2005 Top Ten: Trends to Watch

As 2004 draws to a close, it's time to take a peek ahead -- even while we're still trying to digest the current year along with Grandma's cranberry pudding and Uncle Benny's eggnog punch (hiccup! blerrrrpp!).

Below is what we see shaping up as major storage networking themes in the months ahead. Do you agree? Hit that message board, not us!

No. 10: Funding Flush and Trickle

It was a banner year for funding, with at least 30 storage companies closing rounds for a total approaching $600 million, more than double the total for storage companies in 2003. Its unlikely that VCs will fork over as much this year, though. Most of the VC money spent in 2004 was on late rounds, like third or later. And most recipients hope they won’t need more. At least one startup won’t be back at the trough: Candera picked up $12 million in February, but closed its doors in December.

Funding stories from 2004 include:

No. 9: IPO -- Yes or No?

There was a lot of IPO talk in 2004, with little action. Xyratex Ltd. (Nasdaq: XRTX) went public in June, but Engenio Information Technologies Inc. had second thoughts after pricing shares in July. Blade server startup Egenera Inc. also filed for an IPO but remains private. Other candidates for IPOs in 2005 include AppIQ Corp., BlueArc Corp., CommVault Systems Inc., EqualLogic Inc., and Xiotech Corp.

We don't think a lot of these will take the public plunge. We do think a few will, however -- enough to make the storage networking market one of 2005's most interesting.

No. 8: A 4-Gig Gaggle

Who’s ready for 4-gig storage gear? Vendors certainly are. This year was filled with demos of 4-gig switches, HBAs, chips, and controllers. The question is when will customers start demanding the higher speed? We expect that even if adoptions don't start to ramp up in 2005, consideration of higher-speed Fibre Channel will.

No. 7: Serial Platforms -- Ready for Primetime

Serial ATA (SATA) drives saturated the market in 2004, and serial-attached SCSI (SAS) products are right around the corner, with shipments scheduled for the first quarter of 2005. IDC says serial-disk technology will bump the storage semiconductor market past $1 billion next year, and market research firm The Info Pro (TIP) says SATA drives are already the top storage spending priority.

No. 6: NAS Proliferation

Everybody’s getting into the NAS act as 2005 approaches. This year, SAN vendors Dell Computer Corp. (Nasdaq: DELL), EMC Corp. (NYSE: EMC), IBM Corp. (NYSE: IBM), Hewlett-Packard Co. (NYSE: HPQ), Network Appliance Inc. (Nasdaq: NTAP), Sun Microsystems Inc. (Nasdaq: SUNW), and Xiotech made NAS news either with product refreshes or by jumping into the market. The roster of NAS startups also grew. We even saw wireless and home NAS devices pop up. As the year ends, we hear Cisco Systems Inc. (Nasdaq: CSCO) plans to get into NAS as well. It should be interesting to see how it all shakes out in 2005.

No. 5: Disk Backup in the Forefront

Tape’s not dead, but it certainly isn’t thriving. Tape vendors Advanced Digital Information Corp. (Nasdaq: ADIC), Overland Storage Inc. (Nasdaq: OVRL), Quantum Corp. (NYSE: DSS), and Storage Technology Corp. (StorageTek) (NYSE: STK) keep beefing up their disk products, and startups such as Copan Systems Inc., Diligent Technologies Corp., and Sepaton are gaining traction. Microsoft Corp. (Nasdaq: MSFT) plans to enter the backup and recovery software arena in 2005. Seems like a hot zone.

No. 4: Storage Vendors Rethink Small

Just about everybody unveiled products for small and midrange companies in 2004, but few reported significant sales to SMBs. If SMB sales don’t pick up in 2005, storage marketing folks will have a lot of explaining to do to their bosses. We see the SMB trend continuing, but with some refinements to the "small is beautiful" message.

No. 3: ILM in the Money

EMC is leading the drum-banging about ILM these days, joined by all of its competitors and most of the small hardware and software vendors. Indeed, being in the market means pitching your storage networking gear as ILM -- cheap disk, fixed content storage, and software designed to move information across media as it ages. Never mind that half the pieces are still missing. ILM talk will intensify in 2005:

No. 2: IP SANs Pick Up Steam

iSCSI made its mark this year and is poised for solid growth in 2005. The numbers tell the tale: IP SANs have been fertile ground for startups over the past few years, and EqualLogic Inc., Intransa Inc., and Sanrad picked up a combined $57 million in funding this year. But they’re not alone. NetApp is already off and running with iSCSI revenue, IBM jumped into the game this year, and EMC will make a splash next year. IDC forecasts the iSCSI market to reach $2.9 billion by 2008. NetApp CEO Dan Warmenhoven says it will grow even faster. A Byte and Switch poll in October found that 75 percent of the respondents were running IP SANs or planning to by the end of next year.

No. 1: Virtualization Battle Escalates

The great storage debate of 2004 centered around virtualization, and the disagreements will probably intensify in 2005 as EMC puts its storage router into play. Hitachi Data Systems (HDS) and IBM have already staked their claims to having the best storage virtualization technology. In 2005, we’ll see the major switch guys enter the fray along with switch, appliance, and intelligent software startups, especially as virtualization products gain more use for data replication.

— The Editors, Byte and Switch