This morning, I came across this grim piece from Chris Mellor at The Register, detailing evidence of the violent restructuring in our familiar storage array market.
Call it confirmation bias, but many of us have seen this coming for a while, and have acted accordingly. The numbers have been mediocre for many quarters, but recently the pace seems to be accelerating.
It wasn't all that long ago that storage companies were almost semi-glamorous in the enterprise IT world: EMC, NetApp, HDS, Pure, Nimble, et. al. Great growth all around, and tons of VC flowing into the sector.
What happened? And should we think of this as a temporary aberration, or a permanent structural shift?
The Lure Of Storage
I became sold on the idea that -- in the world of computing, information mattered. Capturing, persisting and re-using data was going to be a big deal, so storage was going to be really important.
And I thought standalone storage vendors would have a better strategic positioning than server vendors in this regard.
So I packed up my young family, and off we went on our adventure. It turned out to be a good decision, but nothing lasts forever.
The Last Twenty Years
The need to store and protect corporate data has grown rapidly, and there has been no shortage of new technologies that make things better: performance, capacity or functionality.
We had year after year of rosy industry numbers: healthy growth, good margins and wildly optimistic forecasts for countless zettabytes! of future growth.
The growth in information still holds true, it's the consumption model that's changed.
Once again, nothing lasts forever. The familiar model is gone, and it's not coming back.
I think there are three primary reasons we're seeing a structural shift in the storage sector.
1. Opportunities for differentiation are gone.
Early on, storage was difficult enough technologically that there was plenty of room to invest heavily in unique IP and establish differentiation. In addition to secret sauce, things like integration and availability and customer support really mattered to enterprise IT teams.
And, overall, aggregate demand for capacity, performance and functionality exceeded supply, hence overall growth.
But storage technology has matured. The opportunities for secret sauce are now few and far between, and generally quite niche. And once differentiation slows, commoditization kicks in with a vengeance.
New, disruptive technologies aren't the answer because everyone has access to the exact same tech.
For example, how many flash arrays are in the marketplace today? Hyperconverged systems with integrated storage? Cheap, dense storage boxes that do dedupe? As another example, NVMe flash and fabrics are all the rage today, but it won't be long before it's just another checkbox feature.
Without meaningful differentiation, storage (like compute) becomes a race to the bottom. Unless demand for standalone storage skyrockets, the overall market will shrink. And that demand isn't there.
FWIW, part of Oracle's differentiation in the storage space is unique feature integration with the Oracle Database. The two of them working together do a long list of things that others simply can't. To the extent that differentiation is meaningful to all those Oracle users, it's an advantage.
2. Storage has become part of something else.
I think the trend started in earnest with converged systems, picked up a notch with hyperconverged, and went into full turbo mode with public cloud.
Decades ago, when cars came with crappy sound systems, there was a huge market for aftermarket stuff. Now that most cars come with a decent sound system that's fully integrated, not so much.
This has not been lost on standalone storage vendors. They are in a desperate race to surround themselves with converged (and now hyperconverged) consumption models.
Public cloud is a different story entirely. Not a one of them have figured out to be a meaningful player in any public cloud. And I don't think it's for lack of trying.
At Oracle, we're in pretty good shape in this regard. Our ZFS storage appliance is an integral part of our popular on-premises engineered systems offering. And there's over 600 PB of ZFS storage running in our public Oracle Cloud.
3. Supply exceeds demand.
4TB drives became 6TB and then quickly 8TB and now we're looking at 10TB and 12TB drives. Flash storage started with megabytes, quickly jumped into the gigabyte range and is now safely in terabyte territory.
Fast processing cores are getting cheaper at the same pace. As are wickedly fast interconnects between components, storage and servers. I would argue that supply has exceeded demand, as there's only so much storage capacity and performance a traditional enterprise can consume.
There are only so many flat panel TVs you can put in your house. Or consider the the automotive world, where 300HP+ cars are now commonplace. How many people can justify a 600HP+ car for their daily driver?
OK, myself excepted, but ... good enough is good enough for most folks.
Not only that, thanks to decent storage software, storage array vendors are starting to get cut out of the middle -- adventurous buyers are starting to roll their own.
Witness the success of VSAN, Scality, and others.
What Lies Ahead?
We are witnessing the end game of a structural industry shift. It will still continue exist as a category, but -- before too long -- we won't be seeing any more Gartner MQs as no one will care as much as they once did.
Unless storage vendors can offer meaningful differentiation, as well as being part of something architecturally bigger (like a public cloud), it's a grim scenario.
You might have noticed that the VC spigot has turned off for on-prem storage array vendors, and the IPO market has not been kind to the new entrants.
Storage *software* companies that have a decent public cloud angle might still be an opportunity though. Or not.
It was a nice run, but nothing lasts forever.
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