Top 10 Storage Markets to Watch

The storage networking market includes a range of key vertical segments, each with its own set of requirements and buying patterns. During 2006, some loomed larger than others, boding well for more growth in 2007. Below, in order from smallest to largest slice of the pie, is our take -- empirically, if unscientifically, derived from our own observations -- on where the top storage buyers are located:

No. 10: SMBs. Suppliers have finally wised up to the fact that this huge market requires specially tailored gear. Instead of stripping down existing midrange wares and then forcing users to upgrade later, the vendors are seeing the potential in SMB volume sales. The segment's demands are also paving the way for new kinds of NAS-plus-iSCSI gear. (See Dell, Microsoft Team on NAS-Plus-iSCSI.)

No. 9: HPC. High-performance computing may be a niche market, but it's giving birth to a strain of high-end storage gear we'll soon start to see in areas like financial services and manufacturing. The HPC market is also tied into government and education segments, where massive R&D projects influence the shape of tomorrow's storage products.

No. 8: Service Providers. Managed services of all kinds are getting more popular in IT, and storage is no exception. Ask Seagate, which just shelled out $183 million to buy EVault. (See Last Minute Shopping for Seagate.) Under increased pressure to organize and protect data, IT pros are turning to outsourcers for help with everything from online backup to email archiving. (See Managed Storage Moves On.) And providing for the providers is a key focus for storage vendors. Just ask 3PAR. That vendor claims that about half its "growing customer base" comprises providers of managed storage services. (See Managed Services Resurge.)

No. 7: China and India. OK, these are geographic regions, not industry segments, but these areas of the world contain some of the hottest growth markets for storage. Cisco and EMC have earmarked India for investment. (See Cisco Updates Investment.) Huawei-3Com is pursuing a sizeable IP SAN market there. (See Huawei Sets Sights on IP SANs.) And Hitachi, which knows these markets, noted in its first-half 2006 earnings report that "Asian economies grew strongly, reflecting a high growth rate in China and other factors. European economies, meanwhile, staged a moderate recovery." Storage, by the way, was listed among Hitachi's key growth markets. (See Hitachi Sees Growth.)No. 6: Government. The top 20 IT contracts for which the U.S. federal government has issued RFPs for fiscal 2007 amount to over $120 million, according to an October 2006 report by research firm INPUT. That's a sizeable chunk of change, and we think plenty of it goes to storage.

IDC says government, including federal, Department of Defense, and state and local entities, accounted for 11.9 percent of storage spending in the U.S. in 2006. IBM is one example of a vendor that's glommed onto the opportunity. (See IBM: In a State.) But there's little doubt that other leading storage players are keeping government in their sights.

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No. 5: Healthcare. While the healthcare market accounts for 5 percent of all IT spending, according to Goldman Sachs, we think the segment is bigger than that when it comes to consumption of storage. Indeed, IDC says healthcare is the vertical for which the most storage growth is forecast worldwide.

A large part of storage for healthcare is driven by better record-keeping, as mandated by HIPAA and other regulations that call for data on patients to be saved forever, literally. (See Service Providers Target Healthcare.) We see no waning here.No. 4: Energy. Oil and gas firms are flocking to clustered storage to cope with loads of data pertaining to the discovery and development of geological resources. (See Energy Firms Clamor for Clusters.) That's no surprise: This is an area where massive scaleability is called for -- fertile ground for new kinds of technologies. Look for seismic growth (pun intended!) in archiving and CAS.

No. 3: Broadcasting and Media. Roll 'em! This vertical accounted for over 10 percent of all storage spending worldwide in 2006, IDC reports. And depending on whether you include ISPs and Web-hosting providers as well as movie companies and firms like AOL, Time Warner, Turner Broadcasting, and Fox, the figures could come close to those of manufacturing or financial services.

Cisco has declared video, the coin of this realm, to be a top driver of its telco and carrier business. And video calls for lots of storage. This is also where clustered NAS firms like Isilon, Panasas, and OnStor have staked their claim. (See Turner Exec Explains Overhaul, Panasas Hires Marketing Chief, and Fox, IBM Expand Archive.) And considering Isilon's successful IPO this month, it's been a safe bet. (See Double-Take, Isilon Go Public.)

No. 2: Manufacturing. Here is a world where storage is key. We're talking enormous computing requirements, complicated workflow systems powered by technologies like RFID, and voluminous design and engineering data. Case in point: automobile giant General Motors, which has undertaken an ambitious $15 billion five-year IT outsourcing plan based on six big-name vendors, including EMC, HP, and IBM. (See GM's Eggs, IBM Picks Up $500M GM Deal and HP Grabs $700M of GM Biz.)

IDC says discrete manufacturing (including IT, automotive, electronics, and aerospace) accounted for 13.1 percent of U.S. storage spending in 2006. The firm sized the market at $1.5 billion in 2005. Can you say cash cow?No. 1: Financial Services. This is the vertical of verticals, the primary target for nearly every storage networking vendor. Besides having the biggest dollar power, this market depends on IT for its lifeblood. Not that other sectors don't -- but let's face it, the economy is what sustains the rest of the verticals, and without the necessary machinery, investors are stumped.

According to a report issued by Goldman Sachs Research in September 2006, financial companies account for 21 percent of all IT revenue. IDC figures concur and put the market at over $2 billion annually. According to IDC senior analyst Daniel Corsetti, banking alone was the highest worldwide spender in the 2006, accounting for 14.2 percent of all worldwide storage spending.

Financial services require all kinds of storage support -- from fast and scaleable primary storage to fully manageable archives befitting a highly regulated industry. (See New Tools for New Rules.) Even if spending next year is 2 percent above that, the pickings will definitely be sizeable.

Mary Jander, Site Editor, Byte and Switch