Data storage is an essential component of the ITC market. While the annual spend on storage systems hardware has been steady at around $40b over the last 20 years, there are a number of key trends for suppliers to adopt to succeed.
I classify it into five separate areas – storage systems – both hardware and software – and three ‘raw storage’ components of NAND (flash), Hard Disk Drive (HDD) and DRAM (memory as cache in storage systems and all computer systems). Over the years there has been a full scale separation between the storage systems vendors and the manufacturers of the ‘raw’ elements. We have moved from a vertically-integrated market (IBM, for instance, invented and manufactured the first tape and Winchester hard drives) to a now fully disaggregated one in which few if any storage system vendors would ever consider making their own flash or disk drives. Consequentially there are a great variety of vendors in each sub-market, as my Figure above illustrates.
My Figure above shows the annual spend on storage system hardware compared with the three raw storage components as dotted lines. Clearly the ‘spending’ is different, as the components are principally sold to other suppliers before they are sent on to end-users. To a certain extent the NAND and HDD lines are related to the storage systems one, showing the growing domonance of flash over disk storage, with NAND overtaking HDD in 2016. The addition of NAND and HDD is always larger than storage systems; typically because their inclusion in desktop Pcs, laptops, smartphones and as Direct Attached STorage (DAS) in servers and – from 2011 onwards – their increasing use in self-built systems in the data centers of large public Cloud suppliers. The growing expenditure of raw storage unassociated with storage systems also underlines the importance of storage software.
When Dell acquired EMC in 2015 their combined revenues accounted for c. 29% of the storage systems hardware market. At the time many analysts believed that the differences in the two companies’ sales strategies would lead to a decline in market share; however the combined company has done well to retain its dominance over the years, achieving a market share of 28% in 2023 (see my top Figure in this post). Three vendors – HPE, IBM and Hitachi – have also held their market positions well. Three newcomers – NetApp, Huawei and Pure Storage – have also found significant success, although all of them have reached a plateau in annual revenues.
At a regional level sales of storage systems hardware in the Americas have been the largest in each of the last 20 years (see my Figure above). When measured in current dollar currency conversions (the bold pink and red lines above), sales in Asia Pacific have been slightly higher than in EMEA, although the relative positions of these two regions is reversed if we convert currencies on a constant dollar basis (the dotted lines above).
As for the future, I have no reason to believe that the annual spend on storage systems hardware will vary much from the $40b we’ve seen over the last 20 years. I also expect a number of broad trends, including:
- The dominance of Dell,
- A move back to on-premise, rather than cloud-based, storage for generative AI applications, due to the need to secure personal data,
- The growth of JBOD (Just a Bunch of Disk) arrays to soak up the significant cost savings of raw storage,
- Stronger use of storage software to virtualize multiple, otherwise siloed, arrays.
I also expect the sharp decline in raw storage shipments to be reversed this year and will continue to cover the latest announcements and strategies of leading suppliers. Please let me know if more details of my research can help you in your business planning.