Excess capacity abounds as storage budgets tighten

Posted on October 23, 2008

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By Kevin Komiega

October 24, 2008 -- In anticipation of belt tightening and possible budget cuts heading into 2009, IT buyers adjusted their spending and accelerated technology refresh projects in the second half of this year, resulting in excess storage and the lowest capacity utilization rates in five years, according to a survey of Fortune 1000 organizations that was conducted by TheInfoPro (TIP) research firm.

The results of TIP's Wave 11 Storage Study, released this week, show that storage utilization rates in enterprise organizations are at low levels not seen since 2003. Robert Stevenson, TIP's managing director of storage research, says storage decisions-makers sped up infrastructure upgrade plans this year to ensure they could maintain current budget levels and operate in lower-budget environments in the future.

The study polled 250 firms, including 140 Fortune 1000 enterprises and more than 100 midsize organizations in both the US and Europe. The research indicates midyear technology refresh purchasing is offsetting typical year-end storage buying. Both factors are resulting in a significant decrease in storage spending for the fourth quarter of this year, according to Stevenson.

He says storage buyers bought capacity for 2008 based on growth rates from the past two years. However, the current economic situation, coupled with slower business growth and fewer new application deployments, has left these organizations with excess capacity. 

"Storage professionals were accelerating their spending as an end run around the possibility of budget allocations being frozen or taken away," says Stevenson. "This was accomplished through a 20% increase in technology refresh activity compared to the same time in previous years."

Stevenson sees this as a "glass-half-full" scenario. "Once business confidence returns, the cost of building new applications will be lower, due to the available capacity that can be used without purchasing," says Stevenson.  "However, if confidence does not return in the near future, the spending outlook for the next three quarters could be lower, given that in a slower-growth business environment, there is enough excess capacity that no additional purchasing would be necessary."

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