Disk Array Sales Rebound A Bit, Reversing Declines

March 17, 2014 Timothy Prickett Morgan

Despite all of the software wizardry that storage array makers have come up with to help customers make better use of the capacity in their devices, revenues rose modestly in the fourth quarter. The revenue gains were driven by what can be now thought of as a decent uptick in aggregate capacity shipments, but to be perfectly clear the growth does not approach what seemed to be normal for almost two decades.

In the quarter ended in December, the analysts at IDC reckon that the world’s companies, institutions, and governments consumed a whopping 10.2 exabytes of capacity across all types of disk arrays, an increase of 26.2 percent over the prior year’s fourth quarter. These arrays–both external ones linked to systems by various networks and internal ones tucked inside of server skins–accounted for an aggregate of $8.83 billion in revenues, says IDC, up 1.3 percent year on year and a whole lot better than the revenue declines the storage market has seen in the past several quarters and better than the slight revenue dip that the server market had at the same time.

The IDC figures take into account the substantial amount of storage that gets embedded inside of servers. Internal disk arrays are the main way that IT shops using entry-level and midrange systems add storage to their systems, and those who are I/O bound and who do not have to share arrays across multiple systems are even more inclined to go with a mix of internal flash drives (either solid state disks that plug into disk controllers or PCI-Express flash cards that plug directly into the PCI bus) than use an outboard array. IDC reckons that external array sales came to $6.91 billion in the fourth quarter, rising 2.4 percent, and if you do the math, then that means that internal array sales fell by 2.3 percent to $1.92 billion.

Hyperscale datacenter operators (those who provider services only at a massive scale) and public cloud operators (those who provide infrastructure and platform services) are building or buying bare-bones systems with modest CPUs and lots of cheap SATA disk drives to forge cheap storage arrays that run clustered file systems like Ceph or Gluster or to support Hadoop workloads, which are a kind of storage system mixed with a batch processing system. It is unclear how IDC is counting this kind of capacity, but what is clear is that this storage server approach is becoming a third way that enterprises add storage to their systems.

The fact that external array sales and capacity shipments were up despite this pressure from the cloud builders and hyperscale datacenter operators should be thought of as good news, just like when sales of servers to enterprises, as opposed to these customers, points up instead of down. Take the good news where you can find it.

“The disk storage systems market was able to break free of recent headwinds due to traditional year-end budget flushes, improved economic sentiment, and a strong desire to address long-standing storage infrastructure inefficiencies,” explained Eric Sheppard, research director for storage at IDC in a statement accompanying the figures. “Industry stakeholders able to capitalize the most on this demand were often those with recent product refreshes and strong go-to-market initiatives targeted at integrated infrastructure and storage optimization.”

EMC continues to set the pace in the disk array market, despite the fact that it doesn’t sell internal arrays. The company boosted its revenues by 9.9 percent to $2.28 billion in the quarter. The launch of VMware’s Virtual SAN (vSAN) arrays, which as the name suggests implements a virtual SAN on a cluster of virtualized servers that are running the virtual machines. It is a converged server-storage architecture, and one that will appeal to a lot of companies for certain workloads like virtual desktop infrastructure, basic cloud infrastructure, and applications where replication of data does not have to be synchronous. vSAN is going to eat into EMC’s sales over the long haul, but it is very likely a much more profitable product than an actual physical SAN and with EMC actually owning most of VMware, EMC will benefit if vSAN succeeds.

Hewlett-Packard is seeing its storage business stabilize, with revenues up 4.3 percent to $1.44 billion in the quarter, rising faster than the market at large and giving HP back some last market share. The big gains were for external arrays, which rose by 6.5 percent to $667 million at HP. IBM, on the other hand continues to struggle, with its total disk array business falling 11.2 percent to $1.24 billion and its external array business dropping 10.6 percent to $901 million. Dell’s overall disk array business dropping 11 percent in the quarter, to $875 million; its external array business does not make the top five cut, so I can’t tell you how that did. Exactly what the problem is for both IBM and Dell is not clear. They have reasonably fresh product lines that offer a mix of disk and flash as well as sophisticated storage management software. NetApp, which only sells external arrays and which was getting ready to refresh its product lines as 2013 came to an end, only grew at 1.5 percent, hitting $791 million in sales in Q4. Just last week, the company announced it was laying off 600 employees to get its costs in line with revenue and profit expectations, so clearly NetApp thinks the competition among array makers is going to get tougher, not easier. To my way of thinking, NetApp sees the threat that vSAN presents in enterprise accounts and is gearing up for a protracted battle. Add up the remaining vendors and they accounted for a tad over $2.2 billion in revenues and outpaced the growth in the market by a factor of four.

IDC says that the so-called open networked disk storage system space–meaning network attached storage plus any storage area networks that are not tied to mainframes–grew by 4 percent in the fourth quarter with nearly $6 billion in sales. EMC has the dominant share in this key part of the market, with a combined 35.6 percent share across those SAN and NAS products. NetApp has 13.3 percent of that pie, followed by IBM with 12.1 percent.