Computerworld

Study: US economy may slow storage spending

The effects of a weakened US economy may begin to take a toll on the lucrative storage industry, slowing investments in storage architectures such as SANs until a 'killer app' can begin to justify the expense.
  • Dan Neel (Unknown Publication)
  • 14 February, 2001 22:00

          The effects of a weakened US economy may begin to take a toll on the lucrative storage industry, slowing investments in storage architectures such as SANs until a "killer app" can begin to justify the expense, according to a report released this week by US Bancorp Piper Jaffrey, in Menlo Park, California.

          The report dashed an industry perception that the critical need for data storage will continue to drive storage earnings even if the rest of the industry slows. It also suggested that storage customers may begin to slow their storage spending and make do with current storage capacities.

          "The market is more conservative in a way the storage industry has not expected, and its conservatism applies to fiscal responsibility as well as product quality," says US Bancorp Piper Jaffray analyst Ashok Kumar in the report.

          The recent arrival of better equipped and more affordable midrange storage products from name brand vendors such as EMC and Network Appliance may not be the fix. Kumar says that if the storage customers begin tightening their belts, it "doesn't mean the market will start buying inexpensive storage clones, but they will learn to do with what they have until the requirements for storage are more clearly defined."

          Pointing to SANs as one of those areas in need of better definition, Kumar says that "SAN products are coming under closer scrutiny" and that their complexity makes it difficult to translate their value into hard dollars, meaning "SAN purchases are now less likely to get funded."

          "The SAN market will not heat up again until the [market] sees clear killer apps to justify the expense," Kumar says. Hardest hit here would be SAN-only companies such as Brocade Communications Systems and Emulex, the flagship products of which are based in complex Fibre Channel technology, the current backbone of most SANs.

          However, the near $US100 billion install base of SAN-capable storage servers ensures the technology's continued market growth, if based on nothing more than the scaling out of existing Fibre Channel storage networks.

          "Fibre Channel could have no more new customers and it will still continue to grow and scale. A lot of people have bought in [to Fibre Channel] and they have to keep building those investments," explains Steve DuPlessie, a senior analyst at Enterprise Storage Group in Milford, Massachusetts.

          With the complexity of SANs rooted in the complexity of direct-attached storage and Fibre Channel relay and switch technology, companies such as Nishan Systems are moving quickly to introduce Fibre Channel to IP conversion switches, allowing Fibre Channel customers to continue to scale their storage using IP solutions such as SCSI and Ethernet.

          Traditional networking companies such as Nortel Networks and Cisco Systems have also begun to rub the IP storage lamp, because IP is already a core technology in networking, transfers data just as fast as direct attached storage, and easily connects to the rest of the world via the Internet for long distance file transfers or remote mirroring.

          "It's absolutely huge for networking vendors to get in to the storage market," DuPlessie says, adding that with Cisco's recent purchase of NuSpeed Internet Systems, a company that connects SANs with IP networks, Cisco is poised to become an IP storage vendor within the next two years.

          "Being a disk drive company isn't really being a storage company anymore; it's using the information and moving it around and that is what Cisco does," DuPlessie says.

          In this thinking, DuPlessie believes that Kumar and the storage industry may find their "killer app."

          "When Kumar talks about lack of a killer app, he's just looking in the wrong place. Storage is the killer app for networking," and not the other way around, DuPlessie says.

          Kumar agrees that at this juncture, the storage market is primed for the acceptance of IP-based networking, and that for networking companies such as Cisco, the storage market going forward is theirs to lose.

          "The Fibre Channel industry has shrunk too far to be a major force again," Kumar says. "The next big wave of storage industry growth is likely going to be the deployment of IP-based storage. However, this depends on the IP networking industry taking storage more seriously," Kumar says.

          "If the networking world misses the point, Infiniband will be close at hand and ready to make its run at storage success," Kumar says.

          The first Infiniband products have already begun to arrive following last October's release of Version 1.0 of the Infiniband specification. Infiniband is a switched fabric I/O technology.