Analysis Hard drive makers are, metaphorically speaking, shifting from being gunsmiths to arms dealers. In other words, their customers, who take the drives and put them in boxes, better watch out.
Let's take a look at where the industry is heading:
- Seagate acquires Xyratex and sells its ClusterStor HPC and enterprise big data arrays.
- HGST develops an object storage array with Amplidata and Avere.
- Seagate acquires LaCie and sells its range of desktop and rack-mount storage systems.
- Seagate brings out a line of NAS boxes.
- WD’s brings out a NAS product line.
Now, of course, the drive manufacturers say they are not competing with their mainstream storage array makers, such as Dell, EMC, Fujitsu, HDS, HP, IBM, and NetApp, nor their other storage array and enclosure-building customers like DotHill, Imation (Nexsan), Huawei, Synology and the other Taiwanese firms.
To which we say, don’t bank on that promise. The drivesmiths are in intense competition with each other and are building commodity items in the millions with every point of margin fought over like hyenas scrapping over a carcass. And yet they see their drives sold at cost $X to manufacturers who then sell them inside storage array enclosures with software at $2X, $3X, $4X, $who-knows-what-X to their customers. Think of the lost margin; moving up the stack is a logical margin recovery exercise.
Sticking drives in enclosures is relative child’s play. It’s the software that’s the problem. Buying Xyratex, and its Lustre and array management code, solved that problem for Seagate. Working with Amplidata gets HGST access to object storage software. NAS code is a commodity and buying LaCie gets Seagate access to that.
Flogging home and small-biz storage servers isn’t a business mainstream storage array vendors are interested in; the margin’s too low and channels costly to manage. Because of this, EMC arranged for its Iomega business, which dealt in that area, to go to Lenovo. But disk makers, with their online and in-store drive channels can take on domestic and SMB NAS with relative ease, and be pleased at the margin their disks now make.
With their confidence built, they looked further up the stack and into markets overlooked by the major array makers. HPC storage, with DDN and Panasas and Cray fighting for it, was one such arena, into which Seagate sprang with its Xyratex buy. Object storage was another, only HGST has conceivably upset more manufacturers here than Seagate with its Xyratex buy – consider NetApp's E-Series.
After all, EMC has Atmos and Centera, and both HDS and HP have their object storage product lines. Notice has been served on them all. Seagate and WD-HGST are knocking on the mainstream array door.
If Seagate’s ClusterStor is good at big data then it’s an easy extension to move into adjacent enterprise markets. Databases? Why ever not? It’s just bits being loaded onto platters and fetched from them, and bits are bits are bits are...
If HGST’s Active Appliance is good at online cold storage then fill it full of fast 2.5-inch disks and SSDs and PCIe flash, and turn it into a fast file array; HGST is working with Avere and its filer-accelerating products already. Why ever not? It’s just bits being loaded onto platters and fetched from them, and bits are bits are bits are...
HGST (and WD) and Seagate have just forced the thin end of potentially ruddy great wedges under the mainstream storage array suppliers. They’ll talk honeyed words of "co-opetition", and “working with partners”, but be under no illusion: they want a chunk of the stream of dollars going into the mainstream vendors’ pockets for themselves.
What can the storage mainstreamers do? Look at the following numbers:
- Seagate market capitalisation: $19.33bn.
- WD capitalisation: $23bn.
- EMC capitalisation: $60.6bn.
- NetApp capitalisation: $13.85bn, pity that.
- HP capitalisation: $68.85bn.
Think of the possibilities. The disk drive suppliers say the storage market is disaggregating. The server and storage people are seeing a converging market, one with unified storage, silo-reduction, and converged server-storage-networking systems.
So converge down the stack, guys; aggregate right back and buy into Seagate and WD. Become activist investors and tell them to get the hell out of your markets, or else you’re coming into theirs through the share-buying backdoor.
It won’t happen. The array makers will be as frightened as rabbits, mutter about needing more margin themselves, and rush up into flogging storage software; who needs hardware anyway? ®