Through 2006, the lack of robust storage management automation, standards, and process maturity will limit net annual enterprise storage capacity growth to 45 per cent (58 per cent-67 per cent gross procurement), with price/capacity improving 35 per cent per year. To effectively leverage and manage enterprise media assets, users will require a data/media center of excellence. Through 2007, software value-added functionality, manageability, integration, and interoperability will be the primary enterprise storage differentiators, rendering storage hardware a tiered commodity.

EMC’s recent announcement of its high-performance Symmetrix Direct Matrix (DMX) series highlights users’ growing storage infrastructure dilemma: the increasingly large-capacity potential of disk storage frames (e.g., DMX at 42TB raw capacity or Hitachi’s 9980V at a theoretical though largely impractical 147TB) makes fully exploiting that capacity over the traditional, short three-year life problematic for all but the largest users. Indeed, despite adequate internal performance to sustain acceptable, fully loaded service levels, we find users rarely add capacity to existing frames after only 12-18 months. The problem lies in the high cost of financing upgrades over the frame’s diminishing term. For example, the user who adds 2TB to a one-year-old frame must typically write that upgrade off over the remaining two years a 50 per cent increase in amortized cost versus the original three-year write-off. Moreover, the user who upgrades in the frame’s third year must typically absorb the entire cost of the upgrade in that single year. This is often prohibitively expensive, despite the expected 35 per cent annual price/capacity improvement.

Longer term, we project this trend will leverage the increasing sophistication of storage management software to drive enterprise storage infrastructure to true utility status. By 2006-08, users will deploy large (multi-hundred terabyte), monolithic storage frames with highly efficient, automated real-time provisioning across applications and platforms. Moreover, software provisioning will also be rationalized across the enterprise, enabling users to transcend the artificial boundaries of the hardware frame and negotiate enterprise license agreements based not on single frame capacities but on capacity throughout the enterprise. For example, the Global 2,000 user will negotiate a large (e.g., 1,000TB) low-cost license for a specific storage software product, and then allocate that license across multiple frames in granular chunks, according to the business’s specific application requirements and budget. While this will significantly improve storage software economies of scale and management, it will also require more sophisticated discovery and provisioning tools (e.g., EMC’s StorageScope is an initial step in the right direction).

Ensuring Affordable Vertical Growth

Our research indicates most currently installed disk storage frames will complete their (typically three-year) life cycle at only about 50 per cent-60 per cent of total potential capacity (e.g., after three years, an 8830 frame will be returned/sold with only 6TB-7TB installed of its 11.5TB potential capacity). While historically this has been due to relatively poor performance that typically did not scale with capacity growth, we believe EMC’s DMX architecture can deliver consistently high performance at its highest capacities (42TB). The challenge for users will be to achieve the compelling economies of scale of full-frame capacities throughout the frame’s life cycle.

To meet this challenge, users must negotiate upfront economic protection that ensures the affordability of growing the frame to full capacity. This will require two key provisions in the original frame procurement:

Affordable upgrades: Users should negotiate not just the initial frame pricing, but also the cost of capacity upgrades on a sliding scale, in which the slope declines at roughly 10 per cent per quarter (~35 per cent annually). An effective approach is to agree on the pricing of both the required capacity (e.g. 5TB) and the full-frame capacity (e.g., 20TB). These two price points will by definition yield an implied upgrade price that, when blended with the initial capacity procurement, will give the user the lowest full-frame price/capacity.

Four-year economic life: To afford upgrading the frame, the user must extend the standard three-year life to a fourth year, by negotiating a fourth year of warranty (best case) or a post-warranty maintenance cap (worst case). To ensure affordable fourth-year maintenance relative to the cost of new storage, post-warranty maintenance should be capped at roughly 10 per cent of the original procurement price.

Beware of Storage Software Costs

By 2006, we project users will spend more on storage-based software than on the underlying storage hardware much as they do on the server side. As such, users must focus the same enterprise asset management disciplines used for server-based software on the burgeoning storage software budget.

For example, although EMC chose not to enlarge its 12-tier software pricing model with its DMX introduction, we believe the follow-on enhancement to DMX (4Q03: doubling of drives and, hence, capacity per frame) will see a concomitant doubling of the software license tiers.

This will have potentially significant implications for large, full-frame users, who currently pay no additional license fees or support charges for capacity over 14TB of raw storage (7TB usable in a mirrored configuration). For example, the user adding 4TB to a 7TB 8830 frame pays no additional license or maintenance fees. With next-generation DMX models expected to exceed 80TB (raw) per frame, we project EMC will be forced to expand its tiered pricing model to capture some portion of the DMX frame’s growing capacity.

Business Impact: Better, more cost-effective utilization of the enterprise storage portfolio will maximize its value and business return on investment.

Bottom Line: To leverage the growing economies of scale of the new large-capacity disk storage frames, users must capitalize on the frame’s initial procurement to guarantee upgrade price protection and affordable fourth-year maintenance rates.


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