With overall revenues of the storage industry now in decline as of 1Q15, the nearly $40 B per year industry that consists of external storage and internal server-based storage is showing signs it is in turmoil. There are ample signs of strife:
- Fast growing cloud service provider market is buying a new, lower cost, lower margin type of storage system
- Well capitalized vendor competition is surging
- Chinese vendors are organizing to take over Chinese storage equipment consumption
- Many significant technology shifts underway
- Channels of distribution are evolving
In this article, we focus on just one of the architectural changes now underway at the largest cloud service providers. Since large cloud service providers commonly use white box servers running open source (or software developed by the service provider itself) and connected to JBODs with SAS cables, we can observe the progress this type of architecture is experiencing by tracking the ratio of units that are DAS versus those networked. What we see is as a percent of external storage units, direct attached units have gone from high thirties percentage in 2Q13 to high forties in 1Q15, and we expect that a year from now, DAS will represent the majority of units.
Since we track unit shipments of all external storage devices, this gives us an opportunity to consider the impact of the cloud on the overall market another way – by looking at the external storage systems that are DAS on a Y/Y growth basis. In 1Q15, this DAS unit growth was nearly 30% Y/Y, and this compares to -5% for Y/Y unit growth of networked ports. Overall external unit growth was 7% Y/Y. So, if we look at total revenue growth of the external storage market – down 3% Y/Y – and compare that to total external units, which are growing, it is clear that lower cost units are selling faster. This is another indication that cloud providers – which are known to buy software-stripped hardware devices at very low gross margins from smaller or unbranded vendors – are taking a growing share of the total storage market.