IDC: Recession driving down storage spending

Researchers say revenue fell and demand for capacity slowed in the first quarter

Hard times are driving large enterprises to patch holes in their storage architectures with systems designed for small and medium-sized businesses, one reason enterprise disk storage revenue fell 18.2 percent in the first quarter of this year, according to research company IDC.

The drop in revenue from last year's first quarter came with what may be an even more sobering statistic: Demand for storage capacity grew just 14.8 percent in the quarter, the slowest rate since late 2002, according to IDC analyst Liz Conner. Enterprises still need more storage, but they aren't willing to pay for it, Conner said. There were 2,146 petabytes of storage shipped in the quarter. A petabyte is about 1 million gigabytes.

IDC expects the doldrums to remain through another quarter, with a recovery possible late this year or early in 2010, Conner said.

Revenue for all external disk storage, including direct-attached storage, NAS (network-attached storage) and SANs (storage-area networks), fell at a slightly lower rate of 13.6 percent. Total enterprise disk storage brought in US$5.6 billion in revenue in the quarter, of which external storage took up $4.2 billion. Neither category includes disks in PCs or other client systems.

Two of the seemingly bright spots in the quarterly report actually reveal gloomy trends. Sales revenue from entry-level storage systems, priced below $15,000 per system, grew 9.9 percent.

Much of this came from large enterprises buying these systems to meet immediate capacity needs rather than investing in the larger platforms they will eventually need, Conner said. There was also 14.5 percent growth in the price range of $300,000 to $499,999.

However, many of the systems that sold in that price range were supposed to cost much more and were sold at a significant discount, Conner said.

One product category that made genuine gains in the quarter was iSCSI (Internet Small Computer System Interface) SANs, which saw 40.5 percent revenue growth from a year earlier. Enterprises are finding that iSCSI SANs deliver much of the capability of traditional Fibre Channel networks for less money, according to Conner.

Some are actually investing in storage gear that can use both iSCSI and Fibre Channel, so they can upgrade later. Dell led the iSCSI market in the quarter with more than 36 percent of revenue, followed by EMC with just under 16 percent, IDC said.

Neither buying lower-end systems nor temporarily using iSCSI should cause enterprises any great management headaches, especially if they stay with one vendor, Conner said. Certain pairs of vendors also have good compatibility between their systems, though others don't, she said.

The dramatic slowing in the storage market didn't shake up the rankings of the major vendors, IDC said. In the external disk storage market, EMC remained the top seller with market share of 20.7 percent.

Hewlett-Packard and IBM were in a statistical tie for second place with 11.5 percent and 11.3 percent, respectively. Dell and Hitachi were tied for fourth place.

EMC also continued to lead the network disk storage market, made up of NAS and Open SAN. It had 26 percent of market revenue, followed by NetApp with 12 percent, IDC said.

IDC's report counts revenue by the brand of the product and doesn't count OEM (original equipment manufacturer) revenue to vendors whose products are sold under a different brand.

IDC is a division of International Data Group, the parent company of IDG News Service.

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Stephen Lawson

IDG News Service
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