Expect to hear a lot more about the SMB segment over the next 6 months.
Because the high-end market is sucking wind. NetApp and EMC are both reporting problems in the high-end. HP and IBM don’t break out as much detail but I’m sure they are feeling the chill as well.
With Hulk/Maui coming in Q2CY08, you should hold off on any 2nd tier storage purchases you can. I estimate that H/M will be about 30% per GB less than the current gear.
Robin blames the U.S. subprime mortgage mess, butI disagree with the term melt-down.
IBM doesn't publicly report subset numbers on individual product lines, but we are growing, albeit single-digit growth, on the high-end with our IBM System Storage DS8000 and DS6000 series products. Single digit growth is not "booming", but it is what we expected in this space, so it is not like we are"feeling the chill" as Robin stated.Obviously, if the U.S. market overall is doing poorly, then it must be from something else. IBM's success appears to be from organic growth in our Asia and Europe markets, and taking marketshare away from the top two contenders, EMC and HDS. Here are my thoughts why:
- EMC is remodeling its kitchen
Not happy with its status as #1 disk hardware specialty shop, EMC is admirably trying to redefine itself as an ["information infrastructure"] company, buying up software companies and introducing new storage services. [Byte and Switch] reports onEMC's recent acquisitions:
EMC is the latest vendor to pin its colors to the SaaS mast, revealing its plan to offer SaaS-based archiving services during its recent Innovation Day in Boston.IBM has offered[Managed Storage Services] foryears through our Global Technology Services (GTS) division. Gartner recognized IBM as the #1 leader in storageservices, with three times more revenues than EMC in this space.
EMC gave another clear indication of its SaaS intentions last month, when it spent $76 million to acquire online backup specialist Mozy.
As with a restaurant that is remodeling its kitchen, it can expect a temporary drop inrevenue. If it is done right, customers will come back to a bigger brighter restaurant. If not, the restaurant re-opens as a much smaller lesser version of itself. Recent events this year might incent EMC to get that kitchen done quickly:
- A recent [class-action lawsuit]might result in having EMC's "86 percent male" sales force goes to sexual harassment sensitivity training, takingtime away from selling high-end storage arrays in the field. Analysts consider "high-end" boxes as those costingover $300,000 US dollars. Because of the money involved, there is a lot of competition for high-end storage, so face-to-face time with prospective customers is crucial to making the sale.Anytime any vendor is mentioned in a lawsuit (andcertainly IBM has had its share in the past, as Chuck Hollis correctly points out in the comment below), priorities get shifted, and there is potential dip in revenues.
- Dell acquires EMC's rival EqualLogic. Dell resold EMC midrange storage, like CLARiiON, so this should notimpact their high-end storage sales. While Dell will be allowed to sell EMC until 2011, this new acquisition mightmean Dell leads with the EqualLogic offerings, and that could potentially reduce EMC revenues in the midrange space.
IBM went through a similar phase in the 1990's, redefining itself from an "IT Technology" company, intoa "Systems, Software and Services" company. These transitions can't be done in a quarter, or even a year, theytake several years. IBM lost business to EMC in the 1990s, but is back with a stronger portfolio in the 2000's, and so IBM's kitchen remodeling effort appears to be paying off. We will see what happens with EMC in a few years.
- HDS puts on the white lab coats
Meanwhile, HDS appears interested in taking over as #1 disk hardware specialty shop.For years, Hitachi was the stereotypical JCM (Japanese IBM-compatible manufacturer) that made well-engineered"me, too" storage arrays. They would see what innovators like IBM and EMC were doing, and copy them. Recently,however, they seemed to have changed strategy, introducing new featuresand functions on their high-end USP-V device, like[Dynamic Provisioning].
The problem is that customers don't want to feel like [Guinea pigs] in an experimental lab, especially withmission-critical data that they trust to their most-available, most-reliable high-end disk storage systems.Like IBM and EMC and the rest of the major storage vendors, Hitachi has top-notch engineers making quality products, but new features scare people, and so there is a lag in the adoption of new technologies.
In our youth, we might have preferred beer with recent born-on dates, and tequila aged less than 90 days. But as weget older, we switch to drinks like wine and whiskey, aged years, not weeks. The same is true for themarketplace. New start-ups and other "early adopters"might be willing to try fresh new features and functions on their storage systems, but more established enterprises prefer storage with more mature and stable microcode.Storage admins want to leave at the end of the day, knowing that the data will still be there the next morning. In tough financial times, many established companies want the technological equivalent to ["comfort food"], nothing spicy or exotic, but simplehearty fare that fills the belly and keeps you satisfied.
Recognizing this, IBM often introduces new features and functions on its midrange lines first, and position them accordingly. Once customers are comfortable with the concepts, IBM then can consider moving them into the high-end lines. For example, dynamic volume expansion was introduced on the DS4000 and SAN Volume Controller first, and once proven safe and effective, brought over to the DS8000 series. This strategy has served us well.