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 THE STAT 26Percentage of wireless customers who use their cell phones to take picturesMore Vitals
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OCTOBER 28, 2003
Everybody Has More to Store Businesses big and small and consumers of all sorts find they can't do without bigger, faster, cheaper storage. Amen, says the industry During the economic downturn, Northwestern University in Evanston, Ill., has postponed many purchases -- but not of computer storage. Lately, many of its students have been using Northwestern's network to watch cable TV via their desktops. And faculty and staff read their campus e-mail from anywhere in the world. To run these Web-based applications, says Mort Rahimi, vice-president for information systems and technology, the university has had to double its storage capacity over just the past 12 months. He adds that it'll have to do so again within the year. As they've moved to Web-based computing, built heftier networks, and begun using more electronics products, businesses, schools, and other organizations have started to crank up their storage purchases. Some of the impetus comes from new government rules such as the Sarbanes-Oxley financial-disclosure law that requires corporations to keep data and e-mail much longer. Mostly, it's a logical outcome in a society that's becoming digitized to the hilt. In the 1990s, the amount of information that companies stored digitally increased by 65% to 75% annually. Steve Duplessie, founder of consultancy Enterprise Storage Group in Milford, Mass., estimates that over the past two years, that growth rate accelerated to 85% to 90% -- a trend that's likely to continue. MECCA FOR TECHS. As the economy stagnated starting in 2001, many businesses initially made do without more storage. They began to relent as the technology became more powerful even as its price fell significantly. And now, with corporate tech budgets starting to expand, sales of storage hardware and software have become one of the first big tech markets to recover, according to a Goldman Sachs survey in August of 100 chief information officers from among the country's 1,000 largest companies. That should presage a boom for many storage suppliers and their stocks. The potential for fast growth has made this $20 billion-plus business a mecca for nearly every player in computing. Storage has long been a mainstay for veterans such as EMC (EMC ), Hewlett-Packard (HPQ ), IBM (IBM ) and Sun Microsystems (SUNW ). In the past five years, other major players, such as Dell (DELL ), have jumped in. And since 2000, nearly 300 super-aggressive, well-funded storage startups have entered the game to sell advanced technologies, such as new types of memory, not just to the corporate market but to makers of consumer products that are built around tinier but heftier storage devices. Staffed by experienced techies laid off during the downturn, at least some of these startups have a decent chance to succeed as their innovations revolutionize the once-stodgy storage business, says Jeremy Burton, chief marketing officer at the largest independent storage-software outfit, Veritas Software (VRTS ). They've also helped spark a competitive battle that routinely gives customers more for their money and that's forcing the merger of concerns seeking safety -- or prosperity -- in size. BRUTAL BUSINESS. Until recently, storage was predominantly a hardware business -- boxes big and small (including so-called flash memory cards) still account for about $14 billion in annual revenue. But software that extends the life of such hardware is where the growth is now. Veritas says in each of the past four quarters its revenues have set records -- not bad, considering the three-year tech slump. Market researcher IDC forecasts that the $5.7 billion software segment of the storage biz will grow at a 12% compound annual growth rate through 2007, vs. 4% for the more competitive hardware market. Seagate Technology's (STX ) announcement on Oct. 22 showed just how competitive the hardware business can be. It said falling prices for its hard drives, which are used to store files in everything from PCs to consumer-electronics devices, had caused it to lower its sales outlook for the fourth quarter. That despite an estimate from consultancy Gartner that worldwide sales of removable solid-state storage increased 73%, to $2.13 billion in 2002 vs. the prior year as consumer-electronic devices such as digital music players and digital cameras proliferated. The storage industry's evolution is forcing some critical changes that customers have demanded for years. The first industrywide technical standard governing software interfaces should debut next year, says Ray Dunn, a member of the Storage Networking Industry Assn. (SNIA), a trade group with more than 300 members. The new standard will make it easier for customers to mix and match hardware from different manufacturers -- and to manage it with software from any supplier. "THE HOLY GRAIL." The first storage boxes for the corporate market that are based on this standard are due out this fall. Every supplier should benefit as storage becomes easier to install and use -- but chief among the winners will be the sellers of storage software which, more than hardware, can deliver efficiencies in a flash. By making software development easier, the new standard should also fuel innovation. The greatest potential for that may be in what's already the hottest corporate segment: Storage resource management (SRM) software, which is used to control an organization's entire storage operation. When a storage device becomes 80% full, for instance, this software can automatically delete certain files or move them elsewhere. Because of the potential savings in labor costs, "comprehensive storage management is the holy grail," says Bill North, a research director at IDC. A new system announced by IBM on Oct. 13 takes this idea to a higher level. It's a common file system for all the storage elements within an organization (in place of the current arrangement, in which every supplier's storage box uses its own system for storing files). To make the system work, IBM's new software can manage extraordinarily high volumes -- petabytes -- of data, says Bob Samson, IBM vice-president for worldwide systems sales. (One petabyte, equal to 1 million gigabytes, contains as much information as 1.5 million CDs. All of the books in the Library of Congress contain about 20 petabytes of text.) The software is already being used by the European Organization for Nuclear Research, better known as CERN, to help physicists model the first moments of the Big Bang.
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