What a Year

The storage industry went through a lot of changes in 2008, starting off strong and ending up showing signs of weakness as the recession and cutbacks in IT spending began to have an impact. In between, there were business deals, advances in technology, new products, a growing emphasis on energy and data center efficiency, ongoing efforts to boost storage utilization, and the constant growth in the amount of structured and unstructured data that needs to be stored, backed up, protected, and made accessible to more people and applications than ever before.

Analysts say the demand for storage capacity is growing anywhere from 50 percent to 100 percent annually at many companies and other organizations. And that's not expected to slow down any time soon. The growth fueled a steady demand for more disks and tapes and storage software for most of the year. Research firm IDC earlier this month reported that the worldwide storage software market had revenues of $3.1 billion in the third quarter, an increase of 11.6 percent from the same quarter a year ago. It was the 20th consecutive quarter of year-over-year growth for storage software. It also reported that that factory revenues for worldwide external disk storage systems increased 8.8 percent year-over-year to hit $4.9 billion in the third quarter. The overall market for disk storage systems grew 1.1 percent to $6.6 billion, IDC said.

But even the storage market couldn't withstand the worldwide recession. A survey by TheInfoPro Inc. (TIP) based on interviews with IT and procurement personnel at nearly 65 large companies and government organizations, found that, on average, storage budgets will decrease by around 14 percent in 2009. The decline in storage spending began in the fourth quarter of this year, with nearly one third (32 percent) of those interviewed saying they expect to end up spending less in 2008 than had been originally budgeted. Their average spend on storage in 2008 will be $10.7 million.

With most experts predicting that the economy is going to get worse before it gets better, storage spending could decline even more than predicted.

Combined with a declining stock market, the bad economy could make 2009 a big year for deals. We saw a number this past year, including Brocade Communications Systems Inc. (Nasdaq: BRCD) merging with Foundry Networks Inc. (Nasdaq: FDRY) for around $2.6 billion; IBM Corp. (NYSE: IBM) buying data de-duplication vendor Diligent Technologies Corp. ; EMC Corp. (NYSE: EMC) acquiring Pi, a provider of software and online services; Hewlett-Packard Co. (NYSE: HPQ) buying storage virtualization and iSCSI SAN vendor LeftHand Networks Inc. ; and Dell Inc. (Nasdaq: DELL) spending $1.4 billion to buy its own iSCSI vendor, EqualLogic Inc.There were notable advances in technology. Solid-state disks started to become mainstream as major storage systems vendors introduced products or announced plans to do so that included the super-fast and very expensive technology. Some proponents argued that it is time to shift storage metrics from cost per gigabyte to cost per IOPS, which would favor SSDs. Data de-deduplication applications became a must-have way to cut back on the need for more capacity. We also saw new and faster flavors of Fibre Channel, iSCSI, and InfiniBand.

The big issue remains the amount of data that has to be stored, and the rules and regulations that require keeping it for longer periods of time. And it is not just email. More companies are collecting and keeping audio and video from surveillance systems, teleconference, text and video blogs, and things like Webcasts.

That is causing some small businesses and many consumers to begin using cloud storage services, and a host of vendors to enter the market and offer online backup services at very low prices. Cloud storage, the less-popular sibling of cloud computing, hasn't achieved much market traction with enterprise IT managers, who are reluctant to trust their crucial data to a third party. But such services may gain in appeal if tech budgets continue to decline and companies look to simplify their infrastructures. In the interim, companies are exploring building their own private clouds as a way to provide computing and storage services to workers. EMC gave the market a big boost when it introduced Atmos, a platform for building private or public clouds.

One thing didn't change -- you can buy more storage capacity for less money. That trend will probably continue in 2009, which may be the best news for storage administrators facing severe budget pressures.

Note to Readers: Byte and Switch is scaling back operations a bit during the holidays to let our staff spend some time with family and friends. Our daily newsletter will resume publishing on Jan. 5, but we will continue publishing this weekly newsletter and cover important industry news and announcements during this period. We hope you and yours have happy holidays, and we wish you good fortune in 2009.0