If you think back to the data storage market landscape at the beginning of 2015, you would hardly recognize the...
You heard the words transition and disruption thrown around a lot by storage people this year, and with good reason. After all the changes in 2015, it's hard to imagine a year in which the storage industry looked as different at the end as it did at the start.
For starters, some of the world's largest storage companies are set up a lot differently entering 2016 than they were a year ago. Longtime undisputed storage king EMC is now part of Dell -- at least, it will be after Dell's $67 billion acquisition closes. Symantec spit Veritas back out and Hewlett-Packard split into two companies in 2015. NetApp changed CEOs and acquired an all-flash startup. Storage sales from the largest vendors plummeted, flash began replacing disks in significant measure and cloud began doing the same to on-premises storage. Startups that offer flash, cloud and hyper-convergence had no trouble grabbing venture funding early in the year, but there were signs of the faucet getting turned off by the end.
While Dell-EMC was the biggest change in the data storage market this year, that itself was the result of a shift in storage-buying patterns. EMC's stalwart enterprise VMAX, midrange VNX and backup portfolio consisting of Data Domain, NetWorker and Avamar experienced declines for the first time -- and EMC executives have no hopes of them returning to past levels. The cloud played a part there, but so did other emerging technologies, such as flash and hyper-convergence. To EMC's credit, it moved strongly into some of the new technology areas, but its federation approach couldn't keep investors happy. When the Dell deal closes, the long-term storage market leader will be part of an IT conglomerate, rather than an independent company.
One of the fascinating things about 2015 is it is ending on one large cliffhanger. It's hard to predict how much of it will turn out. The outcomes from Dell-EMC, Hewlett Packard Enterprise (HPE), the Carlyle Group-owned Veritas and the status of many other storage vendors could be wild success stories or great failures. Technologies such as flash, hyper-converged and hybrid cloud likely have a bright future, but never have hot technologies risen and fallen as fast as they do today.
Uncertainties plague storage leaders EMC, NetApp
The Dell-EMC deal probably won't close until the second half of 2016. That leaves at least half a year of uncertainty in the market. There are still financing challenges, as Dell figures out what pieces of the company to sell off to help pay its $57 billion of debt. Dell picked up more than storage when buying the EMC Federation. It also acquired VMware, Pivotal, RSA Security, Virtustream and other assets that Michael Dell may or may not consider of much value. Look for spin-offs of one or more of these pieces, and perhaps parts of Dell as well.
EMC's major competitors also went through changes in 2015, as they reacted to shifting buying patterns. NetApp, No. 2 in networked-storage market share, changed CEOs in June and acquired startup SolidFire in December at least in part to cover up a failed attempt to bring out an internally designed all-flash array. The $870 million SolidFire acquisition was the first major move made by George Kurian since he replaced Tom Georgens as CEO. SolidFire replaced the failed FlashRay platform as an all-flash system built from the ground up, and its focus on service providers can help NetApp land cloud provider customers. But NetApp is still reeling from revenue declines caused mainly by customers' reluctance to undergo disruptive upgrades from its flagship Data OnTap operating system to the more modern clustered Data OnTap. Many industry watchers suspect NetApp will follow EMC as an acquisition target for a larger IT company, especially if Cisco decides it wants to own a storage portfolio.
The new HPE is counting on a growing storage business -- mainly around its 3PAR platform -- to help fuel growth after the HP split. But like other large storage companies, HPE's data storage market share has been in decline in recent years. IBM's storage business continued its steep declines in 2015, and Dell storage enters 2016 in as much of a transition period as EMC's.
New technologies define modern data center, take toll on legacy storage
Flash moved beyond playing a niche role in storage in 2015, and will continue to be a major storyline in 2016. The XtremIO all-flash array was a big seller for EMC, likely cracking $1 billion in sales. NetApp put a lot of marketing muscle behind its All Flash FAS array before buying SolidFire. HPE 3PAR's all-flash versions and IBM's FlashSystem were among those vendors' most successful 2015 storage products. The second largest storage acquisition of 2015 was Western Digital's $19 billion purchase of flash manufacturer SanDisk. All the emphasis on flash raises questions about whether hard disk drives have a better future than tape.
However, the all-flash pioneers who helped create the market face uncertain futures. Pure Storage went public in 2015 with impressive sales growth, but it continues to hemorrhage money and is unlikely to hit profitability before 2018. The other surviving all-flash vendors, Violin Memory and Kaminario, face uncertain futures in 2016. They could follow SolidFire as acquisition targets, or they could follow Nimbus Data into extinction.
Cloud storage also gathered many customers and a few interesting newcomers in 2015. Amazon alone picked up more than $5 billion in cloud revenue through the first nine months of 2015. Throw in the revenue from Microsoft Azure and Google Cloud, and you have a lot of money siphoned from traditional IT and storage products. EMC and NetApp are pushing hard to build hybrid cloud strategies to avoid getting shut out when customers move storage off premises. Newcomers ClearSky Data and Velostrata also popped up in 2015, with fresh takes on helping customers use the cloud.
The cloud also continued to expand as a repository for data protection. Disaster recovery as a service and cloud-to-cloud backup options grew, and backup software vendors Veritas and Commvault made the cloud a centerpiece of their strategies.
As expected, 2015 was a busy year for hyper-convergence. Nutanix and SimpliVity reported strong market growth, and Nutanix filed to become a public company in 2016. Like Pure, Nutanix's filing shows a strong sales increase and large earnings losses so far. Nutanix also launched its own Acropolis hypervisor in 2015 to try and counter VMware's move into hyper-convergence. VMware delivered new versions of its Virtual SAN software, but its EVO:RAIL OEM program has failed to pick up steam so far. One of the newer hyper-converged players, Nimboxx, failed to make it through 2015 -- closing its doors in December.
How much disruption will 2016 bring?
The top 2015 storylines will carry over to 2016. Sometime in 2016, we will learn what the EMC storage business will look like under Dell's management. We can also expect clarity around HPE and Veritas, and find out if Dell-EMC will kick off a feeding frenzy of acquisitions, as many predicted in the immediate aftermath of the deal. New flash technologies will continue to advance storage arrays and server-based storage, companies will find new use cases for hyper-converged systems and storage vendors will find better ways to leverage the cloud.
The new year probably won't bring as many changes as 2015 did, but you can be sure the storage world won't stand still for long either.
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