Store It!

By Eugster, Cristopher C.; Hawn, Jeff et al. | The McKinsey Quarterly, Winter 2000 | Go to article overview

Store It!


Eugster, Cristopher C., Hawn, Jeff, Johnsen, Kristin, Torres, Alberto, The McKinsey Quarterly


The authors thank Hugo Barra, Mike Green, Jon Gross, and Jeff Shulman for their contributions to this article.

Who will organize the corporate data closet? The answer depends on whether, how, and when standards emerge.

How and where big companies store the bits and bytes containing their digital data couldn't be described as the glamorous side of information technology. Indeed, until recently, data storage was just another component of the system: if IBM sold you the mainframe, it sold you the storage too.

But with the amount of data stored at a typical Fortune 2000 company doubling--and soon, perhaps, tripling--every year, this once sleepy corner of the IT world is being transformed. The global market is booming: in the next five years, storage-related hardware and software sales are expected to rise to $47 billion, from $27 billion. Yet current technologies, such as server-attached storage, simply can't handle this rapid growth in the volume of data and will soon be swept aside.

Hoping to take part in the boom, many companies--including storage giant EMC, server companies (notably Compaq Computer and Dell Computer), networking powerhouses (like Sun Microsystems), and start-ups (such as Brocade and Vixel)--are following the money. Here, as on many other technology battlegrounds, the outcome will depend on whether standards can be established and, if so, which company establishes them. (See sidebar, "Hard knocks in the hard-disk-drive industry," on the next page.)

A succession of shocks

The industry got a shock in the early 1990s, when EMC, a storage solution provider that is now the market leader, boldly went where no company had gone before: directly into IBM's captive mainframe storage marker. At the time, most people inside and outside the company considered the move to be a colossal--and possibly fatal--blunder. But the gamble paid off famously; by 1993, EMC was selling more storage for IBM mainframes than IBM was. The captive market had been broken, and storage became a market in its own right.

As distributed computing diminished the importance of the mainframe-dominated data centers of large companies, the storage market changed yet again. This time, it gravitated toward storage hardware attached to servers running under open platforms like UNIX and Microsoft Windows NT, so that midrange and entry-level storage systems for those severs came to account for an ever larger share of the total (Exhibit 1). EMC succeeded in keeping up with this shift and remained the overall market leader. Meanwhile, however, the server companies emerged as a threat. Faced with shrinking margins from the sale of servers themselves and interested in pursuing the additional growth promised by storage, vendors such as Compaq, Dell, Hewlett-Packard, and Sun started using the server business as a channel for promoting sales of RAID storage. [1] That approach has delivered results: over the past two years, Compaq's storage business has grown by 43 percent, Sun's by 21 percent, and HP's by 10 percent.

Oddly enough, this development created a set of captive markets for open-system storage, much like the captive mainframe market EMC broke up in the early '90s. In fact, vendors of servers that run under Windows NT capture more than 90 percent of the revenue for attached storage, while almost 40 percent of mainframe storage sales are noncaptive (Exhibit 2, on the next page). Different brands do offer some level of interoperability, but storage solutions that don't come from the server's supplier remain hard to integrate.

Although the reemergence of captive storage markets has generated profits for software and hardware vendors, it has become a headache for the IT departments of the companies that buy their products. The difficulties are most pressing in distributed computing environments, where a storage device is typically attached directly to a single server (Exhibit 3, which also illustrates the two server architectures described below). …

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