Storage Arrays Keep Selling Despite Server Slowdown In Q2

September 17, 2012 Timothy Prickett Morgan

The need for more storage capacity in the data center is continuing to outpace the need for capacity, at least in terms of growth, according to the latest data from IDC. As The Four Hundred previously reported, the company reckons that the world consumed 2 million servers in the second quarter (down 3.6 percent) and drove $12.6 billion in revenues (down 4.8 percent). Disk arrays, by contrast, drive $8.1 billion in sales over the same three months, up 8 percent from the year-ago period, and total disk capacity shipped in those disk arrays hit an aggregate of 6,667 petabytes, up a still healthy 24.8 percent.

Before we get into the details, here are a few things to consider. First, generally speaking, the server market is roughly twice the size of either the disk array or networking market on an annual basis and has been for quite some time. The server market took a breather in Q2 with so many new boxes on the way, and it will rebound in Q4 as new boxes come to market. Second, it would be interesting for IDC to count aggregate compute capacity shipped instead of physical boxes. My guess is that while the box count is relatively stable each quarter–somewhere between 2 million and 2.5 million boxes in recent years–the amount of capacity shipped is probably growing at 25 to 30 percent. Finally, way back during the dot-com boom, storage revenues were growing by around 30 percent per year against capacity shipments that grew about 60 percent per year. The storage market has cooled down thanks to thin provisioning and virtualization, just like virtualization has cooled down the server racket.

External disk array sales sold like gangbusters, coming close to $6 billion of the total and rising 6.5 percent year-on-year. Midrange storage products and emerging markets driving sales skyward. IDC didn’t mention it, but as it turns out, internal disk arrays tucked underneath the skins of servers grew at 12.6 percent to $2.08 billion, and actually helped pull up the class average. Midrange storage arrays (which cost between $25,000 and $250,000) drove external disk array sales, and accounted for 48.2 percent of the total external array pie. The same downshifting from mainframes and RISC platforms to X86 machines that have been given similar high-end functionality is happening in the midrange array space, with boxes getting automatic storage tiering, compression, de-duplication, thin provisioning, and other features once reserved for high-end arrays. And this is driving sales in the belly of the market.

Across all vendors and disk array types, EMC continues to outpace the market, with $1.82 billion in sales in the second quarter, rising 13.1 percent. Hewlett-Packard, buoyed by its position as the number one server shipper in the world, peddled $1.56 billion in storage arrays in the quarter, up 8.5 percent and slightly ahead of the market at large. IBM did a little better on the growth front at 9 percent year-on-year, but was once again behind HP with only $1.26 billion in revenues. Dell came in fourth thanks to acquisitions and its own high-volume X86 server biz, with $924 million in sales, up 11.5 percent. NAS king NetApp ranked fifth, with $727 million in revenues but only grew a point compared to Q2 2011 because all the top players and a bunch of smaller ones are all eating into its biz. Other vendors accounted for $1.08 billion in storage array sales, up 6.3 percent and feeling the pressure from the big five.

Interestingly, the storage software business, which IDC tracks separately from the underlying hardware, was only up nine-tenths of a point to $3.36 billion in the second quarter. Data protection and recovery software was the biggest piece of the pie, with $1.16 billion of that pie (up 2.4 percent) and archiving software accounting for $404 million (up 2.2 percent). The is the second quarter of diminished growth for these add-on products, and it could be a sign that IT shops are getting stingy about the bells and whistles and focusing on raw capacity. I happen to think that many of these functions are making their ways into operating systems or clouds or the arrays themselves and that is why sales are stalling a bit.