SMB storage explosion

Storage providers universally have been talking up the SMB sector, claiming the healthiest growth in storage-related sales for many years, and being equally bullish about the future.

Sargeant says the validity of such claims depends on how you define the storage market. Gartner tracks the local storage/SMB market once a quarter.

"The storage market consists of storage hardware, storage software and the services that go with it. If you look at the hardware part of the storage market then that’s actually very flat.

"In 2005 we expect only about 1 to 2 percent growth in storage hardware from a revenue perspective. If you looked at it from a capacity standpoint, the number of megabytes or terabytes, that’s going up at an incredible rate, 40 to 50 percent."

Sargeant says the healthy growth is in storage software and storage services. This encompasses things like backup and recovery software, email archiving, and archiving in general.

"The storage vendors are putting together products and services around storage solutions as distinct from storage hardware alone.The ramifications of this are that a lot of the storage players need to gravitate to the storage software and services in order to make money. In the hardware space, the growth of one vendor really has to be the expense of someone else," he says.

Cortex's Chang: Software industry has been slow

Globally, we can expect more growth in storage for SMBs than enterprise.The top three ranked storage hardware providers in Australia are HP, IBM and EMC, Sargeant says.

These three are also the big players in storage software as well, but they vary in the services arena.

"EMC came back with a vengeance last year probably at the expense of HP [which was] the biggest provider of storage hardware in Asia Pacific last year but lost market share to the likes of EMC and IBM. 

"They’re still number one but they’ve gone back a bit. Some of the reasons for that is that the focus of the market is on solutions, rather then simply the hardware. And these vendors vary in their ability to address solutions rather than just hardware," Sargeant says.

Network Appliance has been in Australia for seven years and the company’s director of marketing and alliances, Mark Heers, says it’s in ‘heavy growth’ at the moment.

"In recent market share numbers that came out, we are one of only three companies that grew market share in the past 12 months," Heers says.

"Why? It’s starting to become a specialised market, and the companies that grew were specialised storage players rather than server vendors that sell storage, and I think that’s starting to become important."

Linus Chang, managing director of distributor Cortex IT, says the company has been doing well because they’ve focused on storage software.

"While storage hardware manufacturers have been working to make SMB backup devices more affordable, the software industry has been slower to follow, keeping the prices of overall solutions high. This has led many resellers to turn to BackupAssist as their choice in software, he says, enabling them to deliver reliable backup solutions to their clients at an affordable price.

Chang says there was a 24 percent increase in worldwide internet (Google) searches for SMB backup software from March 2004 to March 2005. And Cortex IT had a 110 percent increase in sales of BackupAssist in the past six months.

LAN Systems’ Wendy O’Keeffe says the market size for SMB storage in Australia has been estimated at $144 million.

LAN Systems' O'Keeffe: Resellers are trusted advisers

"SMBs have lots of pain-points just like larger companies. By providing a solution for key pain points in the business -- for example backup, recovery, compliance, archiving, disaster recovery and cost infrastructure -- resellers act as a trusted advisers to SMBs which often don’t have dedicated IT resources."

Statistics from Access Markets International (AMI) Partners, predicts the worldwide spending on storage software will increase at a compounded annual rate of 25 percent between 2002 and 2006, far eclipsing the expected singledigit growth rate for storage hardware.

Between 2002 and 2006, worldwide spending among SMBs on storage hardware, software and services will increase a total of $15 billion (with a CAGR of 40–50 percent) eclipsing spending among large businesses which will increase by a CAGR of only 5 percent.

Verticals driving significant demand for storage include imaging and document management, data mining,multi-media, ERP, CRM, and imaging.

FalconStor has 600 customers in 13 countries and grew 87 percent as a company last year, FalconStor’s Norton says.

"In Australia we’ve gone from having two to three reseller partners to 20 in the past 18 months, and that’s because of demand in the marketplace for the products that FalconStor is delivering."

Adaptec, historically known for RAID and its traditional card business, has been getting into the external storage market through strategic acquisitions and is all the better for it.

"We have a broad range of external storage products that cater into the DAS, NAS and SAN market, primarily for the SMB market, and the entry level to mid range," says Adaptec Australia’s country manager, Demetri Christodoulou. "That’s where we see the growth areas," he says.

Making storage simple is a big catchcry among vendors. Cortex IT’s Chang says the company has made a significant imprint with local SMBs by simplifying storage.

‘Something that was previously rocket science, we’ve made it suitable for the average Joe user. Previously it used to be very difficult to schedule the Windows backup program, or setup a rotation schedule, and the monitoring side of it used to be complex. Some of the bigger companies’ products don’t do some of the notification and monitoring as well as we do, and they can cost five times as much," Chang says.