A recent research report and two major deals announced at the end of 2004 reveal the key drivers in the next wave of development in corporate storage infrastructures. The primary areas of concern when determining which technology to use in a storage infrastructure are no longer just capacity, performance, and price—the traditional axes of comparison. Instead, effectively managing storage has become a top priority, and it's the area in which enterprises are still willing to invest heavily.
But the move to a focus on storage management is only the first step in what promises to be a two-step dance for storage administrators. The next step is tying storage management with other infrastructure-management applications such as data management, network security, event automation and performance management, and platform virtualization. In the long run, the focus in storage might shift from the hardware infrastructure (e.g., servers, peripherals) to the software infrastructure (e.g., a component of an overarching infrastructure management layer).
The shift in emphasis from storage hardware to storage software is already well underway. According to International Data Corporation's (IDC's) Worldwide Quarterly Storage Software Tracker for the third quarter of 2004, spending on storage software reached record levels, topping the $1.9 billion mark. More impressively, the market grew a robust 19.1 percent on a year-over-year basis, making it one of the healthiest areas for investment in IT. This growth compares to largely single-digit growth rates for enterprise storage hardware, measured by revenue.
Moreover, virtually every sector of the storage software market grew sharply. Storage resource-management revenues were up a whopping 27.3 percent, and sales of backup and archiving software, the largest category, grew 17.4 percent. The other two categories—storage replication and file system software—also climbed an enviable 13.7 percent and 10.3 percent, respectively.
Fueled by its acquisition of Legato, EMC remained the market leader, growing 22.7 percent year over year and capturing 31.8 percent of the market overall, based on revenue. Veritas held the second position with a market share of 21.7 percent. It grew 12.7 percent year over year. Computer Associates (CA), HP, and IBM rounded out the top five slots among vendors, with CA and HP both showing sharp growth rates. HP's storage software revenues grew 30.2 percent year over year, and CA's grew 29.1 percent.
Evidence of the next step for storage software is visible in moves that the software market leaders have made. These moves occurred shortly after the release of the IDC numbers. In a blockbuster deal, security software vendor Symantec purchased Veritas in an acquisition valued at $13.5 billion. Shortly thereafter, EMC announced the purchase of SMARTS--a vendor of business services management, application services management, and infrastructure management software--for $260 million. SMARTS technology lets you identify the root causes of performance problems across the network.
Unlike Oracle's acquisition of PeopleSoft, these deals don't necessarily indicate a trend toward consolidation in the software industry, although an element of consolidation is involved. In neither case was the acquisition intended to fill in a product line or to simply eliminate a competitor, which are generally major motivations for consolidation. Instead, they represent an expansion of the infrastructure area for which each company can now provide solutions.
Indeed, Symantec and Veritas have virtually no overlap in their product offerings. The acquisition rests on two premises. The first is that storage management and security management should be—or, at least, can be—related. The second premise is that enterprises want to deal with fewer vendors and will realize cost savings by doing so.
The EMC acquisition of SMARTS is the latest in a series of EMC acquisitions, including Documentum, Legato, and VMware. The company’s senior management has been very clear about seeing EMC's future in software and services, providing end-to-end information lifecycle management (ILM).
Of the two, the merger of Symantec and Veritas raises the most questions. Combining two large, independent organizations is challenging and can present unforeseen obstacles. The EMC purchase of SMARTS is more reminiscent of the way Cisco snapped up companies during the network build-out in the 1990s, often paying what seemed to be inflated prices for innovative technology, then using its huge sales force to rapidly grow sales.
Whether either of these deals works, however, shouldn't be the primary focus of storage administrators. More significantly, the deals suggest that storage is becoming increasingly linked to the infrastructure software management layer instead of the hardware platform.