where, but well north of the 60 percent capacity growth rate per year that the IT industry saw during the dot-com boom and in its wake).

Revenues across all disk array makers rose by 20.7 percent, to $6.78 billion, and that means the price of a unit of capacity, driven by some sort of controller, continued to trend downward. Specifically, if you do the math on IDC's numbers, the cost of a terabyte of capacity on the average disk array dropped by 22.3 percent, to $1,861, in the quarter. Two years ago, it cost $3,420 to buy that terabyte of average disk array capacity. That's a lot of pricing pressure.

IDC says that external disk array sales rose by 20.4 percent, to just over $5 billion, and internal disk array sales came to $1.77 billion, up 18.6 percent. Network attached storage (NAS) sales were up 51.1 percent, and iSCSI storage area network (SAN) sales rose by 49 percent in the quarter, according to IDC. Total networked storage array sales--by which IDC means NAS plus open and iSCSI SAN arrays--grew by 29.2 percent, accounting for $4.2 billion in revenues.

By vendor and by virtue of its large server business, Hewlett-Packard had $1.31 billion in disk array hardware sales in the second quarter, up 33 percent. EMC, which only sells external disk arrays (until it gets into the server business) had $1.29 billion in disk array revenues, up 40.6 percent. IBM did poor by comparison, with $1.07 billion in sales, up only 9.3 percent, followed by Dell, with $832 million, up 22.9 percent. Rounding out the top five, NetApp, which only sells NAS products, had a 55.3 percent growth rate in the quarter, hitting $571 million in sales. Other vendors accounted for $1.72 billion in revenues, up nine-tenths of a percent.

Software is where the center of gravity in the storage racket has long since shifted, with features and functionality being enabled by arrays that are essentially virtualized servers with lots of disks having off them, often clustered for storage scalability and performance. But, alas, if you want customers for your storage software, you need to make a very good hardware platform since this is the ante to get into the game.

In the second quarter, IDC reckons that companies shelled out just under $3 billion to buy add-on software for their disk arrays to give them archiving, management, data protection, and high availability extensions, as well as basic software such as file systems to run atop the iron. This was up a modest 3.3 percent compared to a year ago.

EMC led the pack, with $722 million in growth for storage software, up 13.3 percent and raising the class average significantly on the storage software front. Symantec, thanks to its purchase of Veritas a few years back, raked in $488 million in storage software revenues in Q2, down 6.9 percent. Companies are trying out new clustered file systems, both open source and closed source variants, and there is also pricing pressure in the file system market. IBM ate some storage software revenues in the quarter, rising 10.6 percent to $410, and fueled by a number of storage-related acquisitions (notably XIV and soon to be further boosted by its recent acquisition of Storwize). NetApp continues to grow after righting its biz, with 6 percent growth, to $256 million, followed by CA Technologies the new name for the old Computer Associates), with $108 million, up 2 percent. Hewlett-Packard has some issues in the storage software business, with sales off 10.3 percent, to $97 million. Interestingly, other storage software makers held revenues perfectly flat at $874 million in the quarter.

According to Laura DuBois, program vice president for storage software at IDC, four segments of the storage software arena are showing growth. Revenues for data protection and recovery software were up 4.9 percent year-on-year), while archiving software was up 8.2 percent, storage management software was up 5.8 percent, and storage infrastructure software was up 12.7 percent.

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