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The business of storage

A storage vendor may have a great technology, but the bottom line is how fit it is for survival in the marketplace. So put down that spec sheet and pick up the business section.

A storage vendor may have great technology, but the bottom line is how fit it is for survival in the storage marketplace.

Everyone knows that to stay current, a storage manager needs to keep "teched up" by reading tons of technical articles, white papers, product specs and testing results. But to truly keep up with storage these days, your newspapers' business pages need to be on your reading list, too.

While poring through all the data we collect with our twice-yearly Storage Purchasing Intentions surveys (see "Storage managers can reach for their wallets again"), I always find it interesting that storage managers consistently rank the financial stability of a vendor as one of the least important factors -- if not the least important factor -- in making a purchase decision. Financial criteria isn't just ranked low vs. things like product features, familiarity with the vendor's other products, tech support and the perception that a vendor is a leader in their market, it's barely a consideration, with typically only 1% or 2% of those surveyed saying it's a key consideration. I'm not suggesting that purchases should be made only on the financial prospects of a vendor, but it seems that it should figure into the equation a little more prominently.

There's just too much going on to overlook the business of storage and focus solely or predominantly on the technical picture. The most obvious case involves taking a chance on a startup with some hot new technology that nobody else seems to have. If the technology is a good fit that addresses a key issue, the fact that it comes from a startup shouldn't put the brakes on the deal. But some due diligence is in order, not just to scope out the vendor's financials but to consider things like the company's prospects for survival, why other vendors aren't touting the same technology and if the vendor is addressing a niche market that may be a bit too niche-y to produce enough revenue to survive.

Not too long ago, Copan Systems made waves with its massive array of idle disks (MAID) technology, which has since (in several variations) found its way into a growing number of other vendors' products. It's a cool idea -- cram a lot of drives into a small space and just spin up the ones that are actually doing some work -- that offered capacity and power conservation at the same time. Cool tech or not, there was something amiss in Copan's plan, and its remains, intellectual property and presumably short customer list were recently sold to SGI for $2 million, the approximate price of a big, enterprise-class storage array. (Interestingly, SGI was itself acquired by Rackable Systems Inc., which picked up the former Silicon Valley star for only $25 million and then adopted its name.)

But chancy buys with startups aren't the only financial hazards a storage manager needs to negotiate. Two of the hottest storage topics right now are solid-state storage and cloud storage, and while they're definitely filled with promise, there are some caveats lurking there. STEC, one of the most successful solid-state purveyors around, tempered what normally would have been banner-waving news -- record revenues that topped last year's by 56% -- with a rather glum prediction that the first half of 2010 would be far less spectacular. It's not that user interest in solid state has already faded; it's that EMC, its biggest customer, has a closetful of inventory and isn't likely to be buying all that much more real soon. It'll be interesting to see what effect (if any) this has on STEC, which has been perceived as a leader in solid-state storage.

Going back to our survey, we see that interest in cloud storage services is fairly high, but here, too, is another case where you truly need to bone up on the business side of things. For a relatively new technology (or maybe refreshed technology is a better description), the number of cloud storage service players is unprecedented (I think there are a billion of them), so the odds of any one of them going belly up are pretty high. In fact, you can count on scores of these services shuffling off this mortal coil and disappearing into the clouds.

You can, of course, take this advice too far and let financial stability and market position become overwhelming criteria. EqualLogic seemed to be cruising along just fine with good products and happy customers when Dell ponied up some big bucks for it. But most of the reports I've heard suggest that the new union is working out pretty well. And when storage system market leader EMC scooped up data deduplication leader Data Domain -- the leader buys a leader -- it doesn't mean that you shouldn't consider other dedupe vendors, because there are still a lot of solid dedupe alternatives out there.

If you do storage, you're probably a tech freak to some degree, so the thought of having to wade through financial info probably isn't very appealing. While you're not likely to stop reading systems manuals in favor of The Wall Street Journal, a quick flip through the financial pages once in awhile can't hurt.

BIO: Rich Castagna ( is editorial director of the Storage Media Group.

* Click here for a sneak peek at what's coming up in the June 2010 issue.

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