• 05/22/2009
    7:17 PM
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Storage Industry Consolidation

The move by NetApp to buy Data Domain has rekindled speculation that more deals are on the way. It is time to place some small bets on who will buy who.
Unlike other enterprise IT markets, storage still has hundreds of vendors competing for sales and market share. And many of them are doing pretty well despite the recession. The question raised by the latest big deal -- NetApp buying Data Domain for $1.5 billion -- is how long that will last.

If you look at the server and PC markets or the networking market or the enterprise application market, they all are dominated by a few major vendors. You know their names -- IBM, Hewlett Packard, Dell, Cisco, Microsoft, Oracle. While there are other competitors, these companies have a huge lead in their markets and most of the competition is between the giants. Startups and other competitors battle for the crumbs that fall off the table, but there are few that pose a serious challenge to the big boys in the enterprise data center market.

Big tech vendors also dominate the storage markets, but they have lots of competitors. The rivals are small compared to the big five of storage: HP, IBM, EMC, Dell, Hitachi and Sun. A few competitors -- like NetApp -- are doing their best to move up into the big leagues, and the fastest way to make that leap is to grow through acquisition. That helps to explain the deal to buy Data Domain. The smaller storage vendors also are more likely to introduce or emphasize new technologies and architectures that can have a big influence on future storage trends -- like Data Domain and data deduplication.

The game being played now by analysts, reporters and vendor executives is what will happen next. Will smaller storage companies merge or buy each other in order to bulk up to better compete? Will one or more of the major vendors make an acquisition to plug a hole in their product line? Will a new tech vendor jump into storage so it can offer a more complete data center portfolio?

Much of the speculation focuses on networking giant Cisco, which has recently entered the market for servers and is touting a "unified" approach to data center computing, networking and storage. It partners with EMC and NetApp for storage systems and some think that eventually it will need to buy a storage company so it can offer an integrated data center package to large customers seeking a single vendor solution.

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