The human genome project and a webcast of a concert by rock group U2 might seem to have little in common. Yet both benefit from the advances in data storage technology that make it practical and economical to store quantities of data that would have been unthinkable five years ago.
At a time when most sectors of the IT industry are witnessing a sharp downturn, many data storage vendors are bucking the trend. Spurred by data-hungry applications such as e-business, data warehousing and multimedia, the enterprise storage market is predicted to grow at more than 52 per cent in 2001, according to Forrester Research.
But it is not just corporate IT departments that are big storage users. The humble e-mail has grown into a voracious consumer of storage. Yahoo, the internet portal, has many terabytes to handle the 12bn messages its users generate each month - one terabyte equals some 1,000 gigabytes (GB).
In the internet era, the home PC has been transformed into a powerful "digital hub" for handling digital video, MP3 music files and other multimedia. But all this content requires storing and so PC disk drives keep getting bigger. Just installing Microsoft's Windows XP operating system, announced last month, (OCT), consumes 1.5GB of disk space. "Everything is going digital these days and so you have to have more storage," says Joel Stead, senior vice president of marketing at Seagate Technology, the veteran disk drive manufacturer.
Despite new consumer applications, corporate computing is still the main market for most storage vendors and here prospects are heavily affected by the worsening economy.
"There is no doubt that IT directors are going to be under huge pressure to consolidate spending on all aspects of hardware," says Tim Pitcher, managing director for northern Europe at Network Appliance, the US vendor.
Nevertheless, analysts see the storage sector as better placed than most. "Whatever the economy does, companies are still going to need increasing amounts of storage," says Alastair McAulay, senior consultant at PA Consulting.
In addition, storage vendors sell to many industries, which increases resilience. "If one industry sees a slowdown, others will still be growing," says Alexander Lehrmann, European head of marketing for Compaq's enterprise storage division.
One industry that has been hit especially hard is financial services, first by the slowdown and more recently by the events of September 11. The terrorist attacks have underlined the importance of disaster recovery in corporate computing.
But vendors are treading carefully in their sales pitches. EMC, for example, supplies storage to around 30 institutions affected by the World Trade Center disaster. Many were able to get running again because of EMC's disaster recovery software. But only one, Deutsche Bank, has let EMC publicise the fact.
Vendors admit that the large organisations that most need disaster recovery facilities probably already have them. Nevertheless, there are opportunities elsewhere.
"Small and medium-sized enterprises will now think a lot more about disaster recovery," says Michael Vath, European general manager at Storage Technology (StorageTek), the leader in tape systems. He believes SMEs will be attracted by a new generation of storage service providers.
In return for a monthly fee, these providers offer web-based services, such as storage on demand and online PC back-up. StorageTek spun off a company, Managed Storage International, to focus on this emerging market.
One of MSI's more recent developments is content management for specific industries. Media companies, for example, have archives that are increasingly held in digital format. However, these companies have little experience in data storage and so MSI has developed a "technology-free" approach for managing their digital archives remotely.
European broadcaster RTL uses MSI to archive and access nearly 300 terabytes of digital content for its TV stations. MSI also sees health companies and libraries as promising markets for these managed content services.
These developments echo a broad trend in the industry. "The world is moving to content and it's no longer simply about storing data," says Mr Pitcher.
Network Appliance, which supplied Yahoo's e-mail storage system, specialises in network-attached storage (NAS), which allows storage devices to be hung off an office network. A rival technology, called storage area network (SAN), is promoted by EMC, Compaq, and others. They claim SANs are faster and more reliable than NAS as they use a dedicated fibre network to link the storage devices.
But SANs are also more expensive. Most experts believe SANs will ultimately triumph because the technology is superior. "SANs are not for the faint-hearted as they are new and difficult to implement," says Mr McAulay of PA Consulting. "But when you are looking at managing terabytes of data, SANs are probably the only way forward."
Nevertheless, SANs are expensive and in today's harsh times, Network Appliance claims its cheaper NAS technology appeals to IT directors struggling with reduced budgets (see article comparing the two approaches, on the web).
As well as corporate data centres, Network Appliance systems are used for human genome research, medical records and geophysical exploration. It also supplied the technology behind U2's webcast last month.
To better support network-based applications such as these, the storage industry is shifting to a networked storage model. "There is a move away from directly attached devices to much more networked storage," says Mike Ruettgers, EMC executive chairman. "That trend will get under way with a lot of vigour in the next couple of years and you'll be able to connect thousands of servers to a pool of storage with no impact on performance."
As well as SANs and NAS, there are a plethora of emerging standards, such as Dafs and iSCSI, that focus on networked storage.
Whatever the future holds, the industry's overriding concern today is the sickly economy. EMC, the largest storage systems vendor, frightened the industry last month by announcing its first quarterly loss in a dozen years. Revenue for the third quarter almost halved to Dollars 1.2bn, while restructuring charges pushed EMC into the red by almost Dollars 1bn. EMC is laying off around 4,000 people.
Mr Ruettgers says the data storage industry is slowing a lot faster than people think because of "continued body blows from the economy." He claims the trend is industry wide and not specific to EMC. Nevertheless, analysts say EMC's business model, based on high margins and a costly direct sales force, is probably more to blame.
In stark contrast to EMC, StorageTek last month reported quarterly results that exceeded expectations. Both profits and revenues were up on the year-earlier period.
Network Appliance claims it can already see the light at the end of the tunnel. Last month, it said business had rebounded in the weeks since September 11 and claimed it would not have to cut more jobs if the trend continues (it cut around 200 jobs in August).
The boom times of the past three years are over and many IT budgets have been frozen. But the storage industry believes it is better placed than most to ride out the current crisis. "Even in a crisis, people have to store data," says Mr Lehrmann of Compaq.
Copyright: The Financial Times Limited
