Resellers Must Reposition in Stagnant Storage Market

By John Moore  |  Posted 2005-03-14 Email Print this article Print
 
 
 
 
 
 
 

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Opinion: Compliance is one of the few sales levers still available in the storage market. VARs focusing on storage will have to use it effectively or change tactics to keep up with a market with high demand for space, but low growth in revenue.

A series of recent channel announcements share a common thread: the notion that regulatory compliance helps drive storage demand.

Executives at Arrow Electronics Inc. cited compliance as a force in the company's storage growth.

Electronic Data Systems Corp. said it formed an e-mail archiving alliance with EMC Corp. to focus on corporate compliance issues.

EMC's freshly minted solutions for medium enterprises and SMBs (small and midsize businesses) aim toward compliance as well.

"Regulatory compliance adds new urgency to the challenges of archiving," EMC's promotional literature states.

Other than it being the hot topic of the moment in corporate computing, why is compliance so popular with storage vendors?

It's one of the few sales levers still available in an otherwise-cool market.

Sarbanes-Oxley, the Health Insurance Portability and Accountability Act and a host of other government requirements have contributed to storage demand.

But instead of adding impetus to an already robust sector, compliance seems to be one of the few things keeping the storage market moving upward.

Gartner Inc., for one, believes C-level executives are confining storage purchases to projects that lower operational cost and keep them in line with government directives.

In fact, there's not currently a single application or industry that looks able to grow revenue from RAID-based disk storage by more than "a low single-digit percentage," wrote Roger Cox, vice president in the storage research group at Gartner and lead author of Gartner's Global RAID Disk Storage Forecast, 2004-2007.

Growth predictions.

What growth there is, Cox predicted, will occur in RAID external controllers.

Vendor revenue in the host-based RAID category—direct attached storage—will decline through 2007.

Gartner identified the fourth quarter as the period in which the greatest drop occurred.

In 2004, total worldwide external controller-based disk storage revenue was $13.5 billion—a 5.1 percent increase over 2003.

Fourth-quarter revenue, however, grew only 1.2 percent over the year-earlier quarter, according to Gartner.

International Data Corp. also reported Q4 growth of only 1 percent in revenue for external disk products compared to the previous year but—tellingly—also said demand for external storage capacity grew by 57.7 percent.

That's the heart of the storage dilemma: Demand for capacity is soaring, while revenue growth is negligible.

Increased drive capacity and inexpensive storage technologies such as serial ATA are among the contributing factors, Cox said.

The lackluster growth should give pause to resellers and integrators that have staked out storage as a specialty.

Niches such as compliance will be more important than ever, although they will likely become more competitive.

Solutions providers might also want to borrow a page from EMC's playbook: look for storage opportunities downstream among SMBs.

Smaller companies now appear to be experiencing the same kind of storage crises their enterprise counterparts encountered a couple of years ago.

EMC officials believe the size of the medium enterprise and SMB space already rivals that of the largest enterprises.

Storage provided a life preserver of sorts during the information technology slump, and many channel players have clearly benefited from their storage segues.

But it might be time for storage resellers and integrators to revisit their storage strategies.

 
 
 
 
John writes the Contract Watch column and his own column for the Channel Insider.

John has covered the information-technology industry for 15 years, focusing on government issues, systems integrators, resellers and channel activities. Prior to working with Channel Insider, he was an editor at Smart Partner, and a department editor at Federal Computer Week, a newspaper covering federal information technology. At Federal Computer Week, John covered federal contractors and compiled the publication's annual ranking of the market's top 25 integrators. John also was a senior editor in the Washington, D.C., bureau of Computer Systems News.

 
 
 
 
 
























 
 
 
 
 
 

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