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How Cloud Storage is Changing

The turmoil and change in the enterprise storage market continues. On Monday, June 1st, enterprise storage titan NetApp announced that Tom Georgens would be stepping down as Chairman and Chief Executive, less than two weeks after the company announced 500 layoffs and another disappointing quarterly revenue forecast.

NetApp is far from alone. EMC’s first quarter Information Infrastructure revenues were down from the previous year. IBM Storage has seen declining revenues for just about every quarter dating back to 2011. Since IBM divested its server hardware business in late 2014 one cannot help but wonder whether the writing is on the wall for its storage hardware business as well. It’s difficult to know what’s happening with Dell storage revenues since the company went private, but a recent article in the Register cited Dell’s weakness in the flash storage market, losing to startups such as Pure Storage.

This turmoil is the result of changes that we saw coming years ago. But as with every major disruption in the IT industry, although the power of the change is unstoppable, the change is not visible at the macro level until it is too late for the giants of yesterday. When the revenues of yesterday’s leaders start to decline, it actually means that some other companies – typically successful startups – or some product alternative, are winning. And their wins are big enough to make a dent in the established players. From there, the scenario is always the same: credibility of the new offering increases sharply, and the enterprise changes their purchasing choices en masse.

So, what is causing changes within storage? As I see it there are two major forces eating away at the traditional enterprise storage market.

Cloud

As you have probably read, there’s a major movement in the SMB and enterprise towards the cloud. It’s not so much about IaaS (such as Amazon S3), but rather for SaaS offerings such as Salesforce, Office 365, Google Office or Box. Aside from moving the application off-premises, in most cases SaaS takes the database and file storage to the cloud as well. Email was once one of the biggest consumers of on-premises storage. Yet, once the enterprise moves to Office 365 or Google, the storage goes off-premises as well. The same is true for Salesforce and related customer databases.

Software-based Storage

As Marc Andressen said, “Software is eating the world,” and that’s certainly true of enterprise storage. It started with Internet giants Facebook, Google and Amazon, who built data centers on their own massively scalable software-based storage architecture running on standard servers and commodity storage hardware. As enterprises develop their own internal and hybrid cloud architectures, many are looking to leverage the agility, easy scalability, and low cost of a software-based cloud architecture as well. Since they don’t have the resources and brain power of Facebook and Google, however, they’re using more commercial software offerings (and support). This trend is true as much for high-performance storage with All-Flash Array offerings like Solidfire, as it is with the high-capacity storage with companies like Scality.

In its first quarter 2015 announcement IBM’s CFO acknowledged the shift in the storage market to software as IBM unveiled its own new software defined offering. A January 2015 Research and Markets report, Software Defined Storage (SDS) Market by Component, & by Company Size – Global Forecast to 2019, estimates that the total software defined storage market will grow from $1.4 billion in 2014 to $6.2 billion in 2019, a CAGR of 34.6 percent.

As with any big market disruption, the big players have to balance embracing new trends with protecting their huge legacy investments, high margins, and market power; which is a precarious, delicate balance to sustain. Some succeed while some fail. Or, as Bob Dylan sang in, “The Times They Are A-Changin:’”

“And the first one now will later be last.”

Perhaps. But, the question then becomes: What’s the safer storage investment for the enterprise? The answer isn’t as clear as it used to be.

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