Storage market faces bumpy ride

The already volatile storage market is is facing a battle royal as the two big guns go head to head.

The storage market is poised to turn on its head, possibly to the benefit of storage buyers, as the leaders in storage area networks (Sans) and network attached storage (NAS) go head to head.

The two biggest names in the data storage industry, EMC and Network Appliance (NetApp), have not hitherto competed directly, seemingly content with skirting around each others' borders. EMC is top dog by far in the high-end storage space with its wardrobe-sized San devices, while NetApp has been making its money from smaller, much cheaper network attached systems.

However, this stalemate was shattered last week as EMC announced a new lower-end product, codenamed Chameleon, that analysts are seeing as a direct assault on NetApp's markets.

NetApp is responding in kind with a bid for the high end. It says that its NAS products will attach to IBM's zSeries mainframe computers, formerly called S/390s. It also announced support for IBM's DB2 database, a move that it hopes will make it more attractive to higher-end customers.

The battle will mean a degree of sacrifice for both parties, underlining just how valuable a market is at stake as corporates everywhere invest to protect their data.

Plump profits
For EMC, fighting NetApp in the low-end space will mean losing the plump profit margins it has enjoyed at the high end of the market.

For NetApp, it means educating existing customers to consider more expensive products, at the same time as taking on a whole new customer base with more exacting standards than the one with which it cut its teeth.

And dozens of other companies have been trying to get on the receiving end of today's exploding demand for data storage.

Hewlett Packard (HP), Compaq, IBM, Dell and Sun Microsystems have all announced ambitious storage plans in the last year or two, but none can hold a candle to EMC or NetApp, whose products enjoy the popular distinction of free and open connectivity with other network devices from other suppliers.

These storage vendors have prevailed thanks to high-performance hardware and software features that are difficult to imitate. But as they now start attacking each others' markets, their cosy balance of power might end up being upset, and feathers look set to be ruffled throughout the industry.

NetApps' move on the high end is a response to EMC's November buyout of CrosStor, a company that sells NAS software and which is working on merging San and NAS technology.

The acquisition has other implications, too. HP and Western Digital both depend on CrosStor software to run their NAS systems, and may now be forced to buy from its arch rival EMC.

Cosy arrangement
This will hurt HP in particular, which had a cosy joint marketing arrangement with EMC until a couple of years ago when the deal collapsed acrimoniously.

EMC has since gone from strength to strength in storage, bucking analysts' predictions that it would suffer after losing HP's help. HP, meanwhile, has failed to be the agenda-setter in the San space that it so clearly wanted to be at the market's outset.

Whatever degree of discomfiture the latest moves in the storage space mean for the vendors involved, there are also issues for buyers. How, with allegiances and market positioning changing so fast, are they supposed to trust what any one supplier says for more than a few weeks?

After all, it was only earlier this year that EMC chief executive Mike Reuttgers said: "I see lots of companies running their businesses entirely on direct attached storage. I see some starting to run their businesses on Sans. I see none running their entire business on network attached."

Still, it's hard not to be awed by the performance of a market where even a poorly performing player like StorageTek is trying to manage some kind of lift off. The company has announced goals including increasing revenue by 50 per cent and multiplying profits by a factor of eight to 10 in the next three years.

Analysts aren't laughing
StorageTek may well achieve this even though it has no stake in the trendy San or NAS markets. Its strangth is magnetic tape storage equipment. However, the boom in storage is encompassing this as well as the faster disk-based systems made by EMC and NetApp.

So much data is being generated by corporates everywhere that tape, an archival medium, is enjoying huge popularity. So much so that you have to wonder how long it will be before EMC makes a move on it.

Storage is still not what the man in the street would call glamorous, but it is clearly a vital corporate requirement. Now, with increased competition and fluidity within the market, lower prices might well result. But no one should hold their breath yet, so unpredictable is this space.