Storage-Industry Growth Explodes

The storage industry is charging along like a high-speed express train, so much so that even jaded industry veterans weren't completely prepared for the explosion in demand for storage technology--both hardware and software--that occurred in third quarter 2005. According to market researcher IDC, factory revenue for external disk storage systems jumped a record 12.5 percent year over year, reaching the $3.9 billion mark. This represents the highest growth since IDC launched its disk-storage tracker service in 2001.

Internal storage systems turned in an equally impressive growth performance. The overall storage market, which includes both internal and external systems, climbed 13.3 percent to $5.7 billion. Interestingly, according to IDC, the market for internal storage systems increased faster than the market for the servers for the third consecutive quarter and has grown faster than the external-server market in three of the last four quarters. IDC analysts believe that the robust internal storage market indicates that IT pros are embracing new technologies designed to improve the flexibility of storage configurations.

As you'd expect, the three major varieties of external storage systems all did well, although the legacy NAS market had the slowest growth, increasing just 7.5 percent in the quarter. EMC holds the lead in this sector with 40 percent of the market, followed by Network Appliance with 35.1 percent. In contrast, iSCSI SAN more than doubled, with revenues moving up a whopping 105 percent last quarter year over year. In this area, Network Appliance is the leader, with 35.1 percent of the market, followed by EMC with 24.1 percent. HP also made a strong move in iSCSI SAN, increasing its share from almost zero in third quarter 2004 to nearly 10 percent in the third quarter this year.

The combined Open/iSCSI SAN market gained by 19.6 percent year over year, eclipsing the $2 billion level in total revenue. EMC and HP are statistically tied for the market-share lead in this area: Each vendor holds approximately a quarter of the market. EMC leads the total network-storage market (NAS plus Open and iSCSI SAN), accounting for 27.2 percent revenue share. But EMC might be feeling some heat from its competitors. Its total network-storage revenues grew only 7 percent year over year, compared with Dell's hearty 33.5 percent growth and IBM's 20.2 percent growth.

HP maintained its lead in the total storage market (internal and external combined) with a 23.5 percent share. IBM followed with 20.7 percent of the market, and EMC held the third place with 13.7 percent. Once again, Dell demonstrated the best growth rate in the third quarter, with revenues soaring 30.8 percent. IBM had the second best growth at 19.7 percent.

Although revenue figures are important, the total amount of storage capacity sold was even more impressive and perhaps more meaningful. Total petabytes of disk storage increased 58 percent year over year in third quarter 2005, to 505 petabytes, or more than half an exabyte. (An exabyte is 1 quintillion bytes or 1 quadrillion kilobytes, if you know what a quintillion or a quadrillion is.) Remember when a 10MB hard drive was considered really, really big? We've come a long way in about 25 years.

Of course all that stored data needs to be protected, retrievable, and managed. And the growth in the storage-software market demonstrates that companies are investing heavily to enable their products to do just that. The overall storage software market grew 10 percent year over year in the third quarter, according to IDC, the eighth consecutive quarter of double-digit, year-over-year growth. Breaking down the market, storage-replication software grew 16.8 percent year-over-year, while the backup and archiving market climbed 12.7 percent. Storage resource management and backup and archiving are the largest storage software niches, each representing about one-third of the market.

EMC remains the overall storage-software leader, with 29.1 percent of the market. Next in line is Symantec, which since its acquisition of VERITAS Software, commands 20 percent of the market. Network Appliance, however, exhibited the best growth. Its revenues increased an eye-popping 42.5 percent year-over-year.

The drivers for the growth in storage software are clear. Application availability and business continuity, disaster recovery, and regulatory compliance are high on the IT agenda of enterprises of all sizes. But the storage-market growth numbers demonstrate other key trends as well. First, although storage professionals have studied how to increase the sophistication and efficiency of their systems by using technologies such as storage virtualization, gross capacity still counts. The first response to managing more data by many companies still is to add more data-storage capacity.

Second, at least in the corporate sector from which the IDC numbers are generated, there seems to be a remarkable consistency among the market leaders. Although Dell turned in a spectacular performance on the hardware side, and Network Appliance was even more impressive in the software sector, vendors like EMC and HP in hardware and EMC and Symantec/VERITAS in software remain innovative and dynamic enough to continue to lead the sector