Donna Taylor, Robert E. Passmore, Stanley Zaffos, April Adams, Adam W. Couture, Aman Munglani

Transcription

1 Gartner for Business Leaders Publication Date: 16 December 2008 ID Number: G SWOT: Hitachi Data Systems, Worldwide Donna Taylor, Robert E. Passmore, Stanley Zaffos, April Adams, Adam W. Couture, Aman Munglani This document examines the strengths, weaknesses, opportunities and threats Hitachi Data Systems will face in the worldwide external controller-based disk storage market. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

2 TABLE OF CONTENTS Analysis... 4 Introduction... 4 SWOT Analysis... 4 Strengths... 5 Subsidiary of a Well-Established Parent Company... 5 Worldwide Presence... 5 High-End Products and Innovation... 6 High-End Reliability and Quality... 6 Management Software... 6 Weaknesses... 6 Subsidiary of a Well-Established Parent Company... 6 Continued Underinvesting in Sales and Marketing... 7 Change in Pricing Strategy and Management... 7 Solutions... 7 Breadth and Depth of Professional Services... 8 Channels to Market... 8 Opportunities... 8 Sales and Marketing via Increased Head Count... 8 Develop Vertical-Market Solutions... 8 Grow Market Share in the Entry-Level and Midrange Markets... 9 Build Out Multivendor Managed Services... 9 Channels to Market... 9 Threats... 9 Economy... 9 Exchange Rates... 9 Limited Presence in the IP Storage Market Channels Service Delivery Partner Ecosystem Shared With Competitors No Dedicated Server Virtualization Practice Implications for Company Being Profiled Company Overview Methodology Definitions Recommended Reading LIST OF FIGURES Figure 1. Hitachi Data Systems: Strengths, Weaknesses, Opportunities and Threats... 4 Figure 2. Graphical Representation of SWOT Analysis for Hitachi Data Systems... 5 Figure 3. Hitachi Data Systems: Revenue Distribution, 1H Figure 4. Worldwide External Controller-Based Disk Storage Vendor Market Share, 1H Figure 5. Worldwide Midrange External Controller-Based Disk Storage Vendor Market Share, 1H Figure 6. Hitachi Data Systems Net Revenue by Geographic Region, 1H Publication Date: 16 December 2008/ID Number: G Page 2 of 16

3 Figure 7. Hitachi Data Systems Worldwide Revenue by Sales Channel, 1H Publication Date: 16 December 2008/ID Number: G Page 3 of 16

4 ANALYSIS Introduction This document is a strength, weakness, opportunity and threat (SWOT) analysis for Hitachi Data Systems. The analysis identifies issues relating to Hitachi Data Systems' external controllerbased (ECB) storage offerings branded under its own label. We list only those characteristics that have the greatest potential impact on Hitachi Data Systems' market position and strategy in the worldwide ECB storage marketplace. All characteristics within each SWOT category are considered to have a similar level of impact. This document does not cover political, economic, social and technological characteristics, which are seen as universal factors affecting all players in the industry. SWOT Analysis The ECB storage market is a large and mature market with "megavendors" dominating market share. Hitachi Data Systems ranked No. 6 in Gartner's worldwide disk array quarterly statistics. Figure 1 gives an overview of Hitachi Data Systems' strengths, weaknesses, opportunities and threats, and Figure 2 provides a graphical representation of these in relation to one another. Figure 1. Hitachi Data Systems: Strengths, Weaknesses, Opportunities and Threats Strengths Subsidiary of a well-established parent company Worldwide presence High-end products and innovation High-end reliability and quality Management software Opportunities Sales and marketing via increased head count Develop vertical solutions Grow market share in the entry-level and midrange markets Build out multivendor managed services Channels to market Source: Gartner (December 2008) Weaknesses Subsidiary of a well-established parent company. Continued underinvesting in sales and marketing Change in pricing strategy and management Solutions Breadth and depth of professional services Channels to market Threats Economy Exchange rates Limited presence in the IP storage market Channels Service delivery partner ecosystem shared with competitors No dedicated server virtualization practice Publication Date: 16 December 2008/ID Number: G Page 4 of 16

5 Figure 2. Graphical Representation of SWOT Analysis for Hitachi Data Systems S W O T Source: Gartner (December 2008) To create Figure 2, we analyze the strengths and weaknesses that are internal to the vendor and the opportunities and threats that are external to the vendor. For each category, we define a number of characteristics based on parameters such as company or market, product or services, finance and operations. Each characteristic is examined in terms of the potential impact on the vendor's position in the market if this factor is acted on or ignored in the next 12 months. These impacts are then rated as high, medium or low to determine a final numbered rating for each quadrant in the graphic. Strengths Subsidiary of a Well-Established Parent Company Hitachi Data Systems is a wholly owned subsidiary of Hitachi and, as such, reaps the benefits associated with having a well-established parent company. These include the financial stability required to develop and sustain a market presence, the demonstrated ability to take a long-term stance in the market regardless of economic conditions and geographic variances, and the ability to leverage the R&D in basic research, electronics, semiconductors, hard-disk drives and computer science into the design of its storage products. Worldwide Presence Hitachi Data Systems products are sold in more than 170 countries and regions via direct and indirect channels. While market presence and penetration varies, its sales revenue is primarily Publication Date: 16 December 2008/ID Number: G Page 5 of 16

6 distributed between North America, with 44%, and Europe, the Middle East and Africa (EMEA), with 36% (see Figure 6). During the past two years, Hitachi Data Systems has embarked on a transformation of its go-tomarket approach and has looked to grow its channel presence. The numbers of channel partners enrolled under its TrueNorth partner program increased almost 30% in the past four quarters. Approximately 1,700 channel partners currently sell Hitachi Data Systems products and services across 170 countries. Of this number, almost 60% of partners are registered in North America. EMEA and Asia/Pacific further account for 25% and 15% share, respectively. High-End Products and Innovation Hitachi Data Systems provides mature and market-validated high-end virtualization and thinprovisioning implementations. These features support both internal and externally attached capacity, work with each other and with multiple redundant array of independent disk (RAID) levels, and support both mainframe and open-system environments. Hitachi Data Systems has six generations of high-end storage systems that have supported nondisruptive microcode updates and were the first high-end storage vendor to implement RAID 6. High-End Reliability and Quality Hitachi Data Systems has earned a reputation for building reliable storage systems that support nondisruptive microcode updates, repair activities and upgrades. The USP V is the sixth series of high-end storage systems that support these features. The USP V's nondisruptive microcode update capabilities require minimal planning and install quickly, usually completing within a few minutes; thus, having a limited impact on system performance and throughput. Hitachi Data Systems has also been early in delivering RAID 6 support and more-subtle features such as extra error checking and correction (ECC) codes and disk-scrubbing features that further reduce the probability of data becoming corrupted over time. An ironic consequence of Hitachi Data Systems building reliable disk storage platforms with a rich availability feature set is that customers will often credit Hitachi Data Systems with building quality high-end storage systems but question its support capabilities, because these customers have little interaction with the support organization. Management Software Hitachi Data Systems has successfully partnered with HP for supplier relationship management (SRM), Aptare for backup reporting, and CommVault for backup software. During the past several years Hitachi Data Systems/Hitachi has invested in, and produced, a credible SRM and storage area network (SAN) management software suite, marketed and sold under the label Hitachi Storage Command Suite. The user interface is especially intuitive, making the product easy to install and learn relative to many of the other SRM offerings. This suite allows Hitachi Data Systems to compete successfully with SRM products that are bundled with storage by EMC, IBM and HP, or when users of Hitachi Data Systems hardware seek an SRM product. However, we do not see Hitachi Data Systems selling this software in the general market where Hitachi Data Systems hardware is not present. Weaknesses Subsidiary of a Well-Established Parent Company Being a subsidiary of a well-established parent company comes with both benefits and drawbacks, particularly when the parent company is based in a different geographic area. Hitachi Data Systems must seek approval from corporate headquarters in Japan for strategic requests, Publication Date: 16 December 2008/ID Number: G Page 6 of 16

7 such as product changes or development. This lack of autonomy reduces its ability to react swiftly to localized market developments. When the parent company's plans are not in sync with the best interests of the subsidiary, an extended back-and-forth negotiation process can further delay market response, leaving Hitachi Data Systems less nimble than some of its smaller competitors who are shaking up the status quo with new and competitive technologies. Lack of funding resources from their parent company has impacted acquisitions as well. One case in point is that of Diligent, which was acquired by IBM for its virtual tape library (VTL) and data deduplication technologies. Another was BlueArc, although Hitachi Data Systems was able to gain a minority position. Financial stability of the parent company may have fostered a sense of security that could contribute to a lack of agility and sense of urgency. Hitachi Data Systems' recent decision to more consistently align its branding to the Hitachi corporate brand also has a down side. While strengthening Hitachi Data Systems' name brand recognition and positioning globally, it limits Hitachi Data Systems' ability to be creative in its marketing communications efforts for different markets around the world where the corporate message is not as relatable as an individualized effort could be. Continued Underinvesting in Sales and Marketing Although Hitachi Data Systems sells worldwide, except in Japan, it has limited coverage within many of the countries being served, and lacks depth of coverage from a city tier perspective in many countries, including the U.S. Hitachi Data Systems' recent effort to reorganize its sales force to align with vertical markets has yet to show significant impact. This limited vertical-market and geographic reach can be attributed, at least in part, to its history of underinvesting in sales and marketing. Hitachi Data Systems' competitors hold a strong influence over their channel partners, which has had the effect of isolating Hitachi Data Systems and limiting its ability to compete as effectively as might be expected given its product offerings. Lucrative channel programs and superior outbound communications based on clear, powerful messages are needed if Hitachi Data Systems is to overcome these challenges. Its 30% growth in the number of channel partners in the past four quarters is a promising start, but time will tell if this strategy will meet with success. Change in Pricing Strategy and Management The most frequently mentioned reason for Hitachi Data Systems not making it onto a client's shortlist of potential high-end storage vendors is Hitachi Data Systems "no-bidding" the opportunity, price, or concerns about local support capabilities. With changes in Hitachi Data Systems marketing, sales and product management, Hitachi Data Systems appears to be pursuing market share over margin and becoming more willing to compete on price. It has lowered hardware and controller-based software prices and bundled and rebranded its HiCommand software into the Hitachi Storage Command Suite. Time will tell if these changes are tactical or strategic in nature and whether they are adequate to drive market share gains. As for concerns about local support capabilities, Hitachi Data Systems' reliable hardware results in customers having little interaction with the support organization, thereby limiting reference accounts for service. A stronger marketing effort around this element would be beneficial. What otherwise might be considered potential strengths become weaknesses when their existence and benefits are not meaningfully communicated to end users, resulting in wasted effort and resources in making the changes in the first place. Solutions Hitachi Data Systems, supplemented by acquisitions and partnerships, has developed solutions in areas such as archiving, virtual tape, and tiered storage. However, Hitachi Data Systems has lower penetrations of these market segments than solution quality would suggest, and the Publication Date: 16 December 2008/ID Number: G Page 7 of 16

8 breadth of solutions offered is more limited than the offerings of key competitors, especially EMC, NetApp and IBM. Also, Hitachi Data Systems' network-attached storage (NAS) product offerings and Hitachi Content Archive Platform (HCAP) have yet to gain significant traction in the market. Breadth and Depth of Professional Services Hitachi Data Systems has made several attempts to launch remote administration services and establish a remote managed services practice. However, current offerings are limited to EMEA. Although Hitachi Data Systems' product security is strong, the company has not emphasized security-related professional services (PS) and has no PS offerings for security-related assessments and solutions. Channels to Market Hitachi Data Systems' best channels to market are through its partnerships with Sun Microsystems and HP. Yet these relationships generate business only for the high-end USP V family, and during the past several years both partners have lost share in the high-end enterprise disk array market. In the midrange and lower storage markets, reseller channels are a key element in any vendor's success, and while Hitachi Data Systems has made progress in recruiting partners, its overall effort has failed to generate the market share it needs to keep pace with competitive vendors in the entry and midrange disk array markets. Opportunities Sales and Marketing via Increased Head Count A commitment to focus on sales and marketing is needed to overcome prior neglect. During the past 12 months, Hitachi Data Systems has increased its direct sales force by 20% and increased its focus on training and productivity. However, Gartner believes that more is required. A focus on its midrange product offerings would benefit from this market segment's relatively higher growth rate than the high-end disk storage market. Furthermore, continued efforts to increase the ratio of indirect to direct sales revenue will better utilize both new and existing head count. Hitachi Data Systems has seen growth in the Asia/Pacific region during the past year with a strong showing both in the high-end enterprise and the midrange segment. However, performance across countries has been patchy and overall revenue is dependent on certain key markets such as South Korea, Australia and China that account for almost 70% of its revenue in the region. Hitachi Data Systems is a late entrant in many of the markets in Asia/Pacific but has the ability to catch up with the leading vendors who are ahead of the game and fairly well entrenched in most accounts. Develop Vertical-Market Solutions Hitachi Data Systems has strong product offerings, such as BlueArc and HCAP. However, customers want a storage provider that can demonstrate an understanding of the unique challenges they face in their particular industries. As such, the marketplace wants to see complete vertical-market solutions targeted to specific needs. If Hitachi Data Systems aligns its sales and marketing teams along vertical industries and offers its hardware, software, and services as a complete solution it will capture more market share, and in a more-efficient manner. While the financial sector traditionally provides a large opportunity for storage vendors, along with government, healthcare and media, the current banking crisis creates another barrier to entry albeit temporary to that industry. Publication Date: 16 December 2008/ID Number: G Page 8 of 16

9 Grow Market Share in the Entry-Level and Midrange Markets Despite the promise of the AMS series, it is in fact the high-end enterprise segment that accounts for the maximum share of Hitachi Data Systems revenue and represents the fastest-growing segment for Hitachi Data Systems. While the AMS series is functionally competitive against other vendors' midrange offerings they have traditionally lost on price and on the vendor's inability to provide local support. Its recent increase in channel footprint in formerly underpenetrated markets, coupled with focused vertical-market programs, should help address some of these issues. Build Out Multivendor Managed Services Gartner research suggests that remote storage administration services will be increasingly in demand as customers seek to control storage-related expenses. The market for remote administration services has yet to take off. Therefore, no vendor currently dominates the market in remote administration services. If Hitachi Data Systems can successfully expand European storage administration services to other geographic areas, it can capitalize on burgeoning market demand. Channels to Market Hitachi Data Systems products in the midrange, entry-level, and now NAS segments are more competitive in the market than share results indicate. The opportunity to do better more than anything else lies in improving the number and quality of reseller channels calling on storage customers. Hitachi Data Systems is late to this game; HP, IBM, EMC, NetApp, and Sun (STK) all have much-stronger sets of channel partners. But if Hitachi Data Systems can offer the right business propositions to change loyalties, its market share would grow. Its recent selection of partners for small and midsize business (SMB) is promising, but Hitachi Data Systems has a long way to go to prove itself and secure the partners' loyalty in this segment. Threats Economy While the economic downturn is expected to negatively impact all areas of IT, the storage industry has shown remarkable resilience thus far. In fact, the ECB market in 2Q08 showed a growth rate of 18.8% year over year before the impact of the current economic situation even partially manifested itself. However, this growth rate will not continue for the near future due to the tightening credit markets that will affect the entire supply chain. IT providers that have sufficient and sustainable cash flow and reserves will have the best chance of weathering an extended economic downturn. Everyone else will feel the pinch as IT providers struggle to place orders and pay for materials and manufacturing components. IT providers that have a robust global presence will similarly buffer their prospects via sales into markets that have historically had greater regulations on the credit industry and other business operations; thus, somewhat insulating them from the greater credit crisis gripping regions with little to no regulations in the recent past. Exchange Rates Most of the intellectual property (IP) in AMS and USP V systems originates in Japan, and most of the hardware in AMS and USP V systems is manufactured in Japan and other countries that host Hitachi subsidiaries. Unpredictable declines in the dollar/yen exchange rate could affect street prices by increasing the price that Hitachi Data Systems pays Hitachi for its storage systems. Publication Date: 16 December 2008/ID Number: G Page 9 of 16

10 Limited Presence in the IP Storage Market Hitachi Data Systems' strongest offering in the fast-growing Internet Protocol storage market, the BlueArc Titan series, is not owned by Hitachi Data Systems and may explain Hitachi Data Systems' relatively weak position in this market. The Internet Protocol market includes NAS, Internet Small Computer System Interface (iscsi), and content-addressed storage (CAS) systems, and in each of these markets, Hitachi Data Systems has a smaller share than its shares in the high-end and midrange storage markets. As the number of vendors offering unified storage architecture systems increases, so will the competitive pressures on Hitachi Data Systems. Further amplifying this pressure is the close linkage between data deduplication technologies and NAS storage. While partnering with BlueArc was a good move, it is not without its problems. The first is margin pressures. Vendors selling technology they do not own have "two mouths to feed," their own and their partner's. Second is the difficulty of integrating various OEM technologies to create seamless storage solutions. The third is account control; when the agreement between the vendor and OEM terminates, who owns the account: the vendor or the OEM? Channels One factor that makes channel recruitment challenging is that most of the effective channels for storage are loyal to large portfolio vendors such as HP, IBM and EMC, which sell products that compete with Hitachi Data Systems in the midrange. A potential threat is that these and other vendors will use their muscle to lock Hitachi Data Systems out of even the channel it has today. What reseller, for example, will jeopardize its access to ProLiant server business by selling Hitachi Data Systems storage instead of HP storage? Another threat is the evolution of HP and Sun's use of their own intellectual property in storage. This can potentially reduce the range of the market in which these partners sell Hitachi Data Systems product. Service Delivery Partner Ecosystem Shared With Competitors To supplement its PS delivery capabilities, Hitachi Data Systems partners with a number of pureplay storage service companies, such as Contoural and GlassHouse Technologies. Last year IBM acquired one of these partners, Novus Consulting. Hitachi Data Systems' competitors are actively pursuing similar acquisitions. This activity has the potential to severely limit the pool of nonaffiliated service delivery partners available to supplement internal Hitachi Data Systems service delivery capabilities. No Dedicated Server Virtualization Practice Storage services associated with server virtualization implementations are one of the strongest market opportunities in storage professional services. Although Hitachi Data Systems has some capabilities in this area, it has not developed a dedicated service practice as has its competition, limiting its focus and potentially missing opportunities. Implications for Company Being Profiled Hitachi Data Systems must: Strike a balance between capitalizing (piggybacking) on the Hitachi brand and being autonomous and agile enough to contort that branding to meet local markets. Work with Hitachi to find a way for it to be proactive, or at least rapidly reactionary, to changes in the market and not allow product development, messaging or go-to-market strategy to get bogged down in corporate bureaucracy. Publication Date: 16 December 2008/ID Number: G Page 10 of 16

11 Leverage the resources of Hitachi to increase investments in Hitachi Data Systems sales and marketing efforts to increase end-user "mind share," grow direct and indirect channel bandwidth, and effectively communicate product and service value propositions. Look at increasing its presence in high-growth markets such as India, Taiwan, Eastern and Central Europe, the Middle East, and South Africa, and continue investing in markets such as China, where it has a low market share. Company Overview Hitachi Data Systems is a wholly owned subsidiary of Hitachi and is the go-to-market arm of Hitachi in all countries, except Japan. Hitachi Data Systems is a global provider of ECB disk storage systems, software and services. Outside Japan, Hitachi Data Systems generates nearly $3 billion in annual revenue from operations, which include an OEM relationship with HP and a cobranded reseller relationship with Sun for enterprise storage, storage-related services, storage software and SAN components (see Figure 3). Figure 3. Hitachi Data Systems: Revenue Distribution, 1H08 SAN components 8.4% Software 14.5% Hardware (HDS branded) 38.6% OEM 17.0% Services 21.6% N = $1.4 Billion Source: Gartner (December 2008) In 2007 and 1H08, Hitachi Data Systems was the sixth-largest provider of ECB disk storage systems, based on revenue. In the midrange segment, Hitachi Data Systems held the No. 7 position for 1H08. Almost 44% of Hitachi Data Systems' revenue in 1H08 was realized in North America and just over 36% came from EMEA. Sixty percent of Hitachi Data Systems' revenue was realized via direct sales in 1H08 (see Figure 4 through Figure 7). Publication Date: 16 December 2008/ID Number: G Page 11 of 16

12 Figure 4. Worldwide External Controller-Based Disk Storage Vendor Market Share, 1H08 Fujitsu/Fujitsu Siemens 2.7% Hitachi 3.1% Sun Microsystems 5.8% Hitachi Data Systems 6.2% Others 16.0% EMC 24.4% IBM 12.9% NetApp 8.2% Dell 9.0% HP 11.6% N = $8.7 Billion Notes: EMC revenue excludes OEM revenue from Dell and Fujitsu Siemens. Hitachi/Hitachi Data Systems revenue excludes OEM revenue from HP and Sun Microsystems. Source: Gartner (October 2008) Publication Date: 16 December 2008/ID Number: G Page 12 of 16

13 Figure 5. Worldwide Midrange External Controller-Based Disk Storage Vendor Market Share, 1H08 Fujitsu/Fujitsu Siemens 1.5% Hitachi 2.2% Hitachi Data Systems 2.7% Sun Microsystems 4.0% Others 21.0% EMC 16.2% NetApp 13.9% IBM 11.6% Dell 13.5% HP 13.3% N = $4.3 Billion Notes: EMC revenue excludes OEM revenue from Dell and Fujitsu Siemens. Hitachi/Hitachi Data Systems revenue excludes OEM revenue from HP and Sun Microsystems. Source: Gartner (October 2008) Publication Date: 16 December 2008/ID Number: G Page 13 of 16

14 Figure 6. Hitachi Data Systems Net Revenue by Geographic Region, 1H08 Asia/Pacific 17.7% Latin America 2.5% North America 43.7% EMEA 36.1% N = $544 Million Note: Hitachi/Hitachi Data Systems revenue excludes OEM revenue from HP and Sun Microsystems. Source: Gartner (October 2008) Publication Date: 16 December 2008/ID Number: G Page 14 of 16

15 Figure 7. Hitachi Data Systems Worldwide Revenue by Sales Channel, 1H08 Indirect 40% Direct 60% N = $544 Million Note: Hitachi/Hitachi Data Systems revenue excludes OEM revenue from HP and Sun Microsystems. Source: Gartner (October 2008) Methodology The vendor analyzed in this SWOT was selected because, according to Gartner research, it had the sixth-largest revenue in ECB disk storage systems among Tier 1 storage vendors and presents a unique set of characteristics, which will determine its market share success based on prevailing conditions and internal strategies. The Gartner vendor SWOT analysis is designed for the use of vendors as a supplement to their planning processes. Its primary value is as an independent analysis of the vendor's competitive situation. The SWOT analysis provides a unique independent view of the strengths, weaknesses, opportunities and threats for a specific vendor in a specific market and geographic area. The specific geographic area (for example, globally or regionally) and market and/or submarket is based on Gartner market segment definitions or market focuses (for example, SMB). Vendors are selected based on a variety of criteria such as growth rate, or major changes in positioning, channel strategy they will not necessarily be for the companies with largest market share. Definitions Midrange storage products have an ASP exceeding $24,999; dual-controller architecture and controller-based data services software. RECOMMENDED READING "MarketScope for High-End Enterprise Disk Arrays" "High-End, Block Access Disk Array Storage Price Forecast: 1H08 Through 1H09" "Midrange Block-Access Disk Array Storage Price Forecast: 1H08 Through 2H09" Publication Date: 16 December 2008/ID Number: G Page 15 of 16

16 "Magic Quadrant for Storage Professional and Support Services" REGIONAL HEADQUARTERS Corporate Headquarters 56 Top Gallant Road Stamford, CT U.S.A European Headquarters Tamesis The Glanty Egham Surrey, TW20 9AW UNITED KINGDOM Asia/Pacific Headquarters Gartner Australasia Pty. Ltd. Level 9, 141 Walker Street North Sydney New South Wales 2060 AUSTRALIA Japan Headquarters Gartner Japan Ltd. Aobadai Hills, 6F 7-7, Aobadai, 4-chome Meguro-ku, Tokyo JAPAN Latin America Headquarters Gartner do Brazil Av. das Nações Unidas, andar World Trade Center São Paulo SP BRAZIL Publication Date: 16 December 2008/ID Number: G Page 16 of 16