By Robert C. Gray
According to International Data Corp.'s Server Workloads, 1997-2002 study, 23% (or $15.5 billion) of the $67.6 billion general-purpose server market is currently applied to the prosaic task of file serving. However, end users will spend just 17% of those dollars on network-attached storage (NAS), thus creating both a dilemma and an opportunity for the NAS segment of the storage industry.
- Presents its updated NAS forecast and market shares
- Reviews market/supplier dynamics
- Considers emerging opportunities
- Revisits the NAS value proposition
- Offers recommendations to IT managers and NAS suppliers
IDC's NAS forecast represents only the value of the file-serving opportunity. (Other NAS, or appliance server, applications are not included.) We expect annual revenue growth to be 66% through 2003, with a 2003 street value of more than $6.5 billion (see Table 1).
Most of the big players entered the NAS market last year. In the high end, EMC, whose sales organization dabbled in NAS in the past, ended the year with the internal buzz that NAS is the way to meet and beat quota.
The company's take-no-prisoners sales force sold enough Celera servers to hit $150 million in NAS revenue for the year, enough to secure the #2 position (see Table 2). This year, EMC is expected to put increasing pressure on #1 Network Appliance and to launch additional NAS products based on technology acquired from Data General.
Can EMC repeat its mainframe storage experience in the NAS market? While IBM couldn't keep pace with the rapid technology changes in the mainframe world, Network Appliance is not likely to be as slow in the NAS market. The challenge goes to Auspex, which must resolve product issues to take advantage of the rapidly expanding opportunity for high-end NAS products.
In the low end, many of the innovating pioneers were acquired by larger, better- capitalized companies. Maxtor acquired Creative Design Solutions; Quantum, Meridian Data; and IBM, Whistle Communications. Axis Communications and Procom-at least for now-remain on independent paths.
Mainstream server suppliers, meanwhile, were at a loss as to how to fit NAS into their product lines. Is NAS storage? Servers? Networking?
Nonetheless, Dell partnered with Network Appliance, though the marketing effort produced limited results. Compaq offered a Web-caching appliance with Novell technology, but expected NAS products were not released. And Sun Microsystems, network storage pioneer and originator of the NFS protocol, stayed away from the NAS market altogether.
Of the major server vendors, only Hewlett-Packard marched forward with NAS products-both magnetic disk and optical. However, we expect all of the server suppliers to address the NAS opportunity during 2000, and we expect them to be formidable competitors.
Also missing were major networking suppliers. Only the NetGear division of Nortel Networks has a NAS product. Cisco continues to market new generations of its Web server appliance, but otherwise is a non-participant, as is 3Com despite its focus on NICs and palm systems, which potentially makes it one of the best-positioned NAS suppliers.
The entry-level NAS market consists of single ATA/UDMA disk drives (sometimes with expansion drives). Not surprisingly, disk-drive manufacturers have made the major moves in this market. The integration of networking functionality into disk drives is inevitable. Drive suppliers are counting on low-end NAS first for product differentiation and then for increased value-add and profit margins.
While Seagate has not yet announced a NAS product, it has invested a million dollars in an advertising campaign, which paints the future of storage as networked storage. We also expect NAS market participation from other drive suppliers, such as Fujitsu and Hitachi.
Finally, it's important to note the release of Intel's In-Business NAS products. IDC expects Intel to be increasingly visible as a storage infrastructure supplier. The company has also been a leader in defining a replacement for the PCI bus. With Intel in the fray, can Microsoft be far behind?
IDC expects a series of server appliances to become available during the five-year forecast period. File servers will form the initial revenue base of this market. We also expect other standard information servers (e.g., Notes, Exchange, SQL, Web/HTML, MP3, and streaming) to be "appliance-ized."
And we expect to see low-cost NAS devices based on DVD-RAM jukeboxes. At Fall Comdex, for example, Germany's NSM showed an optical NAS server that is expected to have a street price of $29 per GB. Applications such as Exchange servers and applications with archive requirements will likely adopt this complement to magnetic drive-based NAS.
Finally, Web caching and content distribution will be a massive storage market for NAS devices. IDC has begun a research project that will define this opportunity. We expect that as Internet caching and content distribution needs mature, a specialty form of "cache NAS" will evolve to serve the unique requirements. The study will be released in the spring.
NAS operating systems
Servers priced below $3,000, whether appliances or general-purpose servers, require operating systems with unit costs in the $100 range. Until the middle of 1999, that meant either a custom real-time operating system or an operating system with a Linux or BSD foundation.
In mid-1999, however, Microsoft changed the playing field by establishing the NT-Embedded license policy, making native NT viable as a platform for NAS and other appliance products. Embedded NT OEMs report that Microsoft is committed to evolve the software with appliance suppliers' needs in mind. We expect improved network stacks and better real-time services to be at the top of the list.
The interesting aspect of embedded NT is the wealth of applications for NT, which can be ported to appliances. Custom solutions, Linux, and NetWare have far less support, and only Novell is in a position to offer a similar product.
Custom operating system technology suppliers-such as CrossStor, Realm Technology, and Trakken Technology-will be challenged by Microsoft's move in all but basic file-serving opportunities.
It is also important to note that server appliance suppliers may be challenged by the forthcoming Microsoft Server Appliance. Microsoft's Web site describes it as an OEM product for release in the first half of 2000, featuring print, file, and Internet sharing for 25 or fewer client PCs. The product will also provide automatic backup.
Compelling NAS benefits
The potential benefits of NAS will increase over the next five years. NAS simplifies the operational side of storage use, reducing IT managers' hassles by consolidating file-oriented storage to fewer, easier-to-administer appliance servers.
The size of IT staffs will not change significantly, but the amount of storage and the need to consolidate will increase. For most IT managers, the amount of capacity to manage is increasing by 100% per year.
If you're an end user or IT manager, the best advice is to begin a program of adding or replacing general-purpose servers with NAS appliances. Free the general-purpose servers to improve the level and consistency of application performance and reduce the costs required to manage your file-server inventory.
We forecast NAS sales to more than double this year. Products and marketing efforts are in place and end-user interest continues to build.
Watch for NAS and other server appliances to be part of this year's planned IT spending. And watch for a stream of additional network server appliance announcements in 2000.
Finally, if you want to explore the business opportunities and issues for networked storage in more detail, join me February 10-12 in Scottsdale, AZ, for Network Storage 2000. (For more information, visit www.axis.com/symposium2000.) See you there.