In my last two posts I spoke about the “New Normal” in storage – my view on the future sustained period of slow growth in storage spending. In this post I discuss how I view the impact of the “New Normal” on storage companies.
You might ask why a guy who is negative about storage spending in general is leading an expansion stage storage company. Well, I’ll skip to the punch line and tell you I am optimistic about value creation via storage optimization technologies.
When the economy took a turn in 2008, I believe everything changed in storage. Budget constraints shined the light on storage efficiency in a way the industry had never experienced. That meant the focus in storage innovation changed from speed (frankly, we can store and access information plenty quickly these days) to cost optimization. Simultaneously, the largest storage vendors got conservative and slashed R&D budgets to build cash balances (and they weren’t alone, the US tech sector has unprecedented cash balances today). And, they focused on maintaining account control by slashing prices on less efficient technologies.
By cutting back on investment before and during the down-turn, the largest storage vendors missed a cycle of innovation. Their product portfolios are behind in the areas of deduplication, scale-out technologies, unified storage and automatic tiering/storage virtualization technologies. Now they need to catch up.
Well capitalized, up and coming storage companies continued investment during the downturn as innovation is their only competitive advantage and their place in the ecosystem. If they invested in storage optimization and proved their technologies, they are more valuable in today’s world where the key driver for storage adoption is cost efficiency and mature technologies are scarce.
So, what do I conclude this means strategically for storage vendors? First, lets talk about the leading storage suppliers and then the up and comers or innovators. I should note my simplistic view of the storage world is one in which the leading vendors sell 95% of storage and account for 5% of the innovation, while up and coming companies sell 5% of the storage but account for 95% of storage innovation.
For the largest storage vendors, it is time to open up the spigots and drive investment for storage efficiency. Someone way smarter than me said, “you can’t save your way to prosperity”. Now is the time for storage leaders to aggressively invest in dedupe, scale-out, storage virtualization and unified solutions. They must buy, license or build optimization technologies with a mind set of “eat lunch or be lunch” because their competition is. We’ve seen the start of this with recent M&A activity. Stop debating “is dedupe ready for primary” or “my solution is faster than X” and “SATA vs. fiber channel”. The facts are: dedupe is ready for prime time today and is coming like a freight train, speed is assumed and in the big picture media form factor is irrelevant. Get on the optimization bus or risk market share erosion.
For the up and coming storage innovators, focus on transformational technologies that can massively lower the cost of storage for IT organizations. If you aren’t focused on optimization technologies and cannot reposition, return your investors money. Build your optimization IP portfolio and work with leading storage vendors (OEM) who will leverage your technologies – remember they have 95% market share!
I see a transformational change occurring in storage efficiency driven by aggressive M&A and investment activity by leading storage companies and resulting in massive cost savings for IT organizations. Leading a company that is driving key technologies for the transformation is exciting stuff. I love this job.