View from the Hill

STORAGEsearch looks back on 2002

During the worst days of the US IT recession in 2001, most optimistists were looking forward to a recovery in 2002 which would solve all their business problems...

Well, the recovery came, if you believe the economic data, but this didn't mark the end of storage company woes. When I looked at the financial results of the top 1,000 storage companies for my May article the fastest growing profitable STORAGE companies in the US - I found it difficult to find many companies which were actually making money, so the choice was limited. And I concluded that because of competitive pressure, storage prices in most cases were reflecting the aspirations of companies to grow market share rather than achieve profitability. I commented that for many vendors in the storage industry the recovery could be as bad as the recession.

If we needed any clearer confirmation of this, it came loud and clear from a series of financial results from EMC, the darling of the dotcom boom era, which showed that the company was reporting quarterly revenues at a run rate less than half its $9 Billion FY 2000 peak. So in 2002, EMC lost its leadership role as the model of a successful storage company. But was the recession the sole cause? Or were there underlying changes in the way that buyers were viewing storage vendors? My interpretation was that many of EMC's problems could be traced to the hundreds of other storage companies which were nibbling away at its target markets, and that it would never recover its once pre-eminent market share unless it could become the lowest cost supplier.

Still in the land of the giants, the month of May saw the merging of HP and Compaq into the world's largest storage company. By year end the only positives which had come out of the merger were the optimistic sounding aspirational pronouncements in HP press releases. But these sentiments belied the economic data coming out of the company and its partners. If shareholders and users were going to see benefits arising from the merger, they would have to wait another year to find out.

2002 was also the year in which we discovered that the number one emerging technology of 2001, iSCSI, was still mostly vaporware. Although dozens of companies announced their plans for TCP/IP Offload Accelerators, FCIP and iSCSI accelerators during the course of 2002, there was very little shipment of real tangible hardware products to users, something which we discovered when our advertising sales person knocked on the doors of the companies in the industry in the summer. As several distributors neatly summarised:- "If we can't ship it, because the manufacturer hasn't made it, then there's no point in us advertising these products." Manufacturers who were shipping products were shipping so few that they mostly reported they had little or no marketing funds to do any advertising at this stage in the market cycle.

However, the software side of the internet storage market continued growing apace. iSCSI and related software became the fuel for the holy grail of real-time offsite backup and data replication. RAID manufacturers found that by partnering with the right software company, they could find a new theoretical need for their boxes as disk to disk backup systems. The D2d niche originally pioneered by Nexsan Technologies was joined by a growing pack of other companies including Globalstor Data and ASACA. I wasn't sure whether users really would adopt the D2d network backup paradigm in large numbers until StorageTek announced its BladeStore disk subsystem in October. StorageTek, founded in 1969, has been around long enough to see many passing fads and in recent years the company has not the fastest off the starting block. So I reckon that their market research must have confirmed that disk to disk backup really is something that big storage users want to do.

There are no doubts about the #1 emerging storage technology in 2002. It was Serial ATA. We first started running news stories about Serial ATA in February 2001, and created a special directory page, featuring Megabyte's Auntie Wanda in November that year. But interest in Serial ATA remained low. As with most new emerging technologies, it's mainly marketers and systems developers who are interested until there's an imminent prospect of real products appearing. In July, it entered the top 10 directory subjects on STORAGEsearch, and in August hit #1, where it has been parked ever since.

The companies of the year in 2002, measured by STORAGEsearch reader pageviews on their company profile pages, were LSI Logic in the #1 slot, followed closely by Maxtor, IBM, Adaptec and Sony respectively.

That was the upside. On the downside the number of top 1,000 storage companies which had been acquired or gone bust since the millenium passed the 130 mark. Despite that venture capitalists continued to pour funds into even more storage start ups.

Surprisingly this year the number of storage related events didn't seem to drop off. Our events archive for 2002 looks just as packed as it did the year before. I can only assume that in a market where everything seems to be changing so fast, a lot of people value the insights they get from talking to other people in the same predicament and being able to touch and feel products to get an idea how real they are. As a leading publication in the industry this year we were proud to have sponsored the following storage expos and conferences:- IDC Storage Forum , Network Storage 2002, Storage World Conference 2002, Storage Expo 2002, Storage Visions 2003 and Server I/O 2003 (the latter two events take place next month in January 2003).

2002 was also the year when the rest of the IT publishing market finally caught onto the importance of the storage paradigm, and you could say it was the year of the storage portal bubble. The number of significant web based storage publications carrying advertising grew from a few dozen in 2001, to more than a hundred in 2002. It's hard to believe that there will be enough advertising dollars to sustain all this frantic activity, but it's going to be a big market, so there are many hopefuls out there.

And how did this affect the mouse site? It was hard to notice any significant change as our readership patterns as our readership once again doubled compared to the year before. And as we ended our 11th year as an IT directory publisher and 7th year as a dotcom, we were pleasantly surprised to see that once again we had achieved double digit revenue growth and were still profitable. Of course, we couldn't do this without the help of the thousands of you readers who contribute articles, ideas and raw content to the site, and without the help of our loyal and growing base of advertisers who have stuck with us in good times and in bad.

To all of you, thanks for taking the time to read STORAGEsearch. We hope you find it useful and will bookmark this web site so you can rejoin us after the holiday in the new year ahead. When, who know? The recovery might be for real.

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