4Q02 Update: Disk Storage Forecast Scenarios,

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1 Forecast Analysis 4Q02 Update: Disk Storage Forecast Scenarios, Abstract: Clearly, the near-term fate of the disk storage system market is more tightly coupled with micro IT spending trends than with technology advancements. By Roger W Cox Strategic Forecast Statements Disk storage systems based on new and lower-cost technology are required to meet expanding information storage requirements. Strong enabling vendor relationships with competent storage reseller partners are more important than core technology in penetrating the disk storage system market associated with Windows, Linux and Unix operating systems. Solution packaging, pricing and financing arrangements will influence the buying decision more than core technology. Publication Date: November 19, 2002

2 2 4Q02 Update: Disk Storage Forecast Scenarios, Forecast Overview In the face of continuing economic uncertainty, Gartner Dataquest has developed three forecast scenarios for the disk storage system market. These are best case, most likely and worst case. Changes Compared With Previous Forecasts Forecast Scenario Commentary In August 2002, Gartner Dataquest published its previous version of this forecast. Please see "3Q02 Global Disk Storage System Forecast Scenarios Update: ," HARD-WW-DP Significant changes to that forecast are as follows: The third quarter of 2002 did not produce results that altered the depressed IT infrastructure spending habits experienced in the first half of It now appears that any recovery in the fourth quarter of 2002 will be marginal. The current 2002 most likely case scenario for the fabric-attached storage (FAS) paradigm, which embraces external redundant array of independent disks (RAID) controller-based storage attached to a storage area network (SAN) and network-attached storage (NAS), has now essentially assumed the characteristic of the previous 2002 worst-case scenario. The current 2002 most likely case scenario for the direct attached storage (DAS) paradigm, supported by strength in the host-attached internal RAID storage segment, was reduced 5.2 percent from the August 2002 forecast. Based on the realities that emerged in 2002, appropriate downward adjustments were made to the current 2003 forecast scenarios. Overall, Gartner Dataquest predicts that the 2003 most likely case scenario for the disk storage system market will drop by 2.6 percentage points from The economy and the uncertainty associated with worldwide geopolitical events are the fundamental issues that separate the three forecast scenarios. The best-case scenario projects an optimistic view. The worst-case scenario suggests that these matters improve at a slower rate than the most likely scenario While most are hoping for the best, it is not unreasonable to expect the worst. If the worst does indeed happen, the disk storage system market will experience a year-over-year decline that will exceed 20 percent Gartner, Inc. November 19, 2002

3 2003 Once in the ditch, the climb out is expected to be more closely associated with an improving worldwide economy and a stabilization of geopolitical events, rather than with technology advancements. Tables 1 through 3 show global disk storage system revenue, growth and forecast scenarios. Table 1 Worldwide Disk Storage System Factory Revenue Forecast (Millions of Dollars) 1Q01 2Q01 3Q01 4Q Total 2001 FAS Actual ($) 2,273 2,041 1,536 1,792 7,642 Sequential Change (%) Total 2001 DAS Actual ($) 4,612 4,220 3,521 3,950 16,303 Sequential Change (%) FAS/DAS Actual 6,885 6,261 5,057 5,742 23,945 1Q02 2Q02 3Q02 4Q Total 2002 FAS Best Case 1,741 1,817 1,885 2,406 7,849 Most Likely Case 1,741 1,817 1,885 2,127 7,571 Worst Case 1,741 1,817 1,885 1,621 7,064 Total 2002 DAS Best Case 2,887 3,162 3,325 4,125 13,499 Most Likely Case 2,887 3,162 3,325 3,664 13,038 Worst Case 2,887 3,162 3,325 2,505 11,879 FAS/DAS Most Likely 4,628 4,979 5,210 5,792 20,609 1Q03 2Q03 3Q03 4Q Total 2003 FAS Best Case 2,205 2,299 2,393 2,487 9,385 Most Likely Case 1,985 2,071 2,201 2,373 8,630 Worst Case 1,769 1,848 1,966 2,280 7,862 Total 2003 DAS Best Case 2,942 3,068 3,130 3,381 12,521 Most Likely Case 2,631 2,745 2,916 3,145 11,437 Worst Case 2,218 2,316 2,464 2,858 9,856 FAS/DAS Most Likely 4,615 4,816 5,117 5,518 20,067 Source: Gartner Dataquest (November 2002) >>>copyright**** November 19, 2002

4 4 4Q02 Update: Disk Storage Forecast Scenarios, Table 2 Worldwide Disk Storage System Forecast Factory Revenue, Sequential Growth (Percent) 1Q01 2Q01 3Q01 4Q Total 2001 FAS Actual Total 2001 DAS Actual Q02 2Q02 3Q02 4Q Total 2002 FAS Best Case Most Likely Case Worst Case Total 2002 DAS Best Case Most Likely Case Worst Case FAS/DAS Most Likely Q03 2Q03 3Q03 4Q Total 2003 FAS Best Case Most Likely Case Worst Case Total 2003 DAS Best Case Most Likely Case Worst Case FAS/DAS Most Likely Source: Gartner Dataquest (November 2002) 2002 Gartner, Inc. November 19, 2002

5 5 Table 3 Worldwide Disk Storage System Forecast Factory Revenue, Year-Over-Year Growth (Percent) 1Q01 2Q01 3Q01 4Q Total 2001 FAS Actual Total 2001 DAS Actual Q02 2Q02 3Q02 4Q Total 2002 FAS Best Case Most Likely Case Worst Case Total 2002 DAS Best Case Most Likely Case Worst Case FAS/DAS Most Likely Q03 2Q03 3Q03 4Q Total 2003 FAS Best Case Most Likely Case Worst Case Total 2003 DAS Best Case Most Likely Case Worst Case FAS/DAS Most Likely Source: Gartner Dataquest (November 2002) Gartner Dataquest Perspective The significant "killer" applications associated with the dot-com, Internet service provider and telecommunications markets, which largely caused the irrational exuberance associated with 1999 and 2000 bubble, have proved unsustainable and no longer exist. The principal source for disk storage IT infrastructure investment currently comes from mainline businesses whose spending is constrained by corporate profitability. In view of the substantial uncertainty surrounding the global storage IT infrastructure market, perhaps the most interesting issue is which vendors will gain or lose market share during these extremely difficult times. While Gartner Dataquest does not forecast forward-looking market share by vendor, it is reasonable to assume that vendors will have to gain market share to increase revenue in a down market. That said, Gartner Dataquest >>>copyright**** November 19, 2002

6 6 4Q02 Update: Disk Storage Forecast Scenarios, believes the following five items remain fundamental issues in determining this outcome. Portfolio vendors (that sell servers and storage) have increased external RAID controller-based storage market share from 41.8 percent in 1998 to 49.5 percent in Gartner Dataquest projects this upward trend will reach 52.5 percent by the end of When the disk storage infrastructure technology is at least substantially equal, end users are inclined to purchase disk storage assets from the vendor that also provides the server. This trend is particularly prevalent in the midtier market associated with servers running Windows NT/2000, Linux and Unix. The amount of external RAID controller-based storage sold through indirect sales channels has increased from 31.9 percent in 1998 to 36.6 percent in Gartner Dataquest estimates this trend will reach 39.7 percent by Disk storage system vendors with the strongest global reseller relationships will benefit from the enormous projected growth of FAS in the Windows NT/2000, Linux and Unix markets. DiskstoragesystemvendorsthatprovideacomprehensiveFAS portfolio, thereby simplifying storage infrastructure deployment and support, have a higher probability of increasing market share than vendors with a partial product portfolio. The storage vendor(s) that introduce innovative disk storage systems that radically alter the current cost/capacity relationship will gain market share over vendors selling disk storage systems based on traditional architectures and technologies. Disk storage system vendors that are early to market with storage resource management software that adheres to industry standards are likely to gain share from vendors that are not able to expeditiously execute their vision. Recommendations Vendors should vigorously pursue storage consolidation opportunities, particularly in the Windows NT/2000 market where only 36 percent of disk storage embraces the FAS paradigm. Vendors must gain a comprehensive understanding of the end user's business to propose disk storage solutions that address data life cycle management solutions. Vendors should release high-end external RAID controller-based storage systems that incorporate Serial ATA (Advance Technology Attachment) disk drive technology as a game-changing initiative. End users need to select disk storage system vendors that share Application Program Interfaces (APIs) with competing vendors on a quid pro quo basis. Key Issue What are the forces influencing global storage growth? 2002 Gartner, Inc. November 19, 2002

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