Who's on First?

Trying to work out who's leading the charge in a market as young and explosive as storage networking is tricky. Market research is supposed to take the mystery out of handicapping the players. Unfortunately, that's not always the case.

This week offered a great case in point: Two huge public companies are both claiming the number one spot in SANs -- and both cite the same research source for their claim.

EMC Corp. (NYSE: EMC) and Compaq Computer Corp. (NYSE: CPQ) have both issued statements this week claiming that they lead the world in storage area networking (see EMC Pads Its Lead and Compaq Boasts of Analyst Boost).

EMCs release says research confirms its “leadership in every major segment of the information storage industry.” And it claims it will be "extending its #1 position" in the coming months. EMC backs its claim with as-yet-unpublished figures from Gartner/Dataquest, indicating that EMC had “number one position in SAN revenue in 2000, capturing 38.8 percent of the worldwide market... [which was] $4.84 billion in 2000." [Emphasis added.]

A supplementary pie chart provided by EMC shows that EMC held 38.8 percent of the "Worldwide SAN-Attached External RAID Market" in 2000.

Figure 1: Percentages of $4.84 billion total worldwide revenues. Source: Gartner Dataquest, July 2001

On June 21, Compaq Computer Corp. (NYSE: CPQ) issued statements claiming “global enterprise storage leadership confirmed by Gartner Dataquest research.” On July 25, the company's earnings press release stated, "In June, Gartner Dataquest reported that Compaq's Enterprise Storage Group was named the world's number one supplier of storage area networks (SANs) based on sales in 2000." [Emphasis added.]

Today, Compaq reiterated the figures from Gartner -– as well as some new information from IDC -- in support of its claim to the “top storage vendor” position.

Figure 2: Percentages of approximately 49,400 total units shipped worldwide. Source: Gartner Dataquest, June 2001

Who’s right? Can there really be two companies, archrivals indeed, sharing the number one market spot in SANs? How can one market research firm draw such seemingly conflicting conclusions?Apparently, it depends on how you look at the numbers. Roger Cox, the chief analyst at Gartner who authored the reports in question and endorsed both press releases, says the EMC figures differ from the ones Compaq cites.

He says the EMC numbers, which from the caption on the accompanying chart look as if they only count RAID boxes, in fact include all of the underlying gear required to install a SAN -- not only the RAID arrays but the Fibre Channel switches, adapters, and other kit EMC OEM's from vendors such as McData Corp. (Nasdaq: MCDT) and Brocade Communications Systems Inc. (Nasdaq: BRCD) when installing a SAN based on RAID.

EMC's figures are based on the revenues from the sale of all this gear.

Conversely, Compaq’s figures, which sound like they include all of the SAN pieces, actually include only the RAID devices shipped, Cox says. Also, these figures count units shipped instead of revenues.

Confused? We were.Still, Cox says he sees no need to change or amend the charts provided by the two companies, even when Byte and Switch questioned him about the need for possible clarification. Apparently, the confusion’s in the eye of the beholder. If one looks at revenues from RAID-based end-to-end SAN deployments, EMC wins. But Compaq seems to be selling more RAID boxes than its chief competitor. Who rules the SAN space? Well, what's your preference?

Most reputable market research firms, like the Gartner Group, have stayed in business for many years because they deliver sound, reliable market data. But even as companies spend millions every year on research from the likes of Gartner, they also spend big on in-house help to hone and build upon those figures -– and to present them to the world in the light that illuminates their particular agendas.

Research firms aren’t paid to stop this activity -– indeed, it’s probably in their best interest to go along with it. In the end, it’s up to the consumer to look at the evidence behind the headlines.

In the Compaq/EMC case, there’s no shortage of motivation for both firms to promote themselves as Numero Uno. EMC is concerned about its market position in light of its recent poor earnings performance (see EMC Hammered). In a tighter, more competitive market, EMC faces particular threats from competitors Hitachi Data Systems and IBM Corp.