Guest Nibble

2001, A YEAR TO FORGET

from Jean-Jacques Maleval Editor of StorageNewsletter

The storage industry's report card for the year 2001 is nothing to brag about. There is some hope for recovery in 2002, at least. But when?

- The past year was not particularly glorious for the computer industry in general, and not much better for the storage sector. Storage capacity needs in large enterprises is growing, but IT budgets are tightly monitored, while storage subsystem prices have dropped considerably. The events of September 11 no doubt provoked an abrupt halt in economic activity, but the preceding nine months were far from stellar. Rare are the storage companies that will finish the year with sales greater than in 2000 - in fact, a large majority will likely close out in the red.

- For the very first time ever, fewer PCs and servers were sold in 2001 than the year before. Consequently, it became even tougher to sell hard disk drives. While analysts' figures are not yet known, it seems probable that 2001 was the first year, in the quarter-century history of the HDD industry, when fewer units were sold than in the preceding year, i.e. fewer than the 2000 record of over two hundred million shipped. Revenues for the last quarter of 2001 have yet to be published, but they shouldn't be too bad for desktop drive makers, due to

1) Fujitsu's retreat from the sector, to the benefit of some rivals, and

2) the arrival, at last, of new applications for disk drives outside the IT realm, and more specifically the launching of game consoles with HDDs, such as Microsoft's Xbox. -

At the end of 2000, manufacturers had hit 20GB per 3.5-inch platter - we're now at 40GB at the end of 2001, and as always, at a price that is nearly identical for a drive with the same number of platters. Consumers no longer know what to do with HDDs of such high capacity, but the areal density race rages ahead. The SAN and NAS market would not be what it is without the massive help of disk drive makers, but because of the competition that exists between the two sides, the latter are the last to profit from their efforts.

- No technology is yet in any position to challenge Winchester drives in the medium term, particularly since, as Fujitsu and Seagate have proven, the devices are capable of attaining areal density of 100GB per square inch, or 125GB per platter.

- The industry lost a veteran HDD maker, Calluna Technology, as well as a newcomer, Halo Data Devices. ExcelStor is the most recent arrival, built on the ashes of Conner Technology. - LTO seems to have made stronger inroads than SuperDLT, in a tape market that was nevertheless flat overall. For the first time, Imation dared to take on Quantum's monopoly in DLT. The story is still developing, in U.S. courtrooms, of course. Certain tape makers also caught on to the fact that they need to prompt their R&D services to greater intellectual heights, if they want to keep up with the steady growth in HDD capacities. OmaSS has promised us 600GB in 2003, while Sony has pledged a whopping 500GB for this year. It wouldn't hurt to get the ball rolling a little faster with current tape technologies.

- There are scattered reports that the floppy diskette still exists. We only ever see CD-R/RWs these days. As for writable DVDs that are slated to replace the latter media, the battle between DVD-R/RW/RAM from the DVD Forum against the DVD+RW from the DVD+RW Alliance as the privileged standard reached a fever pitch, although no clear winner is yet discernable. It is evident, however, that there's no room in this town for both of them. If you thought we'd know in 2001, guess again. DVD Forum will most likely triumph this year, if our hunches are right.

- It's clear to everyone that serial interfaces will gradually edge out their parallel counterparts. Unfortunately, there's likely to be little complementarity between all the new serial interfaces: serial ATA, FC and now serial SCSI. The arrival of USB 2.0 technology is certain to shake up proponents of 1394, more sophisticated, but also more expensive.

- RAIDs are relying more and more often on low-cost IDE drives, which are consequently eating into the SCSI unit market, and perhaps even that of tape technology, for back-up, if not for archiving.

- Market research companies were obliged to revise their 2001 forecasts downward in almost every segment of the storage industry. IDC thus foresees a drop of 18% in storage subsystems, due in particular to the poor economic environment and dot.com failures, but nonetheless is banking on 12% growth in open SANs.

- Even if some progress was made, interoperability, or the absence of it, remains an impediment on growth in the SAN market. As in all industries, it's the leaders (we're thinking of Brocade and EMC here) that are the last to move things forward.

- 2001 will also be remembered as the first difficult year in the history of SAN giant EMC, now under assault from both IBM and Compaq (despite the demise of the latter two firm's partnership), as well as Hitachi Data Systems, with allies Sun Microsystems and Hewlett-Packard. And the difficulties are not minor: losses for the first time in 12 years, and nothing to sneeze at, $1.2 billion with restructuring charges, not to mention sales down by 47% from one year to the next for 3Q01 alone. It remains to be seen whether the agreement signed with Dell to resell EMC Clariion will shuffle the deck.

- Since Joe Tucci succeeded Mike Ruettgers as CEO at the beginning of the year, EMC has not been the same. Its new strategy, like that of its rivals, is to seek the holy grail of storage software, with much more comfortable margins than with hardware. In other words, imitate Veritas. In consideration of this, we award Tucci with 2001's lemon of the year, while Veritas CEO Gary Bloom walks away with the title of Storage Industry Man of the Year, no contest.

- EMC's misfortunes will furthermore probably cause it to lose its number one slot among storage companies for revenues, a torch that will most likely be relayed by Seagate, rather than the new Maxtor, even with the latter's addition of Quantum HDD, proving once again that in the case of acquisitions and mergers, one plus one sometimes works out to quite a bit less than two.

- One effect of September 11 was to highlight vulnerabilities in the area of remote backup and disaster recovery, prompting a number of companies to scramble for new contingency solutions.

- Storage over IP sounds like a dream, but we're hearing significantly more about it than we're going to see, at least until total standardization has been achieved, expected some time this year. For Infiniband, this process will come even later. 2001 was also the year in which virtualization software made its big splash, even if sales remain sluggish.

- 2001 also gave witness to an even more disastrous Comdex than the previous year. CeBIT seems to have definitively won the war of giant international IT trade shows. The past year also saw a major blitz among expo organizers to specialize in storage events, an effort that more or less paid off.

- We end on a brighter note: despite the gloomy year the industry just suffered, despite the number of mergers and acquisitions, despite even the dramatic reversal of fortune for SSPs, we've never seen a year with so many start-ups, for the most part looking for an angle in storage networking. Do they all still dream of IPOs? Perhaps not, because the stock exchange is far from welcoming at the moment. Instead, they seem content just to stay the course, perhaps hoping one day to snag a particularly big fish?

Jean-Jacques Maleval is Editor of StorageNewsletter