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It’s the Economy…or Are We Just Stupid?

by Administrator on March 7, 2011

Lately, it has become popular to discuss storage technology in business investment terms. Vendors are doing it, the trades are doing it, and I am about to do it in a few segments of a new seminar series that I will be kicking off with TechTarget in Chicago later this month on the topic of “Storage Efficiency.”

On the one hand, it makes sense to talk tech in terms of dollars and cents, return on investment and internal rates of return — especially, given the fact that business managers

(1) hold the budgetary purse strings (so IT folk would be wise to use terms and language that are part of their common parlance) and

(2) have become rather circumspect about how they invest in technology, given the current state of the economy. 

A lot of my reseller acquaintances (those who cater to SMEs, in particular) say that prospective clients are “sitting on their money.”  “They have the money to spend,” said one fellow recently, but are reluctant to do so.  “They want more confidence that they are buying the right stuff to meet their needs and they are looking for a business case before they buy anything.”  Business case being a narrative to explain to management why they should put their signature on the purchase order.

That observation seems to be in line with many discussions I have had directly with my SME clients. Frankly, I have delighted in this apparent indicator of a “return to consumer rationality,” which I see as good for the consumer, though not necessarily for the industry, some vendors have complained in comments here.

Then again, I have seen rationality in storage choices a lot more often (in good times and not so good times) from the smaller firm than I have from their larger cousins. With large enterprises, the idea of “renewed rationality” seems to fly in the face of many purchases that these companies eventually elect to make — even after any “careful consideration of alternatives.” 

Is Bigger Better or Stupider?

Case in point:  IDC just came out with numbers suggesting that storage subsystems with price tags of over $250K rallied in 2010, claiming a 30.2% market share and returning to their pre financial crisis level.  Assuming such numbers are true, they give little sign that any “unseen hand” of rational consumerism is guiding any purchasing right now. 

The large enterprise companies I talk to are either hanging tight in an “austerity” posture, or they are giving the nod to products that provide tactical, short term solutions to what are really strategic, longer term problems.

Item:  Data reduction “solutions” continue to proliferate, as if compression or de-dupe actually do anything meaningful to contain the expansion of the storage junk drawer over time — a product not of capacity mismanagement, so much as data mismanagement.  The more data we amass without consideration of its business value, the bigger the storage junk drawer becomes. In fact, thin provisioning allows vendors to charge more for commodity disk by insisting that your investment returns the equivalent of 70 non-compressed/de-duped data holders (though it rarely does).

Item:  Thin provisioning and on-array tiering continue to be touted by vendors as the shiny new thing — the former because it supposedly alleviates the labor costs associated with provisioning capacity on a rig, the latter because it “automatically ensures that you use your expensive Tier 1 storage only for the data that needs to be stored there, e.g. active data.”  In fact, on-array thin provisioning isolates this functionality to a particular stand of disk (behind the vendor head), and adds management complexity and labor cost as soon as you outgrow the first stand of drives, while on-array tiering enables vendors (1) to peddle overpriced SSDs as components of their rigs and (2) to charge more for commodity Tier 2 disk when placed in the same cabinet with Tier 1 disk.

In Storage…and in Tech Generally

This phenomenon is not limited just to storage of course.  Witness iPad 2.0 or server virtualization.  The former device — essentially a mobile dumb terminal — can’t do much of anything. Yet, just the appearance of a really-unhealthy-looking Steve Jobs on stage at the product launch event made the crowd swoon and the stock tick up. 

Similarly, server virtualization woes, which have become legend throughout the industry and that are seeing many many projects stall out at less than 20% of completion, don’t seem to have diminished the noisiness of vendors seeking to evangelize (or the willingness of consumers to buy) consolidation via hypervisors. 

And don’t even get me started with clouds, whose core value proposition is as vaporous as ASP/SSPs before them!

Why Do I Care?

I am focusing on this topic for a few reasons. 

First, I have lately been reading the writings of Frydman and Goldberg, “Beyond Mechanical Markets:  Asset Price Swings, Risk and the Role of the State” – in an effort to understand better the phenomenon of market inefficiency and how it contributed so much pain to local, national and global economies over the past decade.  This book was suggested reading in a recent Economist blog penned by Buttonwood and is part of a growing body of literature observing that, contrary to what investment brokers advise, there is absolutely no rational basis for believing that you will realize any sort of return on any investment from anything that you buy in a free market.  Might just as well put your coins in a Vegas slot machine. 

Buttonwood’s takeaway (and increasingly mine as well) is that the “rational actor model” favored by free marketeers might well be a myth.  Moveover, the factors governing the future success of any investment may well be too complex to be calculable. 

Perhaps the IDC numbers should be interpreted through this glass:  absent any real basis for making wise storage choices, many large companies are just covering their eyes with their hands and sticking a pin in the Gartner-approved vendor quadrant chart to choose their next rig.  The bigger the brand logo on the chart (that is, the more money a particular vendor has spent on Gartner products and services), the more likely they will receive the pushpin’s point.

The second reason for my focus on the economic (in)efficiency of storage technology is my growing concern that mergers and consolidations are starting to limit real options available to consumers.  Over the past year, some storage companies have been purchased by the big guys for what are essentially obscene price tags.  I wonder in some cases whether the winning bidder even wanted the products it was buying! 

Were acquisitions made just to deny a competior access to the technology? 

Were these deals based on a calculus that small firm XYZ might become big competitor XYZ in the future, so it would be best to snuff them in their cribs? 

Did the acquisition targets have any intrinsic value at all, or were their angels and investors part of the larger companies that bought them? 

There seems to be little rhyme or reason to any of these deals.  Whatever the reasons behind the mergers, they have mostly hurt consumers.

For one thing, they have limited the innovative technologies available in the market.  Smaller firms tend to be the engines of innovation, while the big guys are the stalwarts of the status quo.  That’s one reason why Big Announcements from the three-letter guys rarely impress.  Most of the time, the small guys were out there peddling an innovative idea first.

More often than not, the little innovators, once absorbed into the Big Company, find their technologies buried (think Spinnaker and NetApp) or bastardized (think FilePool and EMC) or bollixed up (think some of Sun’s open source stuff and Oracle).  Or, as in the case of XIV and IBM, otherwise potentially interesting infrastructure technology gets joined at the hip to — and isolated on — a proprietary controller on a particular rig.

In other cases, mergers have left many customers with warranty and maintenance contract fees payable to vendors they would never have considered bringing through the front — or back — doors of their shops.  The EMCs, et al, have been effectively grandfathered into accounts that once thought better of buying anything bearing their brands.  (Rather like what happens when your local community bank sells its mortgages to a Wall Street conglomerate with which you would never have considered originating your mortgage based on past bad behavior.  Only, now, you are locked in.)

Under such conditions, it is hard to see how the best technology can win.  Ever.  Right now, I think that the smartest things you can do with your storage are (1) simplify it with bricks of high value, high performance, high resiliency block storage that can be managed via Web Services REST, and (2) surface the block devices with a virtual controller that can serve up capacity in whatever flavor you require and perform most data protection services in an extensible and shared way.

Going forward, what we really need is to expand our core understanding of what IT storage administration is all about from the well-understood trio of capacity management, performance management and data protection management to include intelligent data management.  That is what I will be talking about in the Storage Efficiency seminar and in several upcoming webcasts with TechNet, 1105 Media, and UBM On24.

These four things will not only improve storage efficiency from a technical and operational standpoint, but also from a business efficiency perspective, in my humble opinion.  Hope to hear your feedback from one of the events or to these rants.

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