Who Is Making Money?

By Henry Newman

As we start to see financial results from 2013, it looks like very few—if any—storage vendors are making money. So what is going on in the storage industry?

I am thinking that though people are buying lots of storage, the number of storage vendors has grown. And with competition, you always see prices dropping.

Customers do not know how to differentiate between vendors, and vendors are not doing a good job—from what I can tell—selling the importance of their differentiation. Sadly, the lowest common denominator often wins.

I am also seeing something else happen. Even when a storage company does a good job differentiating themselves and explaining that some features increase costs but reduce the management overhead, customers buy products that are more difficult to implement. The reason, of course, is self-preservation of jobs for the people who make the decisions. Buying a simplified product would put them out of a job. This will have a long-term impact on the organization, making it less competitive, but as of now this seems to be happening in the industry.

At least for now, there is a race to the bottom: how cheap can you make it and how low can you go for margins? This is not good for those who have innovated and not good for the organizations that allowed personal gain to get in the way of corporate good.

In the long run, I believe it will be the best valued storage—not the cheapest—that will win. The market will soon figure this out, but a number of good things could be harmed in the meantime.

This article was originally published on April 17, 2013