Fastest SAN growth expected in mid-tier enterprises

Posted on March 01, 2002

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By Lisa Coleman

Smaller enterprises may be the sweet spot for the storage area network (SAN) market in the next few years, according to a recent survey conducted by RBC Capital Markets and the Computing Technology Industry Association (CompTIA).

The fastest growth in new SANs will occur within smaller and mid-tier enterprises, according to the survey entitled "SANs for the Masses." Currently, 25% of medium-sized enterprises (annual revenue between $250 million and $1 billion) and 14% of small enterprises ($50 million to $250 million) have deployed SANs. However, within the next two years, SAN penetration in those markets is expected to increase to 45% and 31%, respectively.

Meanwhile, approximately 46% of companies with more than $1 billion in annual revenue have already deployed a SAN, and within the next two years, Fortune 500 companies and large enterprises are expected to see 66% and 59% SAN penetration, respectively, according to the survey.

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RBC Capital Markets and CompTIA partnered to conduct the study of SAN penetration beyond the large enterprise market. The survey focused on 73 companies consisting of system integrators, resellers, and consultants who provide products or services directly to end users. They were asked to comment on SAN penetration trends within their customer base.

"Now we have evidence that storage networking is starting to penetrate into the smaller enterprise companies...72% of the 73 companies we surveyed confirmed SAN deployments are migrating to small and mid-tier enterprises," the survey reports.

The survey concludes that SAN deployment has achieved significantly greater penetration in companies with annual revenue of more than $1 billion due to two primary factors. First, the lack of standards and the complexity involved with testing and implementing new technology have limited SAN deployment to those companies that have greater technology resources. Second, larger companies typically have significantly more data to store, backup, and retrieve. Since the return on investment on a SAN tends to be proportional to the size of the data center, the case for SAN deployment has favored larger companies.

Small to mid-sized companies have faced high costs, deployment difficulties, and management challenges, and those companies have more limited financial and human resources to devote to IT infrastructure.

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However, small and mid-tier enterprises can be a "catalyst" for the emergence of low-cost SANs and IP-based storage technology, according to the survey. Considered to be complementary technologies in some scenarios, IP and Fibre Channel will be used together in mixed architectures, with Fibre Channel remaining the dominant technology in large enterprises and IP-based storage emerging as a solid choice for the lower-end SAN market.

Although Fibre Channel is expected to remain the dominant SAN infrastructure, it can be expensive and still has compatibility issues. During Fibre Channel's formative years, the cost, complexities, and a lack of trained IT professionals to administer it led vendors to pursue IP-based storage approaches.

The success of IP as a SAN transport protocol will be determined by how it can provide a "compelling solution" at a reasonable price (including deployment and management), according to the survey. While the survey does report that a significant market opportunity exists for both Fibre Channel and IP-based SAN transport technologies, it suggests that the smallest companies (with fewer than 100 employees) show a preference for IP-based approaches due to ease of management and resource limitations.


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