Storage: Show Me the Money

Market counter IDC reported last week "Worldwide external disk storage systems factory revenues grew slightly in the fourth quarter of 2004 (4Q04), posting just 1% growth over the same quarter one year ago to $3.8 billion, according to IDC’s Worldwide Quarterly Disk Storage Systems Tracker. The total disk storage systems market grew at a slightly higher year-over-year rate of 1.8% in the fourth quarter, as internal storage revenues grew faster than external storage. Demand for disk storage systems capacity picked up considerably in the fourth quarter, however, resulting in 57.7% year-over-year growth in external disk storage systems petabytes. For the full year 2004, the external disk storage systems market posted 4.7% revenue growth over 2003 to $14.2 billion."

EMC and EMC partner Dell are growing fastest, while HP lost several market share points last year (see separate blog entry).

Where's the Money?
There is a real disconnect between the piddling 1% revenue growth noted by IDC and the widespread belief that storage growth is 40% - 50% a year. I believe growth is at the 40% - 50% a year range. My research last year at Aberdeen Group with F1000 users showed statistically significant results at the 40%+ level for planned gigabytes of enterprise storage added (e.g., datacenter, not desktop). To this add EMC CEO Joe Tucci's complaint to analysts last month that EMC could not get enough fibre channel disk drives to meet demand this quarter. And it's not just me: EMC states storage industry growth is 50%, so many smart people are drinking the 50% growth Koolaid.

The question I pose is this: since no one is suggesting that enterprise storage prices have declined 40% - 50% in the past year, how can revenues be up only 4.7 percent as IDC claims while gigabytes shipped is up over 40%? The arithmetic just does not work! One answer is that IT is budgeting and planning for 40% growth but buying far less -- 35% less growth than planned. Another could be a fundamental flaw in the methodology used by IDC (and others) which understates storage spending growth as a share of the entire server/storage/software/services pie.

I'd like the answer, please. Post your thoughts.

Peter S. Kastner