Spending on Storage & Servers

Will spending on storage top spending on servers in the near future? Is storage grabbing a bigger share of your IT budget, while servers command a smaller share? Those questions were raised recently when I was reading a blog post by Jonathan Schwartz, the chief executive and president of Sun Microsystems Inc. (Nasdaq: JAVA). He was explaining the company's recent reorganization of its software operations into three groups: a Systems group, an Applications group, and a Cloud group.

Schwartz was busy talking about major changes in technology, a big customer win by Sun, and a variety of other topics (not layoffs or cutbacks), when he wrote the following:

"Second, this move amplifies the obvious (at least to us): the storage market will be larger than the server market"

Obvious? Not yet. There are some reasons to believe that Schwartz may be right. But it is hard to know for sure.

First, it is difficult to get good figures on the size of either market since most of the available numbers are those reported by the major vendors and collected by research firms, or extrapolated from survey samples. Those numbers are always hard to believe, although they can be good when watching trends. At the extremes, I've seen numbers that suggest the annual worldwide storage market is worth around hundreds of billions of dollars and the annual worldwide server market is a fraction of that. And I don't believe either number.The second problem involves definitions. Does the server market include mainframes (yes)? Does it include notebooks that serve as the main machine in a small business or home network (probably not)? The storage market can be even more difficult to define. Most hardware systems, software applications, and storage services are pretty easy to identify as storage or not. But should the storage market include things like enterprise content management or email management or e-discovery applications? Perhaps, but traditionalists would disagree. And what about the cables that come out of servers and connect to storage systems? Would you consider that part of the server market, the storage market, both, neither? And there are a dozen other examples that people can argue about.

Still, some of the current technology trends favor storage. Take virtualization. While storage virtualization helps companies make better use of their current storage and reduces the need to buy more, storage virtualization is just beginning to be widely available and is being adopted by businesses slowly. And it doesn't have the impact of virtual servers.

Server virtualization is one of the hottest things in tech today. If you can pack 10 or 20 virtual servers on a single physical machine, that means you have a whole bunch of physical machines you can repurpose for other uses or eliminate entirely. It will clearly cut down the need to buy more physical servers. For the moment, virtual servers beat virtual storage big time when it comes to efficiency and return on investment.

There are technologies like data de-deduplication and data compression that improve storage efficiency and reduce the need to buy more storage. But the gains they offer seem overwhelmed by the constant growth of data that needs to be stored, backed up, and archived. And new rules and regulations are going to force you to storage it all for longer periods of time.

Think also about the impact of solid-state drives. Even if they only replace a small fraction of conventional hard disks, they are substantially more expensive and could help fuel an increase in storage spending. Yes, they also offer much better performance, but we're just talking about spending at the moment.So Schwartz may be correct and the storage market may become larger than the server market. Of course, there is some self-interest in his statement. As most of you know, Sun isn't showing a lot of growth in server sales, but it is seeing some growth in storage sales. That's why the company is touting its Open Storage strategy, which is based mainly on commodity hardware and SSDs and Sun software. He holds up the nightmare example of a social networking site that outgrows its IT systems and writes:

"…neither a 10 person startup, nor a 10,000 person retailer want to go broke buying software licenses and storage, just because they've struck a chord with the planet. Which is increasingly why both sides of the industry are moving to open source... And open storage."

I don't know about that. But I do think there is a good chance that the storage market will continue to grow faster than the server market and eventually might surpass it in size. That may not last, since one of these days storage will become more standardized and virtualized, and commodity storage -- like commodity servers and most kinds of commodity hardware -- will be much cheaper.

But that day hasn't arrived yet. Until it does, I expect that you and your company will spend a growing percentage of your IT budget on storage and a shrinking percentage of your IT budget on servers. Let me know if that is the case.