Internal Disk Arrays Prop Up Storage Sales in Q4

March 15, 2010 Timothy Prickett Morgan

The way disk array storage vendors have been talking for two decades, you would think that the day would never come when storage revenues would cease growing. Well, the economic meltdown last year sure saw that trend come to an end. But spending has taken off again as 2009 came to a close, and while it is too early to call this a recovery, much less a return to high growth, there certainly is more optimism in the storage racket now than a year ago.

“Although 2009 might have gotten off to a rough start, it ended on a strong note,” explained Liz Conner, senior research analyst of storage systems at IDC, in a statement accompanying the market stats put together by the company. “Total (internal plus external) factory revenue for the fourth quarter posted the first year-over-year growth since the third quarter of 2008. Although Q4 is traditionally a strong quarter, 4Q09 accounted for 29.7 percent of the revenues for 2009, compared to 26.2 percent for Q408. Much of this increase was driven by open networked storage, which posted its first year-over-year growth, of 3.6 percent, since the fourth quarter of 2008.”

Open network storage is one subset of the disk array market that IDC tracks, one that combines network-attached protocols and commodity piece parts to make the disk array. NAS arrays accounted for 20 percent of revenues in the fourth quarter of 2009, and mainly because companies are wrestling with how they can cope with file-based, unstructured data. Casing the disk array market is going to get a bit trickier as more and more companies are offering so-called unified storage products that can handle both file-based and block-based data with equal aplomb.

In the final quarter of 2009, worldwide disk array sales (including both internal and external disk arrays) rose by two-tenths of a percent to $7.27 billion. Not exactly a cause for celebration, considering that internal disk array revenues in the quarter dropped by seven-tenths of a percent to $5.29 billion. However, the recovery of server spending among enterprises (rather than SMBs) seems to have aided and abetted a recovery in internal disk array sales, which grew by 2.6 percent in the quarter, to just under $2 billion. Across all disk array types, IDC estimates that 3,304 petabytes of raw disk storage capacity was sold in the fourth quarter, up 33.4 percent compared to the final quarter of 2008.

When you do the math, you discover that the cost of a terabyte of raw capacity, on average, came down just under 25 percent for the year. So companies bought a lot more raw capacity (but the capacity growth rate was half that of the dot-com boom) and they paid quite a bit less for it. But perhaps not as low as they otherwise might have because storage arrays are loaded with lots of extra snapshotting, replication, performance, and archiving features. Minus these features, which companies need as they try to do more with less (and often need to do more with fewer people, not just less money), disk array sales might have been a lot lower than levels seen.

For the full 2009 year, which a lot of IT vendors would like to say good riddance to, total disk array sales were down 10.2 percent to $18.1 billion, and internal array sales were hammered down even further, falling 16.3 percent to $6.39 billion for all of 2009. All told, disk array sales no matter where those arrays sit (inside of server skins or outside of them in racks) came to $24.5 billion, off 11.9 percent from 2008. And 2008 wasn’t exactly a great year.

Across all disk array types, Hewlett-Packard remains the top supplier, but its lead over IBM and EMC is shrinking. For the year, HP posted $4.51 billion in sales, down 17 percent and falling faster than the market for both internal and external disk arrays. HP is not holding ground with its products, plain and simple. IBM squeaked by EMC, with $4.14 billion in disk revenues in 2009 compared to EMC’s $4.11 billion. (The EMC numbers include sales from the recently acquired Data Domain.) Dell, which sells its own PowerVault products as well as rebadged and Dell-manufactured CX4 Clariion arrays from EMC, came in at fourth in the 2009 disk array revenue rankings, with $2.79 billion in sales, down 10.4 percent. NetApp rounded out the top five disk makers, with $1.56 billion in sales, declining only 2.5 percent for the year. The disk storage market is vibrant and still has dozens of other players, like the server racket did when I was a pup two decades ago, and these Others accounted for $7.36 billion in sales in 2009. However, the top five fought hard against them, and these others had a slightly steeper decline, as a group, than the market as a whole, falling 14.4 percent for the year.

Just to give you a sense of how important the add-on software is for disk arrays these days–and I am willing to bet that this software is wickedly profitable–such software accounted for just under $3.1 billion in revenues in the fourth quarter of 2009, up by a half point, and in all of last year, accounted for $11.7 billion, down 4.7 percent from 2008. This add-on software, including file systems as well as clustering, archiving, replication, disaster recovery, and other tools, basically accounts for a third of total system storage sales (internal and external arrays together and plus software to make it do tricks).

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