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What a Year

The storage industry went through a lot of changes in 2008, starting off strong and ending up showing signs of weakness as the recession and cutbacks in IT spending began to have an impact. In between, there were business deals, advances in technology, new products, a growing emphasis on energy and data center efficiency, ongoing efforts to boost storage utilization, and the constant growth in the amount of structured and unstructured data that needs to be stored, backed up, protected, and made accessible to more people and applications than ever before.

Analysts say the demand for storage capacity is growing anywhere from 50 percent to 100 percent annually at many companies and other organizations. And that's not expected to slow down any time soon. The growth fueled a steady demand for more disks and tapes and storage software for most of the year. Research firm IDC earlier this month reported that the worldwide storage software market had revenues of $3.1 billion in the third quarter, an increase of 11.6 percent from the same quarter a year ago. It was the 20th consecutive quarter of year-over-year growth for storage software. It also reported that that factory revenues for worldwide external disk storage systems increased 8.8 percent year-over-year to hit $4.9 billion in the third quarter. The overall market for disk storage systems grew 1.1 percent to $6.6 billion, IDC said.

But even the storage market couldn't withstand the worldwide recession. A survey by TheInfoPro Inc. (TIP) based on interviews with IT and procurement personnel at nearly 65 large companies and government organizations, found that, on average, storage budgets will decrease by around 14 percent in 2009. The decline in storage spending began in the fourth quarter of this year, with nearly one third (32 percent) of those interviewed saying they expect to end up spending less in 2008 than had been originally budgeted. Their average spend on storage in 2008 will be $10.7 million.

With most experts predicting that the economy is going to get worse before it gets better, storage spending could decline even more than predicted.

Combined with a declining stock market, the bad economy could make 2009 a big year for deals. We saw a number this past year, including Brocade Communications Systems Inc. (Nasdaq: BRCD) merging with Foundry Networks Inc. (Nasdaq: FDRY) for around $2.6 billion; IBM Corp. (NYSE: IBM) buying data de-duplication vendor Diligent Technologies Corp. ; EMC Corp. (NYSE: EMC) acquiring Pi, a provider of software and online services; Hewlett-Packard Co. (NYSE: HPQ) buying storage virtualization and iSCSI SAN vendor LeftHand Networks Inc. ; and Dell Inc. (Nasdaq: DELL) spending $1.4 billion to buy its own iSCSI vendor, EqualLogic Inc.

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