Network-Attached Storage Market Shows Weakness

Transcription

1 Market Analysis Network-Attached Storage Market Shows Weakness Abstract: Despite Dell's strong growth in revenue, most other network-attached storage vendors experienced weaker performance in the first half of 2002, signaling the first contraction in the market's short history. By Pushan Rinnen Strategic Market Statements Low-end NAS penetration in small and midsize businesses requires more marketing dollars from major brands to be successful. Midrange and high-end NAS vendors should focus on packaging their NAS and storagearea network products to provide customers a flexible total solution with low total cost of ownership. Publication Date: October 30, 2002

2 2 Network-Attached Storage Market Shows Weakness Marketplace Description First Half 2002 Results Vendor Analysis Gartner Dataquest recently released its first half 2002 vendor survey results for the network-attached storage (NAS) market, as well as the total revenue numbers by quarter. For the first time since Gartner Dataquest started tracking the market in detail in 1999, the NAS market is in a contraction mode on an annual basis, reversing its historical high-growth trend. Gartner Dataquest provides a high-level analysis of the data in this market analysis. In the first half of 2002, the total NAS market registered $694 million in revenue, about 43 percent of 2001 annual revenue and a decline of 23 percent compared with the estimated NAS revenue generated in the first half of Unitwise, about 37,500 units were shipped, accounting for 47 percent of 2001 annual shipments. However, about 21 petabytes of capacity were shipped in the first half of 2002, over 75 percent of the total capacity shipped in The large capacity number mainly results from the fact that more higher-capacity disk drives were shipped and that more capacity upgrades were shipped. Quarterly Trending After a sharp decline in revenue in the third quarter of 2001 (mainly because of Sept. 11), the NAS market regained some momentum in the fourth quarter of However, the market dropped again in the first quarter of 2002, down 14 percent sequentially over the fourth quarter of 2001 and by 28 percent over the first quarter of Although the second quarter of 2002 grew 3 percent from the first quarter sequentially, it suffered an 18 percent decline compared with the same time period one year earlier (see Figure 1). Combined, NAS revenue in the first two quarters of 2002 represented 43 percent of the total revenue in 2001, indicating a possible down year for 2002, unless the second half experiences a substantial uptick. Although the top two vendors' market share slipped from 84 percent in 2001, EMC and Network Appliance (NetApp) still controlled 76 percent of the total NAS market revenue in the first half of Both vendors were hit hard by the weak economy and reduced IT spending in the first two quarters of 2002, as their high-end systems are among the most expensive of all NAS products (see Figure 2 for their quarterly NAS revenue). While NetApp maintained its 35 percent revenue market share, EMC saw its market share drop from 49 percent in 2001 to 41 percent in the first half of 2002.

3 3 Figure 1 Worldwide NAS Revenue by Quarter Millions of U.S. Dollars Q01 2Q01 3Q01 4Q01 1Q02 2Q02 Source: Gartner Dataquest (October 2002) The Windows-powered NAS products from major hardware brands fared well in the first two quarters of Dell's NAS revenue in the first half of 2002 nearly reached its annual number for 2001, while Hewlett-Packard (combined with Compaq) and IBM also saw healthy growth in their NAS business, with their half-year revenue representing 70 percent and 62 percent, respectively, of their annual revenue in Maxtor, however, droppedoutofthetopfiveranking,andthecompanyexitedthenas market in August 2002 to focus on its core business disk drives. Combined, the Windows-powered NAS products from the top 10 vendors increased their market share in the first half of 2002, with their revenue representing 13 percent of the total revenue (up from 6 percent in 2001) and their unit shipments constituting 44 percent of the total unit volume (up from 19 percent in 2001). A notable entry in the top 10 vendor ranking is BlueArc. BlueArc is a startup that launched its super-performance NAS systems in June 2001 and did a good job making its name in the industry. The company boasts 50 percent quarter-over-quarter growth sequentially in the last four quarters.

4 4 Network-Attached Storage Market Shows Weakness Figure 2 Top Five Vendors' Quarterly NAS Revenue Millions of U.S. Dollars 250 1Q Q01 3Q01 4Q01 1Q02 2Q EMC NetApp Dell Quantum HPQ Source: Gartner Dataqeust (October 2002) The top 10 NAS vendors with their revenue market share in the first half of 2002 are: EMC 41.4 percent NetApp 34.9 percent Dell 5.3 percent Quantum 3.4 percent HP (with Compaq) 2.9 percent IBM 2.8 percent Maxtor 2.4 percent Procom 1.8 percent BlueArc 1.4 percent Hitachi 0.7 percent Market Segment Analysis NAS gateways experienced fast growth in unit terms, with unit shipments in the first half of 2002 nearly equal to the total shipments in Revenue, however, came in below expectations, as vendors are aggressively marketing these systems with lower prices and as EMC Celerra's attach rate to storage area networks (SANs) is lower than expected. Stand-alone NAS devices (those with direct-attached usable

5 5 storage) withstood the economic blow fairly well, with revenue and units in the first half of 2002 coming in at about 45 percent of 2001 numbers. Among the stand-alone NAS price bands, the $5,000-to-$25,000 segment showed strong growth, as a result of Windows-powered NAS's success from major hardware vendors. Market Events Several important events happened in 2002, which will impact market growth. They include: EMC strengthened its Celerra software features in February, including tighter integration of the optional High Road file system, native support of the Windows environment and faster backup using Network Data Management Protocol (NDMP). It also improved its SnapSure function for Celerra later in the year. The company also now offers its Celerra platform with support of Symmetrix and CLARiiON (CX600). The Celerra/Symmetrix solution will target customers desiring features such as TimeFinder and Symmetrix Remote Data Facility (SRDF), while the Celerra/CLARiiON combination will meet customers' needs for SnapView and MirrorView. Unlike Symmetrix, which can be partitioned to serve a Celerra and a SAN, the CLARiiON is dedicated to the Celerra. Before merging with HP, in March, Compaq introduced a low-end advanced technology attachment (ATA)-based NAS appliance (an original equipment manufacturer [OEM] product from Maxtor) and the "NAS and SAN in one box" B3000 and later the B2000 with a smaller capacity. Dell revamped its NAS strategy in June, making its midrange NAS product more flexible, enabling attachment to small computer systems interface (SCSI) arrays, Fibre Channel (FC) arrays or FC SANs. It also introduced the PowerVault 77XN series in October. Quantum launched its Guardian series (14000 in May and 4400 in August), standardizing its rack products on the Linux platform, which is more scalable and richer in features than its proprietary Snap operating system (OS). Its desktop products remain as Snap Servers. Quantum also announced the soft bundled sale of the Guardian products with its ATL tape products in September. Most recently, on 15 October, Quantum announced the spinoff of its NAS business to focus on its core business tape backup products. The NAS business will form a new company together with Irvine, California-based startup Broadband Storage. The new company will be called Snap Appliance to leverage the strong Snap brand. The next-generation Snap Servers will leverage Broadband Storage's unified storage technology to offer file and block services through Ethernet. In October, NetApp launched the new FAS900 series, which provides simultaneous file service and FC block service. Selected filer models can also support the FC protocol. These announcements will allow NetApp to expand its business to customers that need to deploy FC SANs.

6 6 Network-Attached Storage Market Shows Weakness Gartner Dataquest Perspective The NAS market experienced a weak start in 2002, pointing to possible negative growth for the entire year. In fact, Gartner Dataquest revised its NAS revenue forecast in August, predicting that NAS revenue will decline by 9 percent in This forecast will be revised again toward the end of the year. Market consolidation began in the first half of 2002 when HP acquired Compaq. However, HP is offering customers the HP NAS line and the Compaq StorageWorks line, even though the StorageWorks NAS family had much stronger sales. Maxtor's decision to exit the NAS market signaled a difficult market penetration issue at the low end, as the company didn't have much brand equity for storage systems, nor did it have marketing dollars to educate the target markets. Quantum shared the same problem on the marketing budget front. The spinoff of its NAS assets and the formation of the new company, Snap Appliances, will likely disturb sales and support in the short term and provide Dell and other vendorswithanopportunitytogainlow-endmarketsharefaster. However, with the top two low-end vendors shedding their NAS business, and with Snap Appliance only selling to North America, the low-end segment will likely have lackluster performance in With more NAS products offering file and block transfers over an Ethernet, the historic definition of NAS (that is, NAS is offering only file service) is beginning to blur. The difference between NAS and SANs are becoming more focused on networking protocol differences (Ethernet vs. FC) rather than access methodology. NetApp's new FAS900 product further blurs the line between NAS and FC SANs by creating the first fabric-attached storage product capable of simultaneously processing filelevel and FC block-level accesses from a well-known company. With technologies evolving, converging and maturing, NAS will be in a much better position to satisfy customers' needs when the economy rebounds. Gartner Dataquest Recommendations Under the current economic situation, NAS companies should first strive for profitability, and then greater market share. However, they should not ignore technology innovation so they won't lag behind competition when the economy expands. For the low-end NAS to grow fast, major vendors that have entered this market, such as Dell and IBM, should spend more marketing dollars to educate the small and midsize businesses and resellers to increase the penetration rate. Midrange and high-end NAS vendors should address the issue of flexibility to offer a better total cost of ownership story than the one based only on simplicity. Key Issue What are the relative market shares of key companies in various storage markets?

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