Tape Defends Its Place in the Storage Market

Market Analysis Tape Defends Its Place in the Storage Market Abstract: Despite threats from inexpensive disk systems and a confusing plethora of incompatible formats, users still find practical and creative ways to implement and utilize tape drives and tape automation systems. By Fara Yale Strategic Market Statements Despite the array of tape technologies that exist today and the difficulties that are inherent to establishing a new format in the market, vendors still have a quest to develop and build something bigger or better than what already exists, and Gartner Dataquest believes that there will continue to be new formats introduced in the future. Tape vendors must be aware that hard disk-based systems will increasingly be inserted into the backup process, but these systems can be expected to be largely complementary to tape systems, not replacements for tape. Publication Date: September 16, 2002

2 Tape Defends Its Place in the Storage Market Marketplace Description Since the mid-1980s, the number of tape technologies has exploded. Across all technologies, the tape drive industry has been forced to intensify its efforts to catch up with the rapid progression of capacities in the disk drive industry and in server storage. Technology advancement accelerated as each tape technology raced to beat the others to higher capacity and performance, a situation that, at times, appears to be a battle of virtual migration paths. The tape drive market teems with a variety of "standards" and competing recording formats and technologies, many of which are available from only a single source. Time to market and the ability to deliver new products according to designated dates have become major factors in determining a new product's success or failure. As more new tape products and technologies have appeared on the scene, real standards have become a thing of the past, and manufacturers have been forced to come to terms with reality. This reality is that, with a plethora of competing recording formats and proprietary designs, each individual product or technology can only hope to capture a smaller part of the overall market share as the market is divided into smaller portions. Figure 1 depicts the revenue market shares for all tape technologies that were available in 2001, grouped by Gartner Dataquest's segmentation. The detailed vendor market shares, and the unit and revenue history and forecastsforthetapedrivemarketcanbefoundinthegartnerdataquest Market Statistics "2002 Tape Drives Market Share and Forecast" (HWST- WW-MS-0119). Tape Drive Evolution The origins of magnetic tape for the storage of computer data date back to the 1940s and early 1950s before the invention and introduction of hard disk drive (HDD) technology. The early tape drives recorded data on large 12-inch or 10.5-inch-diameter reels of half-inch-wide tape, and the initial reel-to-reel tape drives were used for primary storage of data as an extension to central processor memory. Half-inch reel technology continued to advance into the 1990s, and 9-track, half-inch reel tape drives are still shipping today. The primary function or use of tape was destined to change with the advent of hard disk technology, which began with the first fixed HDD, IBM's RAMAC 350, in 1956. Even though the 4.4MB capacity of this first rigid drive was extremely small by current standards, it would be nearly two decades before the first Winchester-technology drives would be introduced. The initial RAMAC portended the beginning of the end of tape's use as a primary storage device. Applications for tape in the computer world evolved to encompass data archiving and data interchange or distribution, and the role of tape drives and tape media changed to that of secondary storage. The evolution of the tape drive industry was a direct result of the proliferation of disk drives and changes in the computer systems and server storage marketplace. As disk drive

capacities and capacities on servers grew, the primary application for tape drives changed to backup/restore and archive, with data interchange and distribution of data moving further down the list of tape applications. Figure 1 2001 Tape Technology Factory Revenue Shares All Technologies 3 Half-Inch Cartridge: Low-Cost 3480/90 (1%) Minicartridge (3%) 1/4-Inch Data Cartridge (2%) Half-Inch Cartridge: High-End 3480-90/3590/9840/9940 (27%) 4mm Helical Scan (24%) Other Helical Scan (2%) 8mm Helical Scan (5%) Small Form Factor Half-Inch Cartridge/Other Data Cartridge (36%) 109798-00-01 Source: Gartner Dataquest (April 2002) In 1975, tape streaming became an important technology for the backup function, and data streaming features were added to half-inch reel drives. The first streaming versions of 1/4-inch cartridge drives were shipped in 1981. In 1983, users primarily chose half-inch reel-to-reel drives and 1/4- inch cartridge tape products. Most of the 1/4-inch cartridge drives shipped that year were 8-inch form factor drives, as 5.25-inch drives were just beginning to emerge. The number of types of tape transports and recording technologies began to change in the mid-1980s as new methods of transporting data emerged. In 1984, 3M introduced the 1/4-inch DC-2000 minicartridge. Another new technology surfaced that year, with IBM's introduction of the "square tape" 3480 half-inch cartridge an 18-track parallel recording technology as its new standard for save/restore and data interchange on large systems and as the replacement for half-inch reel products. In 1985, Digital Equipment introduced its own half-inch cartridge technology, beginning with the TK50 tape drive, which recorded data on 0.5-inch-wide tape using a serial serpentine method of recording. In the mid-to-late 1980s, increasing storage capacities enhanced the appeal of helical scan recording for computer storage applications. Helical scan

4 Tape Defends Its Place in the Storage Market technology uses a rotating scanner containing read/write heads to record data on tracks that are laid out at a slant, or diagonal, to the edge of the tape. This contrasts to the linear method of recording on 1/4-inch cartridge, half-inch reel or half-inch cartridge products, in which tracks are laid out parallel to the edge of the tape. Helical scan technology began in the early 1950s, but for decades its usage for the digital storage of data occurred only in isolated cases. Its roots were in instrumentation recorders and video and audio tape recorders. Exabyte was the first company to introduce a high-capacity, yet affordable, small form factor helical scan tape drive. In 1987, Exabyte introduced a 5.25-inch form factor drive that used a helical scan method to record 2.5GB of data on 8mm-wide tape. In 1988, 4mm digital audio tape (DAT) technology became a force in the tape drive industry with the introduction of the DDS recording format by Hewlett-Packard and Sony. The initial DDS drives, with a capacity of 1.3GB, began shipping in 1989. Additional helical scan drives with larger form factors entered the market in the 1990s. Beginning in the mid-1990s, the proliferation of new tape formats and technologies became a prevalent feature of the tape drive industry. The following is a brief summary of the array of new technologies that were introduced from 1994 through 2001. Specifications shown are as of the time of the original product introduction. 1995 New technologies introduced in 1995 were: IBM's 3590 Magstar drives Interleaved serpentine longitudinal recording on 128 tracks, 0.5-inch-wide tape in a single-reel, half-inch cartridge package; 10GB native capacity; 9 MB/sec data transfer rate StorageTek's RedWood drives Helical scan SD-3 recording format, 0.5-inch-wide tape in a single-reel, half-inch cartridge package; 10GB, 25GB and 50GB native capacity; 11.25 MB/sec data transfer rate (The last shipments of the RedWood drives were in 2000.) Sony's DTF drives Sony Digital Tape Format (DTF), helical scan recording, 0.5-inch-wide tape in a magnetic tape cassette package; 42GB nativecapacity;12mb/secdatatransferrate 1996 New technologies introduced in 1996 were: Sony's SDX series drives Sony AIT helical scan recording format on 8mm-wide tape in an 8mm-size cartridge (92 x 62.5 x 15mm; W x H x D); 25GB native capacity; 3 MB/sec. data transfer rate Hitachi MT8M1 Series drives Hitachi HH-1 (Hyper Helical Scan Data Format) on 8mm-wide tape in an 8mm-size cartridge (72 x 54 x 10mm); 20GB native capacity; 3 MB/sec data transfer rate (This technology was reintroduced in 1997 by Hitachi Computer Products as the Wolfhound drive. These drives never entered the market because, a few months after their introduction in North America, Hitachi decided not to

participate in the 8mm helical scan tape business and all operations for the HH-1 8mm tape family were halted.) IBM Magstar MP drives Longitudinal serpentine recording on 128 tracks, 8mm-wide media housed in a dual-reel cartridge package that is similar to a 1/4-inch data cartridge shell, but designed for the tape to be positioned at its midpoint during a cartridge load or search operation; 5GB native capacity; 2.2 MB/sec data transfer rate (The final shipments of Magstar MP drives will occur in 2002.) Philips LMS NCTP (Next Compatible Tape Product) Longitudinal serpentine recording on 126 tracks, 0.5-inch wide tape in a half-inch cartridge package; 20GB native capacity (original announced capacity was 20GB, but capacity at time of initial shipment was changed to 18GB); 10 MB/sec data transfer rate (This product was more than one year behind schedule when it entered the market in March 1998. Market acceptance was minimal and NCTP went to end-of-life status in 2000.) Iomega Ditto 2GB Iomega 2GB format, 60 tracks on QIC-Wide tape in a 1/4-inch minicartridge-type package; 1.0GB native capacity; 1 Mbps or 2 Mbps data transfer rate (Shipments of Ditto drives ceased in 2000.) 1997 The only new tape format announced was a product called the Eagle DMi from Exabyte's Eagle Division. This drive was based on Philip's DigaMax (Digital Compact Cassette) technology, and Exabyte was developing it in partnership with Philips. The original specifications were for a drive with a native capacity of 13GB and a variable data transfer rate up to 4 MB/sec. This project was discontinued when Exabyte closed down its Eagle Division in early 1998. 1998 Although the escalation of new formats slowed in 1997, the situation in 1998 was vastly different. Six new formats or tape technologies were introduced from 1998 through 2000. Several were introduced as new technologies in 1998 and, for some, product introductions were also made that year. For others, product announcements and first customer shipments did not take place until 1999 or even into 2000. These new formats are summarized below. LTO From HP, IBM and Seagate The story of Linear Tape Open (LTO) technology actually began in the fall of 1997 when Hewlett-Packard, IBM and Seagate announced (on 4 November 1997) an agreement to introduce a new tape technology that the trio stated "is intended to simplify the tape industry." The three companies said this technology would be offered in open format specifications as an alternative to the current array of incompatible technologies in the storage industry. The trio stated that the specifications for the new format would be developed by HP, IBM and Seagate (which would be known as the Technology Provider Companies [TPCs]) and offered on a licensee basis to other interested parties (in much the same way that HP and Sony did with the DDS formats). The companies did not reveal any details about the 5

6 Tape Defends Its Place in the Storage Market technology at that time, and the industry waited with frustration and anticipation for a formal announcement of the technology. On 7 April 1998, HP, IBM and Seagate unveiled their new open tape architecture proposal called LTO. IBM made the first announcement of an LTO-format product on 27 October 1999. However, shipment by IBM did not immediately occur, and IBM made another announcement and formally launched its LTO product line on 23 August 2000. Product announcements from HP and Seagate also took place in 2000. The first LTO Ultrium drives began shipping late in the third quarter of 2000. Based on the Ultrium format specification, all first-generation Ultrium drives have native capacities of 100GB. Vendors can differentiate their drives within a range of data transfer rates, and the initial Ultrium drives have data transfer rates of 15 MB/sec or 16 MB/sec. Cooperation among the TPCs and the LTO licensees is centered on the development and promotion of the LTO format and technology. The cooperation ends there, and each of the TPCs, as well as the licensees, work independently in the development and marketing of the individual products that are based on LTO. SDLT From Quantum Quantum made its rebuttal to LTO on 6 April 1998 (one day before the LTO announcement) when the company announced its new DLTtape architecture. Although backward read compatibility to previous DLTtape cartridges is inherent to Super Digital Linear Tape (SDLT), it represented a new architecture and a new method of recording data on tape. On 9 May 2000, Quantum announced its intentions to develop a family of "competitively priced tape drive products based on SDLT." (Quantum later abandoned the multiple-product, family-of-drives concept.) Without making an actual product announcement, Quantum announced on 26 September 2000 that it had begun shipments of SDLT drives to leading automated tape library partners. These initial SDLT drives were nonbackward-compatible products, and the announcement from Quantum of a backward-compatible SDLT drive was made in early March 2001. The first-generation SDLT drives have native storage capacities of 110GB and data transfer rates of 11 MB/sec. StorageTek's 9840 StorageTek previewed its 9840 technology at Gartner Dataquest's 1998 StorageTrack conference, held 10 and 11 June 1998. But the company did not formally announce its 9840 drive until 27 January 1999. The 9840 tape drives began shipping in the fourth quarter of 1998, and StorageTek announced that the 9840 was in general availability more than one month before the product announcement took place. The 9840 was the first drive developed by StorageTek with the intent of establishing a presence inside and outside of the "glass house" with a single product. The first-generation 9840 has a native storage capacity of 20GB and native data transfer rate of 10 MB/sec.

Three New Formats From Benchmark, Ecrix and OnStream Just before COMDEX/Fall '98, three startup companies, Benchmark Tape Systems, Ecrix and OnStream, revealed their existence. With the launch of these companies came the introduction of three more new formats. Benchmark's DLT1 Benchmark made its existence known in a public announcement on 19 October 1998. At that time, the company stated its intent to develop tape drive products based on DLT technology, but it did not announce products. The company did reveal that it had licensed certain patents and technologies from Quantum and that the underlying agreement with Quantum included the transfer of product designs, product hardware and software, manufacturing tools, and manufacturing software to Benchmark. Benchmark's first drive, called the DLT1, was introduced on 7 September 1999; it began shipping in late October 1999. This drive has a native capacity of 40GB and a data transfer rate of 3 MB/sec. Benchmark's DLT1 drive (and the follow-on half-height VS 80 drive) is read-compatible with Quantum's DLT 4000 utilizing DLTtape IV media. But it records data in a format that is different from the Quantum DLTtape format. In October 2000, Benchmark changed its corporate name to Benchmark Storage Innovations. Ecrix's VXA Technology Ecrix went public with information about the company and its new tape technology on 20 October 1998. However, the company elected to not announce products at that time and instead focused its initial public announcement on its new tape architecture, called VXA. The first drives based on the VXA technology were announced on 1 March 1999. This first VXA-technology tape drive, the VXA-1, has a native capacity of 33GB and a data transfer rate of 3 MB/sec. General availability of the first-generation VXA-1 drives took place in September 1999. Ecrix merged with Exabyte in November 2001. OnStream's ADR Technology On 5 November 1998, a third new tape drive company, OnStream, with a corresponding new technology and a new format, was publicly announced. The company revealed its initial tape products in four models at the COMDEX/Fall '98 trade show on 16 November 1998. OnStream's tape drive products are based on its patented Advanced Digital Recording (ADR) technology. The first drives from OnStream were the DI30 and DP30, with native capacities of 15GB and data transfer rates of 1 MB/sec, and the SC30 and SC50, which have native capacities of 15GB and 25GB, respectively, and native data transfer rates of 2 MB/sec. The 15GB drives began shipping in March 1999. OnStream closed its operations in March 2001 after filing for Chapter 7 bankruptcy. But, after securing new funding, the company reopened in May 2001 as OnStream Data, with headquarters in the Netherlands. 7

8 Tape Defends Its Place in the Storage Market 1999 1999 was a quiet year for new tape format introductions, as the industry waited for delivery of products for the formats that were introduced in 1998. There were no announcements of new tape formats or technologies in 1999 or in the first half of 2000. 2000 The next new tape technology came in the form of an announcement for the Japanese market by TEAC. At Data Storage Expo '00 in Japan, TEAC introduced a new drive called the IS-635, based on DVDPRO DATA technology. (TEAC previously showed this product at the NAV show in 1999.) The IS-635 utilizes the DVCPRO DATA 6.35mm digital video cassette of the DVCPRO cassette family developed by Matsushita in Osaka, Japan, to serve the digital video needs of the broadcast industry. TEAC adapted this Matsushita drive for data storage applications. The technology uses a helical scan mechanism to record 35GB of data on 6.35mm-wide metal particle tape that has a coercivity of 2,300 oersted (Oe). The data transfer rate is 6 MB/sec. Samples of this drive began shipping in March 2000, but it was never made generally available in the market. StorageTek's T9940 The second new format in 2000 came from StorageTek with its introduction of the 9940 tape drive at its Forum2000 conference on 17 October 2000. Much of the technology for the 9940 is derived from StorageTek's 9840 technology. The major mechanical difference is the loader mechanism for the take-up reel, because the 9940 uses a single-reel cartridge vs. the dual-reel cartridge of the 9840. The 9940 is StorageTek's capacity-centric drive for users that need more capacity than the 9840, but do not need the fast access time of the 9840. The 9940 became generally available in October 2000. It has a native capacity of 60GB and a native data transfer rate of 10 MB/sec. 2001 The only new format that was announced in 2001 was S-AIT from Sony. This announcement of S-AIT was made on 2 November 2001. It was made as a technology announcement only, not as an actual product announcement. S-AIT is based on helical scan recording technology. However, instead of using tape that is 8mm wide (such as Sony's AIT and Exabyte's MammothTape and VXA tape technologies) and a cartridge that contains two reels of tape, S-AIT will use media that is 0.5 inches wide that is housed in a "square," single reel cartridge similar to an LTO cartridge. It is based on the AIT architecture. But, because it has five times the amount of tape on which to record data, the first S-AIT drive is slated to have a native capacity and data transfer rate of 500GB and 30 MB/sec. Sony plans to launch this product in late 2002. Despite the array of tape technologies that are available today and the difficulties that are inherent to establishing a new format in the market, there seems to be no end to vendors' quest to develop and build something

bigger or better than what already exists. With the degree of market fragmentation, thoughts that any single product or technology will achieve the status of market dominance or become the market standard are not founded in reality. Nevertheless, Gartner Dataquest believes that there will continue to be additional new formats introduced in the future. It is clear that this market is not large enough to support the number of vendors and technologies that are available. We further believe that some formats will no longer exist at the end of our five-year forecast period, and the industry will likely see more vendor consolidation. 9 Tape Cartridge Automation Becomes a Force in the Market The evolution of the tape marketplace is closely tied to the same phenomenon that has driven the growth of redundant array of inexpensive disks (RAID) storage systems. In recent years, there has been an explosion in the number of terabytes (TBs) shipped internal to a server, directly attached to a server or in external RAID products each year. In just the three-year period from 1999 to 2001, the total direct-attached storage (DAS) and fabric-attached storage (FAS) increased from 157,235TB shipped in 1999 to 471,805TB in 2001. Multiterabyte high-end servers and RAID storage systems in storage area networks (SANs) that are used for applications, such as aerospace, data warehousing, seismic data collection, and financial and insurance databases, have become the norm. As the growth in disk storage has increased dramatically, the requirement to automate the backup process has also increased. Demand for tape automation has also been driven by corporations' needs to reduce their operating costs to enhance their ability to compete or to even survive. The total tape cartridge automation market (autoloaders and libraries) had a banner year in 2000 with unit growth of more than 22 percent. However, overall revenue growth in 2000 was negatively impacted by lower shipments and price competition on the high-end half-inch cartridge 3480-90/3590/9840/9940 libraries. Despite the sluggish economy and the tragedy of Sept. 11, the automation market fared fairly well in 2001 with a unit decline of just under 5 percent and a factory revenue decline of only 3.3 percent. Unit shipments of all automation systems in 2001 were 169,800 and factory revenue for the year was $2.25 billion. Autoloaders represented 62.6 percent of the total units while the other 37.4 percent were libraries. The biggest drop in units was in the 4mm helical scan and 8mm helical scan segments, where units fell by 13.5 percent and 25.6 percent respectively. The decline in 4mm DDS autoloaders is in direct correlation with the overall decline in the DDS drive market. Gartner Dataquest attributes the drop-off in 8mm helical scan automation systems on reduced shipments of the Exabyte MammothTape libraries as well as libraries based on Sony's AIT drives. Because of its small 3.5-inch form factor and ability to yield libraries with high-density capacities, AIT-based automation systems were very popular in dot-coms and in Internet service provider (ISP) sites, which typically had physical space constriction. But,

10 Tape Defends Its Place in the Storage Market when much of this available market went away with the implosion of many dot-com companies, AIT automation was negatively impacted. One segment that did show growth in units and revenue for 2001 was the small form factor half-inch cartridge segment, which had more than 4,500 units in 2001 than in the previous year. Units and factory revenue for this category in 2001 increased by 4.8 percent and 4.7 percent, respectively. This segment, which comprises mainly autoloaders and libraries that contain LTO, SDLT, DLTtape or Benchmark ValuSmart drives, accounted for nearly 55 percent of the total factory revenue for automation systems shipped in 2001. Libraries that incorporate high-end half-inch cartridge 3480-90/3590/9840/9940 drives declined by 13.6 percent in units for 2001, while factory revenue for this class of libraries fell by about 15 percent. Gartner Dataquest believes these libraries will continue to decline during the next five years. However, should StorageTek or IBM decide to do a refresh of their respective high-end libraries, new library designs could create an upgrade market that would have a positive effect on shipments. Table 1 shows the top-level units, factory revenue and end-user revenue for each of the Gartner Dataquest automation segments and the total market for 1999 through 2004. Detailed market shares and forecasts for automation can be found in the Gartner Dataquest Market Statistics "2002 Tape Cartridge Automation Market Share and Forecast" (HWST-WW-MS- 0123). Gartner Dataquest Perspective Gartner Dataquest has frequently advised end users to view new tape purchases as tactical, not strategic. With the wide variety of formats available, end users, as well as original equipment manufacturers (OEMs) and resellers should explore all options when considering the purchase or adoption of new tape drives or automation systems. With the increased use of tape automation systems, the cost of media and the availability of multiple sources for media should be viewed as an integral part of the purchase decision. By the time a library that holds 500 cartridges is filled with media that costs $90 to $100, the cost of the cartridges can actually exceed the cost of the library and it can represent at least 50 percent of the total cost of the library and drives combined. Likewise, this means that drive and media vendors must ensure that cartridge costs do not become even higher as capacities increase. If media costs become increasingly higher as capacities increase, then tape products inthefuturewillfindthattheyarelessabletofendoffthreatsfromdiskbased backup solutions. Increasing media prices as capacities go up is also contrary to trends in the rest of the computer and computer storage industry. Typically when a new PC or server is introduced, the vendor increases the performance of the system while the price remains the same or goes down. The same is true for RAID storage and HDDs. For example, our Gartner Dataquest HDD analyst estimates that, from 1997 through

2006, the average capacity of a 3.5-inch ATA disk drive will increase by more than 13,000 percent, while the average price per drive will decline by 70 percent. Table 1 Worldwide History and Forecast for Tape Cartridge Automation Systems 1999 2000 2001 2002 2003 2004 2005 2006 CAGR (%) 2001-2006 4mm Helical Scan Unit Shipments 45,880.0 59,345.0 51,345.0 42,400.0 31,100.0 19,700.0 10,200.0 5,600.0-35.8 Factory Revenue (US$M) 78.7 95.9 81.9 67.4 48.2 30.0 15.3 8.4-36.6 End-User Revenue (US$M) 136.6 163.8 146.1 119.8 86.3 53.7 26.5 13.4-37.9 11 8mm Helical Scan Unit Shipments 11,933.0 21,371.0 15,898.0 16,745.0 17,690.0 18,790.0 20,140.0 21,750.0 6.5 Factory Revenue (US$M) 89.5 189.4 130.3 119.7 121.9 124.6 135.6 141.5 1.7 End-User Revenue (US$M) 140.1 267.6 180.5 164.9 167.5 170.9 183.7 190.9 1.1 Minicartridge/Data Cartridge Unit Shipments 262.0 1,010.0 1,115.0 1,025.0 740.0 480.0 0.0 0.0-100.0 Factory Revenue (US$M) 0.6 2.1 3.2 2.9 1.9 1.2 0.0 0.0-100.0 End-User Revenue (US$M) 1.9 5.9 5.7 4.6 2.9 1.8 0.0 0.0-100.0 Small Form Factor Half-Inch Cartridge Unit Shipments 84,282.0 93,925.0 98,438.0 105,400.0 117,200.0 130,800.0 141,700.0 151,900.0 9.1 Factory Revenue (US$M) 1,077.1 1,177.3 1,232.4 1,347.3 1,440.1 1,571.3 1,675.1 1,778.9 7.6 End-User Revenue (US$M) 1,602.6 1,617.2 1,682.1 1,841.6 1,957.9 2,131.8 2,277.7 2,417.2 7.5 Half-Inch Cartridge: High-End 3480-90/3590/9840/9940 Unit Shipments 3,159.0 2,785.0 2,405.0 2,220.0 2,110.0 1,965.0 1,895.0 1,810.0-5.5 Factory Revenue (US$M) 1,035.9 865.8 733.9 666.2 623.3 592.6 551.1 498.3-7.5 End-User Revenue (US$M) 1,143.3 996.9 820.4 744.1 696.5 661.2 606.9 550.6-7.7 Other Helical Scan Unit Shipments - - 599.0 506.0 495.0 530.0 580.0 640.0 1.3 Factory Revenue (US$M) - - 71.2 60.1 56.5 58.3 63.8 69.8-0.4 End-User Revenue (US$M) - - 98.5 83.2 80.3 83.8 91.5 100.2 0.3 Total Units 145,516.0 178,436.0 169,800.0 168,296.0 169,335.0 172,265.0 174,515.0 181,700.0 1.4 Total Factory Revenue 2,281.7 2,330.4 2,252.9 2,263.6 2,292.0 2,378.2 2,440.9 2,496.9 2.1 (US$M) Total End-User Revenue (US$M) 3,024.6 3,051.4 2,933.2 2,958.4 2,991.5 3,103.2 3,186.5 3,272.4 2.2 Source: Gartner Dataquest (July 2002) There are several new applications, such as storing digital assets and storing data related to life sciences, to name a few, that will consume vast amounts of storage in the future. Vendors in this industry must target these opportunities for tape and seek out partners to enable them to provide a complete solution for these markets whenever possible.

12 Tape Defends Its Place in the Storage Market HDDs can be viewed as the panacea for the long-term survival of tape products or as a technology that places the long-term existence of tape in peril. The growth in the number of disk drives shipped each year and the vast increases in the capacities of individual drives and disk subsystems is a boon for tape products because of the increased amount of data that will need to be backed up and archived. On the other hand, the everdecreasing prices of disk-based products, most notably for ATA drives, is encouraging more vendors to offer disk-based systems as a backup medium in lieu of tape. Certainly, many companies encourage their RAID disk storage customers to duplicate their data on a second disk system at the same location or at a remote location. Mirroring disk drives, data replication and remote copy are not new concepts. These functions have gone on for years, especially in the high-end of the market, without having any significant impact on the market for tape and tape automation systems. But, a growing number of NAS companies are positioning their NAS products for applications, such as e-mail archiving and for disk-todisk backup and restore. Companies, such as Alacritus, have appeared with software products that utilize disk systems to emulate a tape library. Alacritus has a corporate goal of disrupting the market for tape libraries by replacing tape systems with disk systems that use its software. The company also believes disk drives will eventually be used for archiving data as 2.5-inch disk drives grow in capacity. Even tape companies, such as Quantum, have introduced a disk system (the DX-30), which emulates tape and can be used as a backup system. Another example of a product that could threaten the role of tape in emerging applications is the Centera system from EMC, which was announced in late April 2002. The system is positioned to address the market for storing fixed content, such as electronic documents, digital x-rays, digital magnetic resonance imaging (MRIs), movies, e-mail, check images and broadcast content, and providing for the management and fast access of this type of information. Gartner Dataquest believes that users will increasingly use disk drives in some form as a first method of recovery and backup. In fact, we encourage this. But, for server storage, users will still also need to back up the majority of their critical data to tape to provide for an off-site disaster recovery copy and because, for many applications, tape is still a faster recovery media than disk. Also, users will still require a removable media product for archiving data, and tape is the only logical alternative and most cost-effective means for archiving large quantities of data. Tape vendors must be aware that disk will increasingly be inserted into the backup process, perhaps first only for caching, but increasingly for storage of incremental backups and for backing up the data and applications that are at the top of the priority list for corporations to get operational again after a disaster. This may relegate tape to be used only for full backups. Tape drive and tape automation vendors must be prepared for the potential threat to their market from disk-based products and be prepared toreacttoitorembraceit. Gartner Dataquest Recommendations Vendors in this market must always be aware that market timing is key to success and that good technology doesn't equate to automatic sales

without a lot of marketing. No vendor, whether it has been dominant in the past or is gaining share on the competition in the present should fool themselves into believing that the competition will just fold its hand and leave the playing table. In a declining market with intense competition, vendors must realize that there is no magic formula that will ensure long-term success. Vendors must seek out new emerging markets to help grow their tape units and revenue, but ultimately, growth will likely depend on the ability to topple the competition and take market share from another vendor or another format. 13 Key Issue How will storage systems evolve during the next five years?

14 Tape Defends Its Place in the Storage Market This document has been published to the following Marketplace codes: HARD-WW-DP-0331 For More Information... In North America and Latin America: +1-203-316-1111 In Europe, the Middle East and Africa: +44-1784-268819 In Asia/Pacific: +61-7-3405-2582 In Japan: +81-3-3481-3670 Worldwide via gartner.com: www.gartner.com Entire contents 2002 Gartner, Inc. All rights reserved. Reproduction 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. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. 109798