Tuesday, January 27, 2009

2009 Outlook

Like everyone else I'm looking at the business climate in 2009, and it makes me nervous. I listen to the news reports of more layoffs and cutbacks that come almost nightly, and wonder what that means to me and to the storage business. I have coworkers who suggest that storage is recession-proof. That no matter what the economy is doing, that data will continue to grow, and thus companies will have to continue to grow their storage infrastructure. I'm not sure that I buy it, but that just might be my nerves talking. Perhaps it's just that I tend to believe that the truth typically lies somewhere in the middle. So, I thought I'd take a minute and describe what I think is going to happen this year. No guarantees, I can't predict the future, but a little speculation is always fun.

Storage will continue to grow just not as fast
Yup, I do believe that the amounts of data that companies keep on hand will continue to grow. Just not at the same rate it has in the past. Depending on whom you want to believe, year to year growth for storage has been growing at 40-60% CAGAR or even more. I'm guessing that in 2009 we are not going to see that kind of growth. Due to the reduced sales volume that most companies will see due to the recession, there's got to be an attendant reduction in the amount of data that gets created. How much is the $64,000.00 question. I suspect that the growth rate might be cut in half, or even more. Add to this the fact that budgets are getting slashed and storage managers are going to be looking to expend the useful life of storage that they have on hand and it makes me think that this year the average growth rate for storage is going to sit somewhere between 5-10%. So, overall I believe that the volume of raw disk sales is going to drop dramatically. I'm probably not the only one looking at things that way, look at the major storage vendors, they are all cutting forecasts, laying off people, and generally cutting back.

It's not all doom and gloom
I think that in this situation, however, there is some opportunity. Storage providers that can help the storage managers at their clients address the issues of their budget reductions and to find ways to do more with less will get quite a bit of business. I also think that companies, like the one I work for, that can package best of breed hardware and software into solutions that are very cost effective will also do well. Vendor loyalty, however, is going to go out the window and companies that were once locked into a single vendor will look at other vendors if they perceive that other vendor as being more cost effective. Again, this means opportunity for vendors to get into companies that they had previously been locked out of. I predict that we are going to see some of the major storage users leave the "big four" (EMC, NepApp, Hitachi, IBM) and moving to storage from smaller players in an effort to reduce both CAPEX and OPEX costs.

The year of storage efficiency and virtualization
Finally, this year it will all be about efficiency and virtualization. I'm betting that CIOs will actually accelerate any server virtualization projects that they currently have in the works in order to get those reduced costs as quickly as they can get them. However, what they will find is that unless they are quite careful, their server virtualization project might result in increased spending on storage, backup/recovery, and DR that they hadn't planned for. This can be overcome to some extent by partnering with storage suppliers that understand the issues involved when dealing in a virtualized world. I also predict that sales of things like data deduplication, and thin provisioning are going to accelerate this year. Again, all of this is in an effort to "do more with less" on the part of storage consumers.
So, overall, I'm cautiously optimistic that for those that can show their customers how to "do more with less" this year will be just a challenge, but in the end the will survive. For those who continue to try and do business as usual, well, they mind for this year to be more difficult.


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