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Will Sun Succeed in the storage market? - part #1 of a 2 part article

Can Sun reinvent itself as a storage company? And will it be credible if it does?

Later... this article was published before Sun's September 19, 2000 announcement that it was acquiring Cobalt Networks.

Cobalt manufacturers low fat internet servers and , relevant to this discussion, NAS appliances. However, in my discussions with analysts earlier this year, I predicted that Sun would start buying other SAN and NAS companies, and the views expressed in this article already take that possibility into account. (A few years ago Sun did acquire Encore Computer, a little known manufacturer of mainframe class storage systems, and in the intervening time it has incorporated technology from Encore. But the storage market has moved on a lot since that time. )

Back to the Cobalt acquisition, in my view it's just one part of a very large number of steps which Sun has to take to play catch up in this market, and the analysis which you'll see in part 2 of this article (October) will show that Sun is still a long way behind where it needs to be, and Sun's storage problems are not just rooted in technology, but in marketing realities which will take a lot longer, and cost more to fix. By the way I expect that the recent Cobalt purchase will not be the last in Sun's storage portfolio. I'll be analysing the gaps which still remain, in part #2
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September 2000:- This is an occasional column by Zsolt Kerekes publisher of the SPARC Product Directory.
See also:- storage news
Will Sun Succeed in storage? - part #2,
Why Seagate will Fail the SSD Challenge
SSD ad - click for more info
My view, if you don't wish to read the article below and the detailed analysis in part #2 is:

No Sun does not have enough credibility as a storage vendor to most people in this market today.
As the new SAN paradigm creeps its way into the conservative bunkers of the enterprise computing environment, MIS managers suddenly face a choice they have safely avoided for many years. You really can get a better system by buying the storage boxes from a company that didn't make your server. In the long term, the choice of the storage architecture may be more important than the brand of the server and even the OS.

The biggest potential beneficiaries are the new SAN vendors.

The biggest potential losers are the server manufacturers such as Sun Microsystems who may find that in addition to losing OS market share to Linux, it's now potentially going to lose additional billions of dollars of revenue by customers who unbundle the storage box. Can Sun reinvent itself as a storage company? And if it does will it be credible?

I didn't really give this subject much thought until earlier this year, in about May (before Sun's June 14 Sun StorEdge T3 product announcements ) when I was contacted by a whole bunch of people, including storage industry analysts, market researchers and other storage vendors, who wanted to know:

what did I think about Sun's future role in the storage market?

They were contacting me, not so much because they thought I knew anything about storage (I'm still a novice in that area as many of our advertisers can tell you, but luckily they put me on the straight track pretty quickly, so those shortcomings don't last too long on the web site). No, they were contacting me because they knew I've been analysing the Sun systems market for nearly as long as anyone, and they hoped I might have some insights which would help them out with their own strategies.

After several hours of discussion with some other people who are very knowledgable about both markets, I formed my own view, based on the analysis which follows below, that even if Sun did start to take the storage business more seriously (and they do, it's got its own planet called "Sun Network Storage"), and even if Sun had the best products in the business (it doesn't - not even close - but Sun has enough money to enable them to buy most storage companies if they wanted to), Sun would still have an uphill struggle to succeed in the market.

Sun does not have enough credibility as a storage vendor to most people in this market today.

Now it's not impossible that Sun could make up the gap, but it started taking this race seriously upto a decade after many of its competitors started running, and unlike the Unix server market which it came to dominate during the 1990's, the storage market is one area in which technology cannot help them. Other people have better storage technology, but more importantly other companies have been talking about storage longer. For Sun, storage has always been a slice of the cake which they get when someone buys a Sun server. No one could blame Sun for ignoring storage for so many years. After all, their server business was growing like topsy and storage was a low profit commodity right?

That's no longer true. The complexity of today's SAN systems means that they need a lot of software to keep them running. And when you add a lot of networking software to a bunch of boxes with disks and tape drives in, they stop being a commodity and potentially become very profitable products. Especially at this stage in the market before clear industry wide standards have been established.

We know that Microsoft got a wake up call with the Internet and Netscape. But Sun is not Microsoft. It doesn't have the monopoly power to wield, and because most of its business was originally developed by VARS it has to learn a lot about marketing very fast. Probably 98% of computers in corporate America aren't made by Sun at all, they're PC's. (See also my article - View from the hill - Should Sun Microsystems make its own brand of "Intel Inside®" PC's?). That doesn't matter to Sun's server sales, because Sun's SPARC is the #1 server architecture of choice for most large organizations and this is likely to continue. But the problem is that Sun doesn't have a voice or channel in the approximately 98% of computer resellers and systems integrators that do supply PC's, storage and other computer systems to end users. At the start of most new computer paradigms, users turn to their systems integrators as the source of new technology knowledge. They want the stuff to work. IDC estimates that the worldwide storage services market will top $40 Billion in 2003, and the leaders there are currently IBM and HP.

But that's not the real problem. I'll examine the detailed factors which led me to my conclusions in the next installment of this article. Be sure to bookmark the site and come back then.

In addition to the strengths and weaknesses analysis, we'll also be revealing information which we measure on the web site, which tracks the click rates of storage related press release headlines on our SPARC and STORAGE sites. That measures the real views of over 100,000 enterprise computer buyers and is more significant than any focus group. Part 2 - Sun's storage struggle - the analysis.


Footnote:- so what's my outlook for Sun and the SPARC market as a whole? You may be surprised to find that it's still upbeat. Even assuming that I'm correct and Sun will lose storage market share in its previously captive server market and probably fail to get anywhere in the wider non SPARC server environment, the growth potential in its SPARC server products is so large that I expect their revenues of server and storage products to both keep growing through the next couple of years.

Sun's response:- we invited a response from Sun, and one of their marketers said they would contribute to this discussion. However, after sending several reminders and publishing the analysis in part 2 we never heard any more. Looks like, we were right on target in identifying this marketing problem.

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