Optical storage at a crossroads
A clear winner on the desktop, optical still serves enterprise application niches well, but is struggling to expand its reach.
The optical storage industry is a dichotomous market marked by surging growth and flat performance. For example, rewritable CD (CD-RW) formats continue to thrive in consumer markets, leveraging the large installed base of CD-ROM drives. Conversely, unit shipments of optical jukeboxes are decreasing, with manufacturers reporting only modest revenue gains. Despite new technologies on the horizon, analysts say optical will continue to serve niche markets, while struggling to compete against tape and disk.
The strength of CD-R and CD-RW continues to play a significant role in the much-anticipated and much-delayed emergence of rewritable DVD technologies. But high prices have kept the major PC OEM vendors from adopting DVD, sticking instead with CD-ROM, CD-R, or CD-RW. Divergent standards for rewritable DVD have further delayed the technology`s acceptance, creating an opening for CD-RW vendors to capitalize on.
DVD-ROM is on a gradual path toward surpassing CD-ROM shipments, says Ray Freeman, president of Freeman Associates. As the industry standardizes formats and lowers prices, Freeman expects widespread use of DVD drives, led by PC OEMs.
"It`s going to take longer for rewritable DVD to pass rewritable CD, but it will in time. CD-R and CD-RW are very well accepted, and there`s a large base of drives that read those disks. DVD rewritable is not yet that established. So the market will favor CD over DVD for some time," Freeman says.
Migration to re-writable DVD is ex-pected to speed up once industry groups such as the DVD Forum and the Optical Storage Technology Association (OSTA) finalize compatibility standards.
Even with multiple standards on the market, Freeman anticipates modest increases in rewritable DVD shipments later this year as vendors bring their much-delayed products to market. He anticipates another slight boost in the second half of next year when larger capacity drives (4.7GB/side) begin shipping in volume.
By then, rewritable DVD drives should be able to read each other`s media, he says. Freeman says 2002 will be a pivotal year for rewritable DVD as users begin to feel the capacity limits of CD-RW.
While CD`s and DVD`s future on the desktop is secure, its fate in the enterprise is uncertain. Squeezed by higher-performing RAID products and tape`s low prices, optical library vendors over the last few years have not made the technological strides necessary to gain market share. Nonetheless, analysts stop short of predicting a demise in the jukebox market, noting that these devices continue to serve niche applications such as document imaging. Despite a 12% decrease in 5.25-inch jukebox shipments in 1998, slot counts increased as users saw better cost-per-GB returns with the higher-capacity devices.
"Higher capacity optical jukeboxes have much more potential because it often comes down to cost per GB," says Schlicting, "but jukebox manufacturers have to wake up to a much more competitive and fast-moving market than what they`re used to in their traditional niches."
Both Hewlett-Packard and Meridian Data recently introduced network-attached CD ROM/DVD-ROM servers for work group environments. Attaching optical storage directly to networks isn`t new, but its ease of use and low price points may attract users.
While confirming these benefits, industry analysts don`t expect network-attached optical devices to generate widespread acceptance because users typically weigh cost and performance rather than just technology.
"It`s a double-edged sword," says Schlicting. "Networked-attached jukeboxes have a lot of potential, but they face fierce competition from tape libraries, RAID arrays, and a host of other network-attached devices."
"I`m not convinced that [network-attached optical storage] is going to spark the industry," says Mary Bourdon, principal analyst with Dataquest. "It`s nice to have it in the product line, but it`s not going to be something that makes people run to optical."
Large jukeboxes, or libraries, hold the most growth potential in the optical market, but hopes are also pinned on future high-capacity drive technologies such as Maxoptix`s 14X Optical Super Density (OSD) magneto-optical (MO) and TeraStor`s delayed Near Field Recording (NFR).
However, for an MO type of technology such as NFR to be considered, analysts say it needs to meet the ruggedness and price requirements of magnetic drives. Assuming that can be done, Schlicting says NFR, in particular, could challenge midrange tape drives.
While NFR or OSD are not being asked to carry the future of the 5.25-inch library market, Bourdon says it will be these types of high-speed and--possibly--low-cost technologies that will keep the optical market going. Without a new, compelling reason for administrators to consider optical libraries, she says they may opt for RAID or tape.
Analysts caution that migration to or away from optical storage will not happen overnight. Emerging technologies will have to offer competitive capacities and prices. Optical should continue to fare well on the desktop as additional capacity and I/O are needed to run the latest crop of multimedia applications.
At the enterprise library level, optical storage vendors will have to continue to work harder to serve existing customers and keep up with RAID and tape advances.
CD-R and CD-RW revenues are expected to surpass CD-ROM revenues by Q1 of 2000 (top). As the only vendor with products in all four categories, Panasonic`s CD/DVD revenues exceeded $800 million in 1998 (bottom).
Unit shipments of 5.25-inch jukeboxes were down 12% last year, to 11,995.