MARKET RESEARCH: Disk Storage Systems Market Posts Highest Annual Growth Rate In Five Years

EDP Weekly's IT Monitor, Jan 18, 1999

A just released Disk Storage Systems Year-In-Review bulletin from International Data Corp. (IDC) estimates that in 1998 disk storage system revenues climbed to their highest point in five years. The 11.9 percent growth rate over 1997 brings the total disk storage systems market to a value of $27.7 billion in revenue. Says John McArthur, director of IDC's Storage Systems Research group, "more than any prior year, 1998 was a year for focus on the storage business for server and network solutions suppliers. Shrinking server margins, EMC's success, and the realization that the server companies had a captive distribution channel that was underutilized, led many to focus on storage and associated software and services." The top seven disk storage system suppliers now command 67.9 percent of the total disk storage systems market, gaining a modest .6 percent share in 1998. However, IDC predicts these leaders will exit 1999 with an even greater combined share, as the need for innovative storage solutions increases. IDC also expects the rate of revenue growth will moderate in 1999 to 8.4 percent as a result of heavy buying, the re-deployment of storage that was used for Y2K testing, and an overall desire of users to delay discretionary purchases until after January 1, 2000. Looking beyond 1999, IDC predicts storage system revenue growth rates will bounce back to double digits. The upward trend will shift supplier focus on reducing the total cost of ownership of storage solutions. With the purchase of Digital, Compaq surges ahead as the indisputable leader with a sizable 20 percent share, representing $5.5 billion in worldwide revenues. Because of the Compaq-Digital merger, long-time first place holder IBM dropped to second position in disk system revenue in 1998. At 14.3 percent share, IBM had worldwide revenues totaling near $4 billion in 1998. EMC fortified its position as number three in disk storage systems revenue and saw its first billion-dollar quarter in revenues in 3Q98. Now holding 11.5 percent share, EMC had the greatest momentum with 1.7 percent revenue share growth to reach $3.2 billion in worldwide revenues. With a new Network Storage Division created in 1998, Sun retained its number four spot and grew to $1.9 billion in worldwide revenues, with a seven percent share. Due to increased storage capabilities for its server families, Hewlett-Packard grew to 6.6 percent share, representing $1.8 billion in worldwide revenues. Revenue for Hitachi was flat in 1998, owing to heavy discounting and the decline in the Japanese economy. The company faces some challenges, says IDC, in developing a distribution strategy outside of the current direct sales force. Hitachi ended 1998 with 5.1 percent, and $1.4 billion in worldwide revenues. Dell raised its position in 1998 to join the billion dollar storage club with 3.4 percent share and $946 million in worldwide revenues. Dell's shipments consist almost entirely of Windows NT (2000) and NOS, the two operating environments for which IDC expects the highest growth rate in disk storage systems from 1998-2002. From an operating systems perspective, Windows NT (2000) will remain the fastest growing market with 30 percent compound annual growth rate forecast from 1998 through 2002. In 2002, Windows NT (2000) will become the largest disk storage systems market with a 38.6 percent share of revenue. Unix, growing at a more modest compound annual growth rate of 8.8 percent, will fall to second place, but will still capture 35 percent of total disk storage systems revenue in 2002.

Computer Network Penetration Still Low In Small And Medium Business Market

A recent survey of small and medium businesses (SMBs) conducted by the Yankee Group indicates that many SMBs have yet to adopt computer networking as a communications and business tool. As a result, the Yankee Group emphasizes that network vendors and resellers have a "huge opportunity" to tap this market over the next several years. However, they will face some interesting challenges in developing distribution channels to meet future networking equipment and service demands. Yankee Group's data shows that 42 percent of small businesses and 84 percent of medium businesses have a local area network (LAN) connecting computers and devices within the confines of their businesses. More illuminating, however, is that only 12 percent of all small businesses and 42 percent of all medium business have wide area networks (WANs) connecting their businesses to their other locations. Thirty six percent of small businesses that have multiple sites, and 60 percent of medium business with multiple sites use WANs to connect these sites. "Quite frankly, we were staggered by these results," says Joseph Villarosa, director of Yankee Group's Small & Medium Business Communications program. "With the level of strategic value placed on connectivity over the past several years, it is surprising that so many SMBs have yet to adopt the necessary networking technologies needed to better meet their business goals. Although LAN penetration is higher than WAN penetration, our data suggests that there are 7.3 million small businesses that are still without a LAN and 1.5 million SMBs that should have a WAN, but do not! We see ample opportunity on both fronts for network equipment vendors and resellers to develop strategies to sell to this lucrative market." SMBs account for 98 percent of all US businesses, represent about 50 percent of the gross national product, and spend $445 billion annually on IT products and services.