Falling Prices, Regulations Drive SAN Market

Spurred by rapidly dropping prices and by federal legislation mandating better record-keeping, the storage area network (SAN) enterprise market has been growing at a 30 percent annual rate and promises to maintain that pace, according to a study by market research firm iSuppli Corp.

While virtually all large enterprises have installed SANs, the market is just dawning for mid-sized and smaller companies. "SAN demand is increasing," said Denise De Leon, Senior Storage Analyst, "because the costs of a SAN are much cheaper today than they were just five years ago when SANs were only considered by large enterprises. Today SANs are being deployed by just about every size business, including about 10 percent of smaller enterprises [with revenues of] between $100 and $300 million. These enterprises and midsize firms represent the largest growth opportunity for networked storage."

De Leon noted that Microsoft and other software providers have long viewed this market as a major growth opportunity, particularly for regulatory-compliant software packages for vertical markets. For instance, the Health Insurance Portability and Accountability Act (HIPAA) requires the establishment of an IT infrastructure to be in place by April 2005. HIPAA mandates the safeguarding of patient records.

Also driving IT managers to beef up their SAN installations is the Sarbanes-Oxley Act, which De Leon said has a direct and propelling impact "on the storage IT industry and how data is managed, archived, retrieved, and authenticated." In her survey of storage industry hardware and software vendors, she found that the vendors view Sarbanes-Oxley as "a potentially huge sales boon, similar possibly to the way Y2K was viewed."

De Leon also found an interesting trend in IT shops: they tend to view all data--not just mission-critical information--as important data that should be backed up, encrypted, and protected. "Intellectual property is transmitted via email, so several companies are tackling email first," she said. "Other programs such as word processing, spreadsheets, images, databases--in other words, all information-[are] now viewed more stringently as an asset prone to theft or loss" and will be protected.As for SAN market share, the iSuppli survey placed EMC in the leading position, holding 26 percent; Hewlett-Packard has 25 percent and IBM 18 percent. Others with single-digit market share are Hitachi with 8 percent, LSI Storage with 7 percent, Sun Microsystems with 7 percent, and Dell with 6 percent.

The iSuppli report said that SAN Fibre Channel-port market has been growing at a 30 percent annual rate over the past three years. The market-research firm expects that growth rate to continue for five years, with 13.6 million units expected to be shipped in 2008. A total of 3.5 million units were shipped in 2003. While the unit shipments are expected to remain at the 30 percent growth rate, price erosion should restrain revenue growth to about 15 percent per year.