It was supposed to be recession-proof. Storage firms, which sell the huge, refrigerator-sized boxes used by companies to house computer data, thought that their business would be immune to the high-tech squeeze. Even as the economy faltered, they noted, the volume of e-mail and other corporate data continued to grow.
Yet storage ended up suffering along with the rest of the technology industry. Worldwide spending on storage fell by 8% in 2001, compared with declines of 12% for PCs and 11% for servers. EMC, the biggest storage firm, saw revenue fall by a fifth.
Now, with spending cut and firms trying to squeeze more out of their existing equipment, the storage industry is changing. Shifting boxes is out; fancy management systems to make storage easier to operate and maintain are in. The action, in short, is not in hardware, but in software. While large firms’ spending on disk-based storage this year will be flat, at around $26 billion, according to IDC, a market-research firm, spending on storage software will grow by 16%, to $6.5 billion.
The demand for software is driven both by the need to cut costs and by the tumbling cost per megabyte of storage — down from 21 cents two years ago to below five cents today, says Tony Prigmore of Enterprise Storage Group. A rule of thumb in storage is that when a firm doubles its storage capacity, it must also double its support staff. Brian Truskowksi of IBM suggests that the initial hardware purchase accounts for a mere 10% of the cost of a storage system.
As capacity grows and budgets shrink, firms have to manage more storage without extra staff, and to do that they need clever software. Last year’s terrorist attacks emphasised the importance of proper back-up, disaster-recovery and “business continuity” systems, which are heavily dependent on software too.
The storage-software industry is dominated by EMC (the market leader in hardware) and Veritas. But dozens of start-ups have entered the field, and established firms have expanded their activities. IBM and Microsoft have both set up new storage-software divisions this year. For hardware vendors, moving into software has obvious appeal: the margins in software are much higher, says James Staten of Sun Microsystems, which along with HP and EMC has been buying small firms to beef up its storage-software business.
The challenge now is to create software that can manage complex combinations of storage equipment from many different vendors. To provide seamless management, storage software must be able to talk to hardware from rival vendors. Yet vendors are often reluctant to reveal the technical information needed for other firms’ software to work with their hardware.
The result is a familiar tension between proprietary and open standards. EMC hopes that its WideSky software, endorsed by Oracle, Microsoft and others, will emerge as the de facto standard. Its smaller rivals, notably IBM, Hitachi and Sun Microsystems, are understandably keener on a new open standard for storage management, called Common Information Model (CIM).
Without such common standards, grumbles Mr Truskowski, companies that choose one storage vendor then find themselves locked into that firm’s products. For its part, EMC claims that it is fully behind CIM and will incorporate it into WideSky once it becomes established.
Vendors including EMC, Veritas, Hitachi and Sun, have developed CIM-compliant products that will soon go on sale under the name Bluefin, an industry-wide initiative announced on May 22nd. But its success depends on persuading buyers that Bluefin products from different firms will work together reliably.
Disagreements over standards aside, however, firms in the storage industry agree that it is still a good business. Don Swatik of EMC says the long-term trend — away from attaching storage devices directly to large computers, and towards the modern “network-storage” model — will provide plenty of opportunities for vendors over the next few years. Another promising area is specialist systems for storing “fixed” content, such as X-ray images, cancelled cheques and photographs, which are stored but never altered.
The days of 60% margins on high-end storage systems may be gone, but Darren Thomas, a former head of storage at Compaq and now chief executive of Zambeel, a start-up, says that storage remains the most durable part of the technology industry. “I’ve been in storage since before it was cool,” he muses, entirely seriously, and with a touch of pride.