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Storage: A Dell Growth Engine

The week's Dell EqualLogic User Conference in sunny San Diego wrapped up Friday, October 8th. I left the conference with a belief that storage will play a bigger role in Dell's future success. The following are the top ten reasons why storage will be a growth engine for Dell:

#10 - Intelligent Infrastructure - The foundation. Dell's vision for servers, networks and storage that can expand and contract automatically is exactly what's needed by corporate IT organizations building private clouds, and by service providers building public clouds.

#9 - Peer Scaling - The architecture for intelligent infrastructure that gives the Dell product planners and end-users a well-defined blue print for implementing the Dell vision.

#8 - Aggressive Acquisition Strategy - The recent acquisitions of Ocarina and Scalent demonstrate that Dell is aggressively pursuing the components they need to build-out their Peer Scaling architecture. They're also being smart about it. Michael Dell spoke at the conference about the needs to take risks, but he also said that Dell walked away from 3Par because at some point, winning equals losing.

#7 - Synergy between Servers and Storage - At the conference, Dell talked about possibility of integrating EqualLogic storage into server blades, and Ocarina deduplication agents into handhelds, laptops and servers.  If they make it happen, customers will have a great reason to buy Dell storage with their Dell servers.

#6 - Enterprise Class iSCSI - Data center managers love everything Ethernet because it's familiar and it's affordable. But data center mangers need the extra performance that 8Gb Fibre Channel provides over 1Gb iSCSI. That gap has been closed by enterprise-class 10Gb iSCSI storage.  If 10Gb isn't convincing, the appearance of 40Gb iSCSI storage in 2011 will change the game forever.

#5 - 98 percent Customer Satisfaction - The fact that Michael Dell talked about customer satisfaction is an important signal the company understands that old fashioned business values drive the sale of advanced technology. The 98 percent customer satisfaction rating tells me the company is making good products and providing good support.

#4 - The Macro - A tough macro economy has created a technology inflection point. Corporate IT departments are now laser-focused on what they "need," versus "want to have." That buying behavior favors cost-effective Ethernet-based technologies like iSCSI storage. In the future, only the largest data centers will continue to justify the cost and complexity of Fibre Channel storage.

#3 - 1Gb iSCSI Momentum - Shipping since 2004, the rapid growth of iSCSI was ignored because it was growth on a small base. In 2010, iSCSI unit shipments represent about a third of storage arrays shipped, and growing at over 20 percent per year. The large installed base and rapid growth rate can't be ignored anymore.

#2 - The Incumbent Leader - Dell is the revenue and unit market share leader for iSCSI storage. And overtaking perennial winner NetApp; Dell is now perceived by IT professionals as the iSCSI storage market leader, according to the recent IT Brand Pulse iSCSI storage brand leader survey. End users like to buy from the leaders, and incumbency is hard for competitors to overcome. Dell's focus on iSCSI today will pay dividends for years to come.

#1 - No FCoE Storage - Since the industry decided to assimilate Fibre Channel into Ethernet with Fibre Chanel over Ethernet (FCoE) technology, the competition for iSCSI storage shifted from Fibre Channel to FCoE. However, it's been three years since the networking and server vendors set out to incorporate FCoE technology, and there is still no FCoE storage competition. That leaves Dell in the sweet spot as the market leader, and uniquely focused on the fastest growing segment of external storage.

The bottom line is that I'm certain contributions from the EqualLogic line of iSCSI storage was a major part of the 13 percent quarter-over-quarter growth in storage revenue that Dell reported for the July quarter. I expect rapid growth to continue because of growing demand for Ethernet-based iSCSI storage combined with Dell's leadership position and a lack of FCoE storage competition.  Storage will be a growth engine for Dell and soon comprise more than its current 4 percent of total Dell revenue.