The Year in Review

Posted on December 01, 1999

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The Year in Review

A look at the technology and business trends that shaped the storage market in 1999, and what to expect in 2000.

Dave Simpson

Heidi Biggar

No, it wasn`t the Year of the SAN (that`s next year, maybe). But 1999 saw increased awareness on the part of IT managers ad storage integrators of the benefits that storage area networks will eventually deliver.

SAN deployment lagged expectations slightly this year due to a number of factors. On the business front, IT departments were plagued by Y2K issues

that depleted already under-nourished IT budgets. The other gating factors, according to users, were lack of end-to-end SAN management tools, interoperability problems, security concerns, and the daunting cost of implementing Fibre Channel networks.

However, all of those factors are improving, and analysts expect the market for Fibre Channel and SAN hardware and software to take off significantly next year. For example, International Data Corp. (IDC) expects SAN-attached disk arrays to account for 37% of all external disk subsystem shipments in 2002. In the same time frame, network-attached storage (NAS) will account for about 11%, with the rest being direct-attached (e.g., to host systems) arrays.

The SAN surge is expected in part because of diminishing Y2K problems, but technology and cost issues improved significantly this year, too. For example, although the industry is far from plug-and-play Fibre Channel components, if you choose your vendor or integrator carefully, you can be reasonably assured that products will interoperate. Interoperability has improved in large part because of huge testing labs set up by the larger players in the SAN arena, and by industry-wide efforts such as the "Plugfests" sponsored by the Fibre Channel Industry Association (FCIA) in conjunction with the University of New Hampshire.

Improvements in Fibre Channel interoperability were evident at last month`s Comdex show, where the FCIA demonstrated a SAN linking more than 25 vendors` hardware and software products.

In addition, the major industry coalition behind SAN progress—the Storage Networking Industry Association (SNIA)—also recently committed to interoperability testing. SNIA is expected to coordinate its testing efforts with the FCIA. Independent labs, such as Medusa Labs, have also aided the interoperability effort by performing testing for both manufacturers and large IT organizations.

Even Fibre Channel switch rivals banded together late this year to form the Open Standards Fabric Initiative (OSFI), with a goal to provide interoperability between switches from different vendors (see InfoStor, September 1999, p. 10). OSFI participants include Ancor Communications, Brocade Communica- tions, Gadzoox Networks, McData, and Vixel.

However, despite the progress on interoperability, the overriding advice for IT managers is to rely on suppliers that have already performed all the requisite interoperability testing--either a large systems vendor or a third-party integrator that specializes in SAN and Fibre Channel technology.

A number of storage-centric systems integrators stepped up their SAN efforts this year and are able to supply pre- tested storage network configurations (September, p. 10). Examples include Champion, Consan, Control Data, Cranel, Datalink, Intelligent Solutions, More Systems, and Sagitta. And erstwhile distributors such as Bell Microproducts recently set up storage-specific divisions to tackle Fibre Channel SANs.

Lack of end-to-end SAN management software is still a gating factor to acceptance of storage networks. For now, IT managers and integrators will have to put up with "point products"--software from Vendor A that can manage only equipment from Vendor A.

However, large software vendors recently laid out plans for soup-to-nuts SAN management. Examples include Computer Associates (August, p. 1), IBM`s Tivoli unit (August, p. 1), Legato (March, p. 10) and Veritas (see cover story in this issue). EMC last month unveiled a comprehensive storage re-source management suite that can be used to manage disparate vendors` Fibre Channel devices (but only EMC`s Symmetrix arrays). And smaller vendors, such as Exabyte, are also trying to carve out SAN management software strategies (July, p. 8).

Meanwhile, costs are coming down. Seagate prices its Fibre Channel drives at about the same price as its SCSI drives, and other drive manufacturers are expected to follow suit. And switch prices recently dropped to a point that almost puts them on par with per-port prices for managed hubs. For example, Brocade`s low-end, eight-port SilkWorm 2010, introduced last month, is priced at $5,775.

Despite the gating factors to widespread acceptance, the potential benefits of SANs are clear. According to the Gartner Group, benefits include:

•Independent storage connectivity (e.g., separation of storage from host platforms)

•Heterogeneous connectivity and data sharing

•Improved availability, scalability, and storage management

•Cost-efficient remote mirroring

•Lower overall total cost of ownership

Merger mania

No review of the storage industry in 1999 would be complete without mentioning the spurt of mergers and acquisitions. Topping the list is EMC`s purchase of Data General and its Clariion storage division (September, p. 1). Other notable examples include Hewlett-Packard`s purchase of Transoft Networks; the mergers of Andataco and nStor, and Box Hill and Artecon (forming Dot Hill); and Dell`s acquisition of ConvergeNet (a deal valued at $340 million for a company that has yet to deliver product).

Analysts expect declining margins and fierce competition to force further consolidation in the storage market next year. At the same time, however, they expect a new round of startups to emerge, focused on software and services.

Nowhere was merger mania more evident than in the network-attached storage (NAS) market, where three disk-drive manufacturers scooped up small NAS players this year. Western Digital bought Connex (formerly Crag Technologies), followed by Quantum`s acquisition of Meridian Data (June, p. 8) and Maxtor`s acquisition of Creative Design Solutions (October, p. 8). And Seagate recently announced a NAS-related partnership with Axis Communications.

NAS devices are specialized servers that attach directly to LANs and are optimized for file sharing. These "appliances" provide heterogeneous file sharing at the block level, simplified management, and relatively easy scalability. Most NAS servers support the Unix/NFS and NT/CIFS protocols, and thus can be used to consolidate servers and storage or to provide a transition from Unix to NT.

Analysts expect the NAS market, pioneered by vendors such as Network Appliance and Auspex, to explode over the next few years. For example, the market for disk-based NAS arrays is expected to jump from about $2 billion this year to $6 billion in 2002, according to Peripheral Concepts, a market research firm in Santa Barbara, CA.

Further fueling the market for NAS devices, large vendors such as Compaq, EMC, Intel, and Dell (through an OEM partnership with Network Appli-ance) are expected to step up their NAS development and marketing next year. And Hewlett-Packard recently introduced a midrange NAS disk array, complementing its line of optical NAS devices (October, p. 1).

Tape formats proliferate

Despite only modest growth this year, the tape market saw a number of new formats introduced, and more are expected next year (September, p. 28). For example, Benchmark recently began shipments of DLT1 tape drives, which are aimed squarely at the market segment dominated by 4mm DDS devices and manufacturers such as Hewlett-Packard, Seagate, and Sony. DLT1 has a native capacity of 40GB and a 3MBps transfer rate and is read-compatible with Quantum`s DLT4000 (September, p. 8).

Ecrix also introduced a new tape format this year. Its VXA technology, featuring Variable Speed Operation technology, comes in two capacities: 12GB (which competes primarily with DDS drives) and 33GB (targeted mainly at Sony`s AIT-1).

Hoping to recharge its sagging 8mm line of tape products, Exabyte this month began shipping Mammoth-2. Of its new features, perhaps most notable is its super-fast 12MBps native transfer rate, which is double that of AIT-2 (6MBps) and DLT8000 (6MBps). At 60GB native, Mammoth-2 also packs in more capacity than either drive. To redeem itself, however, Exabyte will need to gain the support of third-party library vendors, while building its own automation line.

Arguably the most notable, and potentially disruptive, new technology to hit the tape scene—Linear Tape-Open (LTO)—is expected to shake up the midrange and high-end tape segments next year (see News, p. 1). Championed by drive-manufacturers Fujitsu, Hewlett-Packard, IBM, and Seagate, LTO has attracted a large following. To date, more than 20 vendors have purchased manufacturing, drive, media, and/or automation licenses.

IBM is expected to be the first to ship product early next year, followed mid-year by HP and Seagate, and in October by Fujitsu. All four manufacturers will ship 100GB Ultrium drives. Transfer rates will vary, though HP, IBM, and Seagate have all announced drives with 15MBps native data rates.

HP will also ship a low-end product, distinguished by a significantly lower transfer rate, to entry-level markets, while Fujitsu is expected to target the high end with a greater than 15MBps drive.

In addition to partnering with third-party library vendors, HP and IBM will announce their own Ultrium automation lines. Additionally, existing HP SureStore 2/20, 4/40, and 6/60 tape libraries can be upgraded to support Ultrium. Last month, ADIC, Exabyte, and Plasmon added their names to the growing list of library vendors to support the technology.

Meanwhile, Quantum this month will begin qualifying its next-generation DLT drive, dubbed SuperDLT. Laser-guided magnetic recording, among other supporting technologies, has enabled a quantum leap in both capacity and transfer rate over the DLT8000 (40GB/6MBps). First-generation drives will feature 100GB of native capacity, a native transfer rate in excess of 10MBps, and backward compatibility with all previous DLT generations.

In terms of OEM revenues, DLT has the largest slice of the entire tape drive market, with a 29% share. Following DLT are 4mm DDS (27%), half-inch technologies (21%), Travan (11%), 8mm (8%) and SLR (4%), according to International Data Corp. (IDC).

Although growth in the tape drive market was only modest this year, tape automation products (libraries and autoloaders) racked up impressive gains that are expected to pick up significantly next year. (For details, see this month`s Analyst View, "Tape to undergo a renaissance," p. 36.)

For example, shipments of tape automation units are expected to increase by more than 17% this year, reaching total shipments of 143,000 units. IDC predicts a CAGR in excess of 25% for the 1999 to 2003 time frame.

Another significant trend in the tape market this year was the move by all major library vendors to couple their products with Fibre Channel-to-SCSI bridges (or routers) from vendors such as Atto Technology, Chaparral Technology, and Crossroads Systems.

Bridges enable SCSI devices to be connected to Fibre Channel networks. While bridges are the dominant method of attaching SCSI-based tape libraries to Fibre Channel interconnects, Sony this year began shipments of a native Fibre Channel version of its 100GB, 24MBps DTF tape drives, and a few other tape drive/library vendors are expected to follow suit next year.

Optical: DVD faces challenges

On the optical front, the transition from CD formats to DVD formats went slower than expected this year (October, p. 1). This was due in part to improvements in formats such as CD-RW, and in part to conflicting standards in the rewritable DVD space, where a number of incompatible formats (mainly DVD-RAM and DVD+RW) are vying for user acceptance. In fact, based on a number of recent reports, DVD acceptance is about two years behind the rosy growth predictions that appeared in 1998.

In the read-only market, however, the changing of the guard has already begun. Last year, nearly $4.3 billion in CD-ROM drives were shipped, compared to just $650 million for DVD-ROM shipments. However, CD-ROM revenues are expected to fall to about $3.5 billion this year, and to only $803 million in 2002. Meanwhile, DVD-ROM revenues are expected to nearly double to $1.2 billion this year, and $4.2 billion in 2002.

CD-RW exhibited the fastest growth rate this year, hampering growth in DVD formats. In fact, more than 10 manufacturers entered the CD-RW market in 1999, and a shift toward DVD is not expected until 2002. Some analysts predict that CD-R and CD-R/W revenues will surpass CD-ROM revenues within the next quarter.

Addressing the issue of format compatibility in the rewritable DVD space, the Optical Storage Technology Association (OSTA) earlier this year outlined plans for the MultiRead 2000 specification, a follow-on to the successful MultiRead spec, which enabled compliant drives to read a number of formats (e.g., CD-ROM, CD-R, CD-RW and audio CD). The MultiRead 2000 spec is designed to allow compatibility between various rewritable DVD formats (August, p. 1).

Software is key

Over the course of this year, IT managers and storage integrators became increasingly aware of how difficult it`s becoming to manage burgeoning storage capacities. As a result, the industry saw big improvements in areas such as RAID management software, with enhancements such as Web-enabled monitoring, improved performance monitoring, and capacity planning improvements. All of these products fall under the general category of storage resource management.

Last month, EMC introduced its ControlCenter software suite, which provides SRM capabilities in storage network environments (see related article in this issue). The software is the first to use the FibreAlliance`s management information base (MIB) specification, which enables management of disparate MIB-compliant SAN components.

As evidence of the growing importance of software in the storage market, EMC has stated that it will spend more than $1 billion on software development over the next couple years.

Dataquest predicts that the market for enterprise SRM will be the fastest growth segment in the overall storage management software market, with a compound annual growth rate of 34% through 2003. Enterprise SRM encompasses management of assets, configurations, capacity, events and alerts, performance and policies. The total market for this software category was about $382 million last year, and is expected to exceed $511 million this year.

But perhaps the biggest trend in the storage management software market this year were the SAN-related announcements from vendors such as Computer Associates (August, p. 1), Legato (March, p. 10), IBM`s Tivoli unit (August, p. 1), and Veritas (November, p. 1).

All of these vendors laid out SAN game plans, and most delivered products that provide a degree of management for storage network environments. However, analysts say that end-to-end management of heterogeneous SANs—as found in traditional LANs—may still be a few years away.

In 1999, vendors delivered LAN-free backup, and server-less backup over SANs will emerge next year. Beyond that, ven- dors are expected to focus on high-end SAN software functionality such as "platform-less" management, policy-driven management, and self-managed storage resources.

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Growth in the SAN market is being fueled by the need for storage consolidation, scalability, manageability, nondisruptive backup, and data replication/migration.

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In terms of OEM revenues, DLT, 4mm DDS, and half-inch tape formats dominate the market.

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Enterprise SRM is expected to be the fastest-growing segment in the overall storage management software market, with a CAGR of 34% through 2003. Enterprise SRM includes management of assets, configurations, capacity, events and alerts, performance, and policies.

Wall Street bets on Fibre Channel

Storage industry analysts have predicted strong growth for the Fibre Channel market over the next few years, but if those prognostications aren`t enough to convince you that storage area networks are hot, consider how Wall Street treated Fibre Channel stocks this year.

Over the course of the year, Brocade Communications zoomed from $33 per share to more than $300 per share last month. Other Fibre Channel switch vendors fared well, too. For example, Ancor rocketed from a little over $2 per share to $73 a share. Gadzoox issued an IPO this year, and went from a first-day close of $44 to more than $100 a share.

On the host bus adapter front, Emulex was the darling on Wall Street, with a 52-week low of $10 a share to, at one point last month, more than $195 a share. Qlogic went from a 52-week low of about $23 a share to more than $135. And JNI came on to the market two months ago and was trading at $114 per share in November.


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