Storage: Enterprise Market Blockbuster

Bollywood gospel says: no film starring Big B would ever be a flop. Storage
is the Big B to the enterprise infotech market. The sector revenues seem to be
immune to any southward movement. The growth is average in some years-even
that rivals overall industry growth-while in others, its rise is meteoric.

FY 2005-06 was one such year of stupendous growth. All segments, be it
external storage including network storage, secondary storage including tape
drives and tape automation, or storage software, registered impressive growth.
Since the dynamics of all three segments are completely different, it makes
little sense to collate the overall storage figure. Instead, it will be more
appropriate to analyze how each market grew separately and the lack of vendors
operating in all three segments. Other than HP and IBM, and to some extent Sun
(following the StorageTek acquisition), no vendor covers the turf completely.

External storage grew by 39% while storage software grew by 38%. For
software, this is understandable considering its low base. That external storage
with a significantly high base of Rs 565 crore in FY 2004-05 could record this
high growth is quite amazing. Secondary storage registered a more conservative
growth of 11%, though to be fair, exact data in this category is not available.
This might explain the drop in the growth rate by a couple of points from that
of FY 2004-05.

SAN's Phenomenal Growth

The external storage market owes its massive upsurge in revenues to the
phenomenal 85% growth in the networked-storage category. The SAN market
skyrocketed at 90% to reach Rs 449 crore, while even the 68% growth in NAS
revenues merited headlines. This euphoria about SAN/NAS means the good old
external DAS is to perdition. It might be a bit premature to write its epitaph
with a Rs 208-crore revenue in FY 2005-06. Yet, two consecutive years of
negative growth-this time down by 18%-shows that Indian enterprises have
finally matured to migrate from DAS to NAS or SAN, or increasingly, to a
combination of both.

Fiber Channel (FC) SAN, long regarded as expensive by most Indian
enterprises, became the frontrunner in enterprise storage for block-level
storage access requirements. More than 90% of the SAN deployments during FY
2005-06 belonged to the fiber channel category. The impetus came, as expected,
from banks and telcos. And considering the mission-critical data run by banks
and telcos, fiber channel SAN became its preferred option.

While 1 Gbps and 2 Gbps FC SANs were already available, FY 2005-06 saw the
emergence of the 4 Gbps variety, doubling the speed of the existing standard.
And there was only a marginal price difference, with 4 Gbps coming at no more
than 10% premium over the 2 Gbps price.

Most large data centers, such as Reliance's in DAKC and VSNL's in Navi
Mumbai, opted for 4 Gbps FC SAN as it suited their need for high-speed data
replication. On the flip side, there were problems in its full adoption as all
the front- and back-end components needed to be 4 Gbps-compliant. There were 4
Gbps arrays available in the market, but only for the front end. This year
vendors are expected to come out with 4 Gbps drives too.

IP SAN generated a lot of hype. It was mostly popular with SMBs and at DR
sites. Since it ran on existing LAN and hardware, setting it up was cheap, as it
eliminated the cost of host-bus adapter and management. Despite the hype, the IP
SAN market was miniscule contributing around Rs 20 crore in FY 2005-06.

Intransa, a niche player, did 33 installations during the year. Even NetApp
saw a five-fold increase in adoption. Large enterprises went for IP SANs for
departmental branches and offices in remote locations. However, all were
unanimous that IP SAN's overwhelming popularity was premature. The adoption
base was pretty low to make any major assessment. Then again, most of it was for
non-critical applications where parameters like performance and response times
are not important.

The Compliance Push

Compliance conformation became mainstream. The need to store information for
long periods of time and then retrieve it at a short notice, while adhering to
regulations gave an impetus to compliance in the storage market. Almost all
major storage vendors eyed this market as they considered it to have huge
potential. Many Indian companies with business dealings in the US have been
mandated to comply with international standards like the Sarbanes Oxley Act,
Basel II, etc. 

Major storage vendors such as IBM, Sun, NetApp, EMC and HP have designed a
well-defined strategy to tap this emerging market. Demand for compliance-related
storage solutions is on the rise. The BFSI and telecom segments are expected to
adopt newer compliance-based solutions in India. Special data format
requiredments by corporate governance projects and the Reserve Bank of India are
also pushing the adoption of compliance-based storage solutions in the country.

Enterprise Content Management also became imperative for enterprises, driven
by the unprecedented growth in data, including structured, semi-structured, and
unstructured information, which grew by approximately 50% during the year. Over
80% enterprise information was unstructured, and a bulk was not managed.
Regulations compelled organizations to store and manage data for specific
periods of time giving rise to content management challenges. Various data theft
scandals in the BPO industry also made BPO outfits reanalyze their data storage
and security strategies. Given these content management challenges, enterprises
needed to look at adopting well-defined and well-planned content management
strategies in association with experts in the field.

Virtualizing Storage

Many enterprises adopted storage virtualization in FY 2005-06. Storage
virtualization as a concept has existed for a long time, but has only now
started finding takers in India on a large scale. Storage pooling, data
migration and replication are some of the virtualization technologies commonly
used in SAN. 

Storage virtualization allowed IT departments to easily deploy tiers of
storage based on specific application requirements for performance, capacity and
cost-effectiveness. Enterprises have been able to save storage costs by
increasing the utilization of their storage disks, which is a significant
increase at more than 50%. BFSI, telecom and the energy verticals led the way in
adoption.

HP regains the #1 slot from EMC after a year. However, with Dell reselling substantial EMC products, the EMC-Dell combo will still remain on top. The surprise at #2 is Network Appliance, riding strong on NAS

ILM Provides Direction

Information Lifecycle Management (ILM) was another buzzword. Implementing
ILM means a lot of effort in identifying and categorizing business data which is
often the job of a specialist. Thus storage vendors generated revenues from this
market by offering consultation services for implementing ILM.

Enterprises gradually adopted ILM strategies to protect corporate and
intellectual property information.  Telecom, insurance, government institutes and banks were the
main takers. ITC in Kolkata, Tata Elxsi for its visual computing lab in
Bangalore, Tata Teleservices in Hyderabad and Mumbai, and Hutch across India are
practicing different stages of ILM.

Services Money Spinner

With storage complexities on the rise, services built around storage became
a hot area. While vendors like HP and IBM who are traditionally into services
continued their momentum, pure storage vendors like NetApp and EMC followed the
suit in FY 2005-06, and successfully entered the storage consulting and services
arena. They provided services around storage consolidation to help customers
align their architectures with business requirements.

Big enterprises went in for large-scale adoption of storage services in FY
2005-06, but SMBs are yet to follow suit. Large enterprises, mainly from the
BFSI and telecom sector, drove the storage services due to the unpredictable
growth of their businesses.

Secondary Growth

The secondary storage category such as tape and disk-based backup stayed in
the background, as the  market grew
by only 11%. However, the market reality is that Indian enterprises cannot write
off secondary storage of tapes and drives, especially for backup and archival.
FY 2005-06 recognized that rather than the disks wiping out the existence of
tapes, the market would see a co-existence of both. 

While tape drives accounted for 59% of the revenues during
FY 2005-06, tape automation products contributed the rest. However, it was the
mid-range DLT/VS and low-end DDS/DAT drives that witnessed faster growth. The
high-end LTO is yet to make  inroads
into the Indian market. There were even less takers for proprietary technologies
like Travan and AIT/VXA.

The triumvirate of HP, IBM and Quantum held center stage with Sun
Microsystems joining the party, thanks to its StorageTek acquisition. HP had
more than 40% of the market share followed by IBM and Quantum. Incidentally, for
Quantum, India was its fastest growing market in Asia-Pacific.

Gen-Next Tape Technologies

Tape-based solutions became more intelligent, and tape drives were equipped
with more advanced features. In technology, the capacity, throughput and
scalability had gone up in FY 2005-06 with affordable prices. In tape drives
there were a variety of options to choose from, starting from single cartridge
tape drives and auto-loaders to multiple cartridges and tape libraries that can
accommodate large volume backups. The IT industry was the driver of this growth.
Other verticals like BFSI, telecom, BPO, and R&D establishments also
deployed these backup solutions. This was mainly because tape-based backup
proved to be cost-effective and scalable with long-term reliability.

With data security becoming an increasing concern for enterprises, tape
technologies like WORM (Write Once Read Many) became crucial. Vendors like
Quantum introduced DLT-V4 drive that combined DLTSageT for predictive and
preventive diagnostic manageability. They also developed the DLTIceT for meeting
regulatory compliance requirements through standard media and WORM capability.

FY 2005-06 witnessed the genesis of tiered storage architecture-an
advancement of the ILM concept. This concept of a hybrid solution entailed
enterprises to combine disks and tape solutions. However, what caught popular
imagination was the concept of tape automation. Both tape automation and robotic
libraries gained popularity last year. HDFC Bank uses Sun StorEdge L700 robotic
library, while Pragati Printers uses the Sun StorEdge L40 variety.

Market also Favored Disks

In FY 2005-06, the disk-to-disk backup became prominent, pushing tape into
archival and long-term backup usage. With disk prices falling and SATA-based
storage solutions coming to the fore, customers had a credible alibi for
adopting disk-based backup solutions. Disk-based backups were also finding new
applications. They were suitable for disaster recovery, imaging, document
management, email, archiving, broadcasting, security surveillance and
information warehousing.

Indian companies, both large enterprises and SMBs, realized that the way to
reduce the backup window and retrieve storage was to use the disk-to-disk backup
technology. Although tape continued to be a prime medium for long-term archival,
backups were increasingly being done on disks due to a need for an
ever-shrinking backup window as critical data applications needed to be restored
quickly and efficiently. Additionally, disk drives were available in speeds of
10,000 rpm and 15,000 rpm, allowing enterprises to conduct ultra-fast backups.

With the arrival of cheaper disk technologies such as SATA, disk drives
started giving tough competition to tapes. The adoption and growth of SATA would
definitely lead to more organizations adopting disk storage as it would continue
to provide a cost-effective solution for bulk storage. Nearly 70% installations
in India in FY 2005-06 are still on PATA and their graduation to SATA drives
would take time, but the adoption of disk-based backup is expected to be rapid.

Soft Side of Storage

With revenues going up by 38%, the storage software market matched the
growth of external storage. The leader changed, though only in name. Veritas led
the pack in FY 2004-05, while the FY06 leader was Symantec, thanks to its
acquisition of Veritas. EMC, Hitachi Data Systems, Network Appliance and CA were
the others in Top 5. Backup and archival software still enjoyed a lion's share
of Rs 61 crore that constituted 47% of the overall storage software market.
However, storage replication software and storage resource management categories
showed more impressive growth of 82% and 64% respectively. Storage software was
incidentally one of the strongest performers in the overall IT market as a
result of increased interest in data protection and tighter legislation around
data storage.

Continued customer spending on software for data protection, storage resource
management, and compliance helped drive this growth in FY 2005-06. This spending
growth related to data protection, including replication, backup, and archive
software was an indicator of customers' continued concerns about application
availability, data management, and business continuity. The storage replication
software also witnessed tremendous growth during the year. The replication tool
creates a second copy of the backup for disaster recovery. Incidentally, not
only the storage vendors but enterprise application vendors such as Oracle,
Sybase and Microsoft also contributed to this segment with their replication
tools.

The reliance on business-critical applications was driving enterprises to
deploy and maintain complex and expensive storage infrastructures. The emergence
of new business models demanding non-stop application availability have made the
organizations feel the need for storage management solutions, such as Storage
Resource Management (SRM), SAN management, etc, to ensure that the end-users can
work uninterrupted.

There was a gradual increase in overall shipment throughout the year. Naturally this translated into similar growth in storage capacity shipped		While HP ruled in the BFSI segment it was neck and neck with EMC for a pie in manufacturing segment. EMC, however garnered maximum share in the telecom vertical, as Network Appliance scored in the services sector

The Vendor Saga

HP--It was a great year for HP as it regained the #1 slot in external
storage, led the market in SAN deployment, was the #2 in NAS-though way behind
the leader Network Appliance, and still among the top five in external DAS. It
was numero uno in secondary storage too with nearly 43% of the market share.

It launched a number of new products including the StorageWorks family which
was its trumpcard in networked storage. Both BFSI and manufacturing remained
HP's strong points-there were major deployments in large enterprises like
Bank of India, Bank of Baroda and Ashok Leyland.