The Information Economy Continues To Grow

At least, that's one way of interpreting the latest quarterly storage results from Gartner and IDC.

One of my favorite leading consumer economic indicators that I've come across is holiday wrapping paper sales.  Since this sort stuff has to be ordered far in advance of the holiday gift-giving season, it's turned out to be one of the most accurate bellweathers of holiday consumer spending.

Could storage revenue be the same bellwether for the growing information economy?

The Background

One of EMC's persistent themes is that we're becoming an information economy: one where information becomes the most valuable/costly/risky asset.  The consequences of this societal shift are of the same magnitude as, say, a shift from an agricultural to a manufacturing economy.

But every economic model needs its metrics.  And, somehow, the broader category of overall IT spending just doesn't do it for me.  Too much noise to understand what's really going on.

But, when you boil it all down, information has to live somewhere to be deemed valuable.  If it's not important, it isn't stored.  Hence my growing interest in using the health of the storage market as a proxy of the overall strength of the new information economy.

And, by all recent measures, it's a robust economy indeed.

What Gartner Says

Gartner's release uses  a specific term for storage, ECB -- external controller-based storage.  This excludes things like storage embedded in servers, PCs -- stuff that isn't centrally managed.

And the growth numbers are breathtaking -- 18.8% y/y market growth in Q2 of 2008.  That's one heckuva growth rate.  Lest you think this is a non-US phenomenon, North American growth came in at a healthy 12.8%

The batting order isn't surprising: EMC way out ahead at 24.3%, IBM and HP back a ways at 14.2% and 11.8% respectively, Dell a bit back farther with a respectable 9%, and then lots of other familiar names. 

Note: like IDC, Gartner doesn't count OEM business, so EMC doesn't get credit for Dell for example, Dell gets credit.

The big market share gainer according to Gartner? 

That would be "other" category at 2.3%, meaning more and more of the pie is going to the newer entrants -- collectively, that is.  To me, this means that the market still has plenty of room for innovation from smaller vendors.

The other modest surprise came from Sun, who had a very hot growth quarter with their STK-based array products, albeit off a small base.  I'll be looking forward to the Q3 results to see whether this was an anomoly, or a trend.

What IDC Says

Of the two vendors, IDC provides a more granular view, IMHO, so I tend to follow them more closely.  You have to be an IDC customer to get all the granular stuff, so I can only summarize a few nuggets here.

IDC pegs the global growth rate of "external storage" (not quite Gartner's ECB, but close) at a robust 16.7%, which they state is the highest year-over-year growth rate they've seen in two years.  There's also a capacity growth rate of an astounding 43.7%.

IDC gives EMC credit as #1 with a 21.7% revenue share followed by IBM at 13.1%, HP at 12.9%, and Dell at 9.2%. 

Close enough to Gartner, I'd offer.  They also pegged EMC at a 19.7% growth rate, and picking up about a half-point of market share.

Narrow the focus to "networked storage" (as opposed to direct attach), and EMC's market share bumps up to 26.4%.  Throw in the stuff that goes through Dell, and it probably rises to the 32% range. 

Simply put, it looks like about a third of all networked storage comes from EMC.

High End Strength

More interestingly, one can deduce the strength of the high-end storage market by simply summing the products that play there: EMC DMX, Hitach USP and -- if you're feeling generous -- IBM's DS8000.

Cut this way, high-end storage grew an amazing 20.2% in Q2 year-over-year.  Something's definitely happening there.

Subtract this out of the total external storage, and call everything else "mid-tier", and you'll see a 12.9% growth rate for the remainder.  Yes, mid-tier is growing, but high end appears to be growing faster at present.

And Where's iSCSI and NAS?

Not that I'm looking to get flamed again by the iSCSI fanboys, but there's a story here as well.

Very strong iSCSI growth in Q2 from year-to-year: $190m to $368m -- that's close to 100%.  Even though, that's still a scant 7% or so of the overall external storage market.  Growing, but still not yet a major force -- at least, based on my interpretation of the IDC numbers.

With the EQL acquisition (plus the iSCSI-based EMC products) Dell has rocketed to #1 in this market with 32.8% market share.  EMC and Netapp are in same league with 14.1% and 14.6% share respectively.  Unfortunately, NetApp appears to have lost a healthy -6.7% of market share in Q2 as compared to last year. 

Now that Marc Farley works at 3PAR (rather than Dell/EQL), I probably won't hear so much from him.  Probably won't hear from Val at NetApp either ... :-)

As far as NAS goes, once again, it appears to be growing faster than many other categories, with a torrid 23.5% growth rate. 

Once again, IDC gives EMC #1 with 39.8% market share in Q2'08, and NetApp #2 at 28.5%.  Sorry to say, but there really isn't a clear #3 in this race -- it's shaping up to be a two-horse race, with EMC ahead by a healthy margin, according to IDC.

The Big Picture

Regardless of how the various vendors stacked up in the various categories, this much is clear: the storage marketplace continues to grow and grow.  As people generate more and more of this information stuff, there's gonna be a growing need to have a place to put it.

Even in an uncertain economic environment, organizations of all sizes appear to be consuming more of the one of the key foundational technologies of the new information economy, and that's storage.

And I don't think that's going to change anytime soon.

Comments

[KPC]

Chuck, I agree IDC on the SAN market. It really feels that EMC leads the SAN market.

In terms on NAS and iSCSI, the customer's mindshare is with NetApp. What IDC counts is just the licenses sold by vendors and declares a final statement.

Most customers who have a EMC SAN nowadays have a EMC NAS. But does EMC has NAS alone customers? Hardly a handful.
Buy a DMX and you get a NAS free!

The same goes with iSCSI market. I heard that the EMC CAS is counted as NAS by IDC.

On the otherhand at SAN market EMC had a fantastic run. They kept the marketing the right solutions and leveraged their softwares well. This kept them ahead of the other SAN vendors.

IDC - Not sure how they really count.

The customer mindshare results will be

Enterprise SAN - EMC, HDS, IBM
Midrange SAN - EMC, NetApp, HP
Enterprise NAS - NetApp, EMC
Midrange NAS - NetApp, EMC
ISCSI - NetApp, EMC, Dell (EqualLogic)

Dell is just lucky to be mentioned in the IDC statistics.

IDC -Interesting Disk Commitee.

[Chuck Hollis]

Hi KBC:

Some clarification -- IDC counts revenue (not licenses) for their segments. EMC, like many vendors, don't give them official numbers, they deduce on their own, and -- hsitorically -- have been pretty accurate.

We could debate the relative merits of mindshare vs. actual revenue. I would offer that actual revenue is probably a more indicative measure of relative success in the long term.

EMC has many, many NAS customers who use our NAS products alone. Actually, there are no "pure NAS" products at EMC, every NAS device is effect a unified storage device, providing support for iSCSI and FC as well, making counting and categorization more problematic.

Most of our stand-alone NAS customers are using the integrated NS20, NS40 and (hopefully) the new NX4. These are primarily not the largest shops.

When you buy a DMX, you don't get a NAS for free, unfortunately. The DMX (and CX) can have a portion carved off for NAS usage, but that's a separate product -- a gateway.

Dell is a force to be reckoned with -- with the EQL acquistion (and other iSCSI products from EMC), they are the clear iSCSI leader by quite a margin. I would not write them off.

I do believe that IDC counts Centera as NAS. But, even if you backed out those numbers, the rankings would be identical, just a slightly more narrowed revenue lead for EMC in NAS.

Thanks for writing!