Tech Alert: ‘Caveat Emptor’ for IT Buyers as Cloud Storage Ascends

Permabit CEO explains inevitable impact of cloud and software-driven architectures on storage suppliers – and on end users who rely on them

CAMBRIDGE, Mass – March 30, 2016 – Enterprises will need to make difficult choices about data center infrastructures as changing technology and business models impact storage and networking, according to experts at Permabit Technology Corporation, the leader in storage efficiency and data reduction technology.

As organizations move more data to the cloud, hybrid cloud and hyper-scale cloud providers will make massive share gains, fueling adoption of white-box compute and open-source software for storage, computing, and networking. Tom Cook, Permabit CEO, believes the branded storage vendor business is in a permanent state of decline, requiring end users to make long-view decisions today.

“Flashy startups and storage incumbents are engaged in a race to solve what is essentially yesterday’s problem by building better, faster and cheaper on-premise disk arrays,” said Cook. “Buyers must beware of the disruptive impact cloud adoption is having on those vendors’ market share and profitability.”

Cook advises midsize and large storage consumers to heed the following factors that will inevitably influence their future purchases:

White Box is Winning

Hybrid cloud and software-driven environments are a goldmine for standards-based, commodity-class white boxes for compute, networking and storage. The reliability and features that branded vendors traditionally offered are instead delivered through commodity component redundancy and intelligent software, while inexpensive flash devices yield performance and efficiency. Since enterprise-shared storage can be built from unbranded commodity components, it’s easy to compare acquisition costs from different suppliers – and the branded vendors won’t come out on top. White-box vendors operate at 10 percent margins versus the 55 percent margin of branded vendors. As branded vendors lose sales, their R&D suffers, and they will struggle to bring new-and-improved products to market.

Cost Structures are Changing

Moving data to the cloud changes compute, networking, and storage costs from a capital expense to an operating expense. Converged and hyper-converged architectures orchestrated by more capable, feature-rich software can use hybrid cloud seamlessly, so data is migrated offsite regularly. Budgeting for “hardware refresh” becomes passé as specialized platforms are no longer needed.

Support and Maintenance Dollars are Shifting

When the real innovation is in software, not hardware, and cloud data centers deliver enterprise-class QoS, software systems become mission-critical and so does their support and maintenance. The quality and performance of open source software keeps raising the bar and its business value continues to go up. Users will siphon budget away from keeping their hardware running to keeping software in tip-top shape.

The Storage Admin’s Influence is Declining

As branded vendors lose their influence on decision-making, their incumbency advantage disappears, and purchasing relationships change. Storage admins, storage managers, and other storage-specific personnel may find they also lose influence on the overall data center budget when compute, networking, and storage is consolidated into one entity and capacity is no longer the biggest line item.

The Wealth Is Shared

As the stock of branded storage vendors wanes, it’s not just one industry sector that will wax. Rather, a whole ecosystem of hardware suppliers, software suppliers, open-source support organizations, managed service providers, and hyper-scale providers like Amazon, Microsoft, IBM, and Google all stand to gain. Vendors like these that can capitalize on value-add applications and services like analytics to subsidize free or near-free storage will further drive critical apps and data to the cloud. In the long run, cloud and software-driven architectures deliver cost, scale, and agility advantages, all of which benefit the end user.

“There’s no denying the cloud business model is winning, driving the economic transformation of infrastructure,” said Cook. “With hybrid cloud gaining share, the branded storage business is under severe pressure, and legacy players are in a fight for survival.”

About Permabit

Permabit pioneers the development of data reduction software that provides data deduplication, compression, and thin provisioning. Our innovative products enable storage OEMs, ODMs, Cloud Service Providers, and Software-Defined Storage Vendors to get to market quickly with solutions that cut effective cost, accelerate performance, and gain competitive advantage. Just as server virtualization revolutionized the economics of compute, Permabit software is transforming the economics of storage today.

Permabit is headquartered in Cambridge, Massachusetts with operations in California, Korea and Japan. For more information, visit