Users Set to Flash Storage Cash

By most accounts, storage spending is poised to grow in 2006, even as users focus their expenditures on low-cost storage products.

Analysts foresee healthy storage spending in 2006 as firms open their coffers to deal with spiralling volumes of data. Robert W. Baird & Co. Inc., which recently surveyed 45 organizations about their 2006 spending plans, found that storage, security, and server consolidation are the top priorities for the coming year.

Dan Renouard, senior research analyst at Baird, estimates that total spending on storage -- including hardware, software and services -- was around $50 billion in 2005; although he told Byte and Switch that this figure could grow to $55 billion next year. I think that 2006 is going to be a lot like 2005, which was a reasonable growth year,” he says.

Renouard thinks that a number of factors are driving this demand. “It’s growth of information, it’s compliance and regulations, and it’s managing email,” he says, adding that many firms are looking to technologies such as information lifecycle management (ILM) to get a grip on their stored data.

Currently, users are unsure about how much data they actually own. “Most companies don’t really know,” he explains. “If you ask them how many servers or terabytes of storage they have, most of them can’t answer that question directly.”Despite this uncertainty, Renouard expects some serious data growth from firms during the coming year. “It varies wildly, but I would estimate that most companies will grow their data by about 50 percent in 2006.”

Users are set to grab more disk and tape to deal with this data explosion. Of the firms surveyed by Baird, almost 60 percent expect to increase their disk storage spending by at least 3 percent, and a third by more than 6 percent.

Even tape, which had its share of mishaps in 2005, is growing in popularity, with 45 percent of respondents planning to spend at least 3 percent more of their IT budget on the technology than they did this year. (See A Tale of Lost Tapes and Iron Mountain Keeps Truckin'.) Only a quarter of firms surveyed said they were planning to spend less on tape.

Baird's study also reveals that almost a fifth of large enterprises and 42 percent of small businesses are planning to spend 6 percent more on storage than they did in 2005. Additionally, says Renouard, the growing popularity of blade servers and virtualization technology such as VMWare are driving demand for Fibre Channel. (See BYU Flashes Its Blades and VMware Unveils Upgrade.)

The sentiments are echoed by Financial Insights, a division of IDC, which predicts storage spending growth over the next five years in the lucrative finanical sector. IDC itself has also noted an uptick in storage software revenues over recent quarters. (See IDC Reports Storage Growth and IDC: Storage Software Surges.)But not everyone is anticipating bullish storage spending in the coming year. Gartner Inc., for example, recently surveyed more than 1,500 users and reported that -- while U.S. firms are set to increase their IT spending by 5.5 percent in the new year -- storage and security expenditures will level off in 2006. And, said Gartner, firms will spend more on application development and integration.

Mixed messages about storage spending aren't uncommon. Earlier this year, Baird's annual survey of 80 users found the spending outlook for the rest of 2005 healthier than last year, while 200 CIOs surveyed by Citigroup Smith Barney reported less optimism than they had last quarter. (See Survey: Storage Spending Will Slow.)

Even some users are uncertain about the coming year. Steve Turner, business development manager at Great Neck, N.Y.-based systems integrator Computech International doesn’t know whether his firm will spend more on storage. “The price of storage is coming down and the capacity is going up,” he explains. “It might be the case where we spend the same amount but get more bang for our buck.” That makes it real easy to justify additional capacity, Turner adds.

— James Rogers, Senior Editor, Byte and Switch

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