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HDS: storage sales up, USP down

Hitachi Data Systems’ latest earnings results show a modest year-over-year increase as the recession fades. They also show an interesting shift in HDS sales towards services and software.

Remember when HDS was known as a high-end storage array vendor with little software or services? That’s no longer the case. HDS’ $882 million in revenue last quarter increased 6% over the previous year, despite a “single digit” decline in revenue from its USP enterprise storage platform. The USP platform still makes up most of HDS revenue, but services accounted for 30% and software 15% of its revenue last quarter.

HDS VP of corporate marketing Asim Zaheer says services and software both increased in double digits over last year, as did the HDS Adaptable Modular Storage platform. File and content (archiving) storage grew 200%, thanks to a new midrange NAS system that HDS gets from its OEM relationship with BlueArc.

USP sales may be impacted by customers waiting for a widely anticipated product refresh, although HDS execs won’t confirmed any upgrades are coming They say the change in product mix reflects a shift in buying patterns away from traditional high-end enterprise arrays towards modular SAN and file-based storage, as well as tiering enabled by virtualization.

Claus Mikkelsen, CTO of storage architectures for HDS, says customers are combining the USP virtualization capability with lower-cost disk and using features such as dynamic provisioning to save money through tiering and prolong the life of their storage arrays.

“We view the USP as a virtualization engine, and not a storage array per se,” he said. “There is clearly a blurring of lines in terms of tiering storage. We’re starting to see this new tier one-and-a-half that seems to be emerging, bringing high-end feature sets to other use cases that traditionally have not been considered high end.”

Zaheer says the lower priced NAS system based on BlueArc’s Mercury platform “revitalized our NAS portfolio” by making it more attractive to mainstream shops. The HDS execs say their midrange ASM storage platform grew in sales each quarter since it was introduced in late 2008. Mikkleson says a lot of that storage is being used behind the USP virtualization controller.

“We used to talk about high-end customers and midrange customers, but I think that was the wrong way of looking at it,” he said. “It’s more a case of customers that have different needs. Now we have more native software support in the midrange with features such as replication, copy on write, and dynamic provisioning.”

Mikkleson also said customers are looking at storage costs differently now, too. “It’s no longer about dollars per gigabyte, that went out about 20 years ago,” he said. “Now you factor in storage, maintenance, power and cooling, and the burden rate for employees.”

Mikkleson says Oracle’s decision to end the Sun OEM deal for the USP platform won’t hurt sales.

“If customers used to buying Hitachi storage from Sun can’t do that anymore, they’ll buy it from HDS,” he said.

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