The Indian storage market was quite sedate in FY 08. With single to low double-digit growth reflected across most categories the storage segment was aligned to the overall market sentiment. Which was not so buoyant owing to lowered IT spend as compared to the previous year. Though the Indian domestic IT market was not hit as much as the exports market in FY 08, it did experience slacker growth when compared to the previous year. This took its toll on storage spends as well. Moreover, after an active year theres bound to be a lull, especially when it comes to investments in areas like storage. Considering that enterprises were active over the last two years in their storage investments, they would obviously wait another 2-3 years for technology obsolescence or any new storage investments hence a quiet FY 08.

But, all said and done, the extent of slump in revenue growth did not necessarily mean a propotionate slump in storage demand. In terms of capacity the market grew by 58% to 38,732 Tb in 2007, up from 24,540 Tb in 2006, indicating the growth in storage demand. So, while there was a much higher growth in terms of unit shipments, drop in prices meant that the revenue growth was much lower. Also, some large installations were driven by very aggressive pricing, thereby leading to lesser revenue margins. Overall, the market became extremely competitive on all fronts, whether big deals or low-end channel sales. On a more promising note, wider adoption and expansion of the footprint was a more encouraging story than pure revenue.

Low on Growth
Pegged at Rs 1,231 crore, the overall external storage market in India grew 9%. Networked storage, comprising NAS and SAN, accounted for 85% of the total external storage market. Up from Rs 940 crore in the previous fiscal, the networked storage market touched Rs 1,045 crore, a growth of 11%. This was much lower growth as compared to whopping 63% and 85% seen in FY 07 and FY 06 respectively. Within the networked storage market as well, in both SAN and NAS, there was a similar delta in the growth rates between FY 08 and the previous two years. The DAS market maintained the trend of the previous two yearsits revenues dropped from Rs 188 crore in FY 07 to Rs 186 crore in FY 08. This indicates that the overall storage environment continues to gradually shift to a networked environment from DAS.

The Sunrise
Both the NAS and SAN markets had the top vendors clearly leading the way by a good margin over its closest competitors. NetApp fell just short of garnering half the NAS segments revenue with 49% market share. Its closest competitor, EMC, was way behind at 14% . However, EMC took the lead when it came to the bigger pie of the networked storage market, ie SAN. With 31% market share EMC maintained a comfortable lead over IBM at a share of 19%.

But what is significant is the changing vendor market share dynamics in both these segments. In the NAS market, the pure play storage vendors NetApp and EMC conceded some market share to the two systems vendors, HP and IBM.

However, the market is a lot more competitive in the SAN space with the top four vendors (HP, IBM, EMC and Sun) closely huddled together, making up over four-fifths of the market. In fact, the market dynamics changed over the previous year with the top three vendors competing closely with each other. With Sun upping its market share from 10% in FY 07 to 16% in FY 08, it was able to break into the club of close competitors, comprising EMC, HP and IBM. Sun also emerged as the biggest gainer in the overall networked storage market. The companys consolidated revenue rose from Rs 85 crore in FY 07 to Rs 147 crore in FY 08.

Overall External Storage Market
	FY 08		FY 07
Segments	Revenues (in Rs crore)	Growth (%)	Revenues (in Rs crore)	Growth (%)
NAS	221	9%	203	61
SAN	824	12%	737	64
Overall Networked Storage	1,045	11%	940	63
DAS	186	-1%	188	-10
Overall External Storage	1,231	9%	1,128	44
The external storage market showed a clear shift towards networked storage environment from DAS. Overall, the external storage market experienced much slower growth than last years mid double digit growth

Adding in the DAS revenues, Suns gain continued in the overall external storage market as it improved its market share from 8% in FY 07 to 15% in FY 08. In fact, it managed the highest jump in market share at the cost of NetApp, HP and IBM. Sun continued its winning feat in the secondary storage market as well, emerging as the second largest vendor after HP with earnings of Rs 180 crore.

Suns focus on the storage market got a fillip after its acquisition of StorageTek three years back. The results of that started showing in FY 08 as the integration process got stabilized. Also, the entire storage business gained momentum with dedicated storage teams formed for sales of tapes and disks. In fact, during the year a lot of its large deals were driven by storage. Earlier, the focus was on server-attached storage. So it was mostly deals for servers, and storage came more as an accompaniment.

EMC was another vendor that managed to improve its revenues in the networked storage market. The company brought about some significant changes in its strategies in India in FY 08. It realigned its go-to-market strategy team in India into an Enterprise Division and Commercial Division. Previously, the India and Saarc regions were managed as three separate geographical districts. This realigned go-to-market strategy helped the company accelerate its business momentum. EMC further strengthened its position in the market with a major addition of twenty-five new information infrastructure products and solutions.

Overall, the way the dynamics played out between the pure play storage vendors and the systems vendors there was no clear skewing of the market in favor of either. The pure play vendors like EMC and NetApp have more focus on coming out with newer technologies since storage is the area they operate in. While they have the advantage of technical competence and a more focused approach to storage, the system vendors like HP, IBM and Sun have the advantage of cross-selling and the ability of doing a lot of bundling. Meanwhile, they also have more communication channels and deeper relationships with customers owing to their wider portfolio, which they can leverage for storage as well. The pure play vendors have comparatively limited bandwidth in reaching out to customers. As a result, the market dynamics between the two tend to even out and balance both types of vendors.

Secondary Storage
On the other hand, the growth sentiments in the secondary storage market were more buoyant than the external storage market. On the other hand, the secondary storage segment (comprising tape drives, tape automation, DLTs and some proprietary tapes, drives and media equipment) grew 48% to reach Rs 649 crore. The numbers stand testimony to the fact that far from becoming extinct the secondary storage market was instead the highest growth segment in the Indian storage market. To some extent the comparatively high growth number can be attributed to its relatively smaller base. But a good proportion of the growth was a result of some key market dynamics working in favor of secondary storage, not withstanding the fall in network bandwidth prices and networked storage costs.

The high growth in secondary storage can be attributed to the growing emphasis on regulatory compliance as well as the movement toward tiered storage. Regulatory compliance pushed the need for back up and archival of data for future needs. It is also expensive for the organizations to keep all the data live on the primary storage. As a result, they started moving those portions of their online data onto secondary storage and archived what was not business critical. The need to archive will continue to exist and so will the secondary storage market. The drive toward branch automation further provided the necessary spurt in the adoption of secondary storage. While enterprises went in for high-end networked storage boxes in the head office and central locations, for the branches they relied on secondary storage.

While last year both pure play storage vendors, EMC and NetApp were the top two vendors in the network storage market, this year systems vendor IBM takes over the number two position. This clearly indicates that the market is not skewed toward either type of vendors

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