The storage industry witnessed a steady growth during the three quarters of 2003 (April onwards), but the market simply exploded in the first quarter of 2004, with organizations spending on additional capacities and even management software.

The first quarter of 2004 saw total external storage shipped growing by 370 terabytes QoQ to reach 969 TB, compared to an average of 600 TB shipments for the previous three quarters. However the gain was negated by falling hardware prices, which kept the revenue growth from keeping pace.

EMC was one of the vendors to profit significantly from this sudden surge-the company had a good Q1/04 and sold NAS and SAN worth $6 million, racing to second slot with a market share of 24.6% for the quarter, just a little behind HP's 26% in Q1.

Network storage continued to make deeper inroads into the market and saw its share zoom to 43% from 35% last year. Close to 30% of external storage went in the form of SAN and 13% as NAS. IDC estimates that the share of networked storage will jump to 50% of the total external storage shipments next year.

The business was also helped to no small extent by regulations like those from RBI, which mandated archival of financial data for all banking institutions for a period of eight years. As a result, banks saw their data volumes mushrooming-HDFC Bank had a data size of 25 terabytes and growing.

Also, with US regulations like Sarbanes-Oxley and Basel II, the 60-odd Indian companies listed on Nasdaq had to comply with the US-regulations even though their operations were based out of India. Similar was the case with Indian arms of US MNCs who had to comply with regulations back home. While compliance and regulatory issues added extra pressures to the enterprises, the same drove the storage market and vendors to tell a happy story.

A mass movement towards server and storage consolidation was another highlight of the last fiscal. While the trend began a couple of years ago, it already garnered many takers (a lot of organizations including many in government space also took to the process last year) and some are still queuing up. Once consolidation is over, the only natural progression would be adoption of networked storage (SANs).

Different Strokes
As hardware prices kept falling, SANs began finding favor in smaller organizations as well. 2003-04 in fact, will be remembered as year of SAN proliferation.

The price attrition in storage hardware has been in the order of 30-35% for both disk and tape. In the last two years, the primary (online) disk prices went down from $80-100 per GB to $50–70 per GB, while the automated backup/tape prices have crashed from US$ 3-4 per GB to US$ 1-2 per GB. However, these numbers now have become more complex to interpret since the industry has introduced multiple layers of devices at different price/performance points such as enterprise disk, midrange disk, ATA and SATA disks, and LTO, DLT and SDLT in case of tape.

In the primary market, the DAS continues to have a high share because many customers continue to have only a few large applications that get hosted on single servers. The apparent irrelevance of putting together a separate network or even removing storage from servers have prevented them from buying NAS or switches that would let them implement a SAN.

Many recent reports have suggested that 70% of the Indian enterprises (a large majority of them SMEs) still use DAS. The total market for networked storage was Rs 287 crore (disk storage alone), with SANs contributing to over 70% of the total (IDC India figures).

In the secondary storage market, the fight shifted to LTO and SDLT in the high-end tape market. While LTO offered 200/400GB (uncompressed/compressed) space, SDLT went one step higher and offered 300/600GB per drive. In primary storage, the market grew steadily till December, and then exploded in Q1 of 2004.

The Superstores
BFSI, telecom, IT/BPO and government were the top four storage buyers last year. The routine computerization drive at public sector banks was added to rapid expansion by private banks as they rushed to add branches and customers. Naturally, storage was a big requirement and this was reflected in storage vendors' top lines. Significant drivers were ICICI Bank, HDFC Bank, Citibank, Merill Lynch, SBI and Punjab National Bank.

In telecom, a massive rush to increase subscriber base among all the players forced them to pump in money into their IT infrastructure to maintain the tempo. So everyone from Reliance to Tata, Hutch to Airtel invested heavily in storage with Hutch and Reliance inking the biggest deals. Telecom companies were largely responsible for the sudden surge of demand in Q1 2004.

IT and BPO segments continued to be the regular shoppers for storage. Ballooning data volumes saw even smaller software companies migrate to SANs, while BPOs were hot favorites for NAS vendors.

There were some large isolated deals in manufacturing (Asian Paints) and services (Quark, CDSL, Blue Dart), while sectors like education and healthcare emerged as upcoming storage drivers. Educational institutes in the form of private universities and colleges are installing NAS boxes in a major way, and are expected to be hot favorites for NAS vendors in the years to come. Healthcare, too, shopped about for SANs, and the critical nature of their transactions made them invest heavily in high-availability solutions.

On the SME side, the biggest news was a significant migration to tape-based backups-from the earlier days of floppy or zip drive-based backups. Some small organizations even switched to automated backups. Quantum, HP and StorageTek were major gainers. Quantum sold more than a million dollar-worth of tape drives for SMEs in the two months of December and January alone. Automated tape loaders began happening. High-availability was another major interest area for SMEs. The larger SMEs began looking at storage management solutions like email archival.

The Box Boom
In the storage business, fiscal 2003-04 belonged to EMC-with one thing or the other, the vendor hogged the limelight. Whether it was the three mergers within a year, with VMWare, Documentum and Legato, or its November launch of 11 new products-from mid-range SANs and NAS boxes going to high-end SANs-coupled with a Rs 450 crore investment in India, the company was in the news throughout.

DQ estimates EMC at Rs 107 crore in revenues for the last year (including software, platform sales and storage boxes). The company derived close to 28% of its revenues from software, and the rest from hardware. During the year, the company shipped 550 TB of storage in either NAS or SAN form. In terms of verticals, telecom was the biggest revenue earner with major deals reported from, Reliance and Tata Teleservices.

HP managed to retain its number one position in total storage shipments (disk drives) last fiscal despite competition closing in from other vendors. The company strengthened its already bulging product portfolio with the introduction of new models in tapes, NAS and SAN boxes (Eva 3000, 5000).

Network Appliance was a dominant player in NAS with over 80% market share in the product segment-and it picked up 90% of its revenues from NAS. The company saw better penetration last year with more and more enterprises using its filers for low-end department or branch level requirements as well. The company had a particular good showing in IT industry (software exporters) and clinched good deals from the market segment.

In terms of verticals, hi-tech or technology segment contributed 50% to total revenues, while telecom and BFSI contributed 15% each. Biggest wins were from Polaris Labs, Sasken, Ranbaxy and HDFC Standard Life, all more than $200,000 each.

IBM also saw an explosive year with 80% growth year-on-year, with major deals coming from repeat orders. The mid-range FastT storage boxes did surprisingly well last year for Big Blue.

Sun remained more or less flat with small gains coming from the banking sector-a primary destination for its UNIX servers. But the year-end witnessed Sun getting far more active with a flurry of marketing activities-from road shows to conferences.

The tape vendors led by Quantum, StorageTek and HP also had a good fiscal with the tape market growing by 20% in revenues. StorageTek launched its SL 8500 tape library for use in data centers, the first to provide multiple redundant robotics in a single library, reducing downtime. IT and Telecom contributed most to STK's revenues with major deals reported from Bharti, Cognizant, HCL Technologies, ICICI Bank, Infosys, VSNL and Wipro. StorageTek has over 150 customer installations in India.

Storage Software: Paradigm Shifts
The storage software market saw plenty of action too, backed by prolific demand coming from large businesses in storage resource management (SRM) software, and from SMEs in simple backup and recovery software.

The total size of Indian storage software market was about Rs 75 crore last year. Backup and archival applications remained the biggest contributor, and are estimated to grow steadily at 30% CAGR over the next few years. The second slot went to SRM software, with replication coming in last. The three accounted for close to Rs 87 crore in total revenues.

Going forward, replication and SRM software are set to become the highest growing segments in storage software market, as per IDC India forecasts. This seems obvious from a strive towards simplicity-enterprise customers will far prefer managing storage devices, resources and connectivity from a single central console using SRM tools.

Of the vendors, Veritas remained the king of the Indian storage software market while EMC (combined with Legato) raced along and settled with IBM to make the top three. CA and HP were other major contenders in the market. CA has the largest market share in the backup and restore storage software market with over 3,500 installations. Major customers of last year include Alstom, NIIT, OTIS and Wipro Spectramind.

Post its merger with EMC, Legato grew almost 100% over the year, earning major deals from telecom and BFSI segments and closing with close to Rs 7 crore in revenues (DQ estimates). For Legato, it was like suddenly discovering a rich parent-the company had many resources to spend on sales and marketing activities. Both companies leveraged each other's client base and had a few contracts at the end of the year.

The Buzzword Dept
ILM was the focus of many a seminar and marcom message from a few companies, even as it confused vendors, users and even analysts. You could call ILM (information lifecycle management) repackaged commonsense, or the next big thing. Some users say they have been practicing some form of ILM for years. What EMC and other ILM proponents like HP and IBM say though is that you need to automate it and put the ILM intelligence into the fabric of the storage and the management software. Similarly, Veritas talks about "utility computing" as the next big thing, putting measures and views and metrics in the management software and console.

IDC defines ILM as "the migration of different classes of data according to their perceived value to the most appropriate storage, to meet cost, performance, availability, recovery time, regulatory compliance and other organizational objectives". It adds that ILM is a process, not a product.

ILM thus requires you to segregate business data into different classes, according to unique and individual business rules, requirements and policies. For instance: migrate all CRM records and emails over 180 days old from online to cheaper near-line or offline media. Usually, the rules are far more complex.

Despite recent software tools to help with the segregation, the real action continued in the services space with businesses employing consultants to help them do the job. Even so, software products that automate the movement of data between different media got a lot more refined last year.

By October 2004, the Storage Networking Industry Associatoin (SNIA) aims to issue its own terminology for ILM, reducing the number of interpretations by vendors today. By 2006, SNIA's ILM-compliant products are expected to hit the market.

FC vs iSCSI: The Update
The big news on iSCSI was that after the standard got ratified in February 2003, enterprises started placing their bets on it. In the US market, SMEs moved to iSCSI-based SANs in a big way. The early adopters complained of some performance issues that are expected to go away in a while once the technology matures. On the other hand, they could compromise a little on performance or liability, quite unlike a telecom operator or a banking institution for which every single transaction is revenue critical.

Following the ratification, vendors started taking turns in announcing iSCSI support in new as well as existing lineup of products. NetApp emerged as one of the most vociferous backers of technology, although IBM, HP and EMC also had the native iSCSI support in many of their products.

Net App is one of the most serious backers of iSCSI and thanks to its persistent efforts, the technology-often hailed as a poor man's SAN-found favor with some organizations. Predominantly, it was the IT and software industry that experimented with iSCSI for their SANs, one notable exception being HDFC Standard Life, the insurance major, implementing FileNet over iSCSI.

Large enterprises on the other hand continued to fight shy of the new technology for SAN and went for the tried- and-tested fiber channel. FC on its own maintained its progression path and a 10Gb standard could come in soon. On the IP side too, the technology is growing at its own pace-IP will move to a 40Gb standard in 2 years. Although 10-gigabit has been there for some time, it has not found favor with many people yet. In the US, some large enterprises have moved to 10Gb, but there have been no announcements of 10Gb in India so far.The biggest USP for iSCSI has been the cost differential, even though FC hardware prices have been following a downward trend. A fiber channel SAN, with FC HBA in the $1,000-2,000 range continues to be about three times more expensive than an iSCSI based SAN.

Going forward, the two technologies are expected to co-exist. Big organizations will soon have multiple SANs for their absolute mission-critical core applications as well as department-level applications; and in this environment iSCSI will find favor at the departmental level, while FC will rule the roost in core deployments. All in all, iSCSI needs a couple of years to finally mature and take off in the market.

Network Rising
So,there you have it! A new beginning for the storage industry, a beginning of massive growth in networked storage is on the anvil. There still remains a lot of untapped potential in the Indian market. IDC says only 27% of large organizations and 13% of medium organizations have SANs deployed in India. That's a lot of prospective buyers of high end storage out there.

Rishi Seth in New Delhi

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