Welcome!

CRM Authors: Xenia von Wedel, Ian Khan, PR.com Newswire, Steve Mordue

Related Topics: @CloudExpo, Containers Expo Blog

@CloudExpo: Blog Post

Storage Industry Innovation and Disruption | @CloudExpo [#Cloud]

Data efficiency will serve as the metric that separates Innovation Pretenders from Market Contenders

Some companies have gotten ahead of storage incumbents by offering new, more efficient flash storage arrays. These newcomers have raised money in quantities and valuations that would suggest they are market "disruptors." Indeed, press and analysts have been wooed by marketing campaigns to this effect. In reality, it's becoming apparent that these companies are rather "innovators" with much more modest financial prospects.

By overestimating their strategic importance, innovative array companies have raised too much money and may have already missed the window for high-value divestiture to incumbents, who are making up ground fast. Incumbents like HDS, IBM and EMC are fighting back by adding efficiency technologies to their mature product lines. They "get" cloud and are making the sustaining innovations to maintain relevance in a greatly altered storage market.

The real battle for the future of the storage market will be between Tier 1 incumbents and hyperscale cloud providers like Amazon (AWS), Microsoft (Azure), and Google (Drive) that have novel business models, address new customers, and take new cost structures into account. For this reason, they are the true industry disruptors and the ones most likely to succeed in an era of transformation.

The storage industry is in the midst of a major transformation that will forever change its economics. Lower cost, higher performance, on-premise storage and nearly free cloud-based storage are driving both innovation and disruption in the industry.

In Clayton Christensen's seminal book The Innovator's Dilemma, Christensen argues that industry newcomers, who are often perceived as disruptors, end up losing to industry incumbents when their fundamental strategy for differentiation is based on innovation that is "sustaining" rather than "disruptive" in nature.

Why is this so? Creating and selling a differentiated product to an incumbent's best customers motivates the incumbent to retaliate with similar differentiation. And, because incumbents enjoy significant business model advantages over innovators, they are able to capture the lion's share of economic benefit catalyzed by a newcomer's innovation. Christensen thus concludes that a sustaining technology strategy is not a viable way to build a new growth business.

Let's apply Christensen's theory on innovation to the storage array (spinning disk, all-flash and hybrid) space.  Recent market entrants, companies like Pure and Nimble have aggressively introduced flash products that offer cost and performance advantages over those sold by Tier 1 incumbent companies (e.g., EMC, NetApp, IBM, and HDS) and have speculated that these savings will spell the end of HDD storage and storage incumbents as we know them.

By driving down the cost of performance around flash, the all-flash and hybrid startups have made "effective cost" the new metric for primary storage. The advantage AFA and hybrid startups have enjoyed however is temporary, because it is based on savings from data efficiency rather than on a new or different application of commodity flash.  And, data efficiency is a sustaining rather than a disruptive innovation - centered around improving an existing product category serving an existing market.

To eliminate the startups' advantage, Tier 1 incumbents need to deliver mature arrays with superior data efficiency- something that is already available today. This will enable them to reclaim market share with all-flash and hybrid offerings that afford even higher performance at lower effective cost.

Some companies have gone directly down the path of "innovators." While they've executed well to date, as Christensen's research shows, this isn't enough to build a winning company or to be true industry disruptors in the long run. Indeed, storage incumbents aren't running from a fight with the all-flash and hybrid startups. Pushed by sustaining innovation, they are rapidly adopting data efficiency technologies. The addition of data efficiency to mature storage arrays takes the "innovators" advantage away from all-flash and hybrid startups, and returns it to the tried-and-true storage incumbents who are able to use it as a far more powerful weapon in their arsenals.

Data efficiency not only makes effective cost the defining metric for storage, it also delivers savings for storage, bandwidth, energy management, and backup. It is valuable for primary data, data at rest, over the network, and portfolio-wide, and, most importantly, it is applicable to HDD, flash, hybrid, converged and cloud offerings and for many applications from databases to Big Data. Winning companies will deploy data efficiency solutions throughout their on-premise and cloud portfolios because sales teams can't afford to offer it preferentially in one product and not another.

Permabit spent much of 2014 "arming" (HDS, EMC and NetApp, among announced partners) Tier 1 companies with data efficiency so that they can out-innovate upstart flash and hybrid arrays. If Christensen's theory bears out, I expect Tier 1 storage vendors will regain the upper hand in 2015. I'll take that a step further and predict that 2015 will be a tough year for the smaller, upstart array makers.

However, this does not mean that storage incumbents are out of the woods. There is an even bigger threat to their businesses: disruptive innovation.

In contrast to sustaining innovation, which is all about building a better mousetrap for current core customers, disruptive innovation occurs in markets where incumbent products overshoot the base requirements for many potential customers. Christensen argues that disruptive companies find their trajectory by introducing products and services that are not as good as currently available products, but offer other benefits - i.e. they are simpler, more convenient, or less expensive than incumbent product offerings.

Disruptive companies eventually improve their products and technologies enough to intersect with the needs of more demanding customers. When this happens, disruptive entrants with passable offerings ultimately crush incumbents.

The power of this construct is economic. Entering a market and competing effectively at the low end can be a very valuable asset.
As the low-end disruptor moves upmarket, much of the increment in price/margin will fall to the bottom line, and this continues as long as products can keep moving up market, eating away at the margin of the higher cost products from incumbents.

The storage market appears ripe for disruption. Hyperscale cloud providers, companies like Amazon, Microsoft, and Google are classic hybrid disruptors (new customers and low-end pricing), and they are building the fastest growing, multibillion-dollar segment in storage. Disruption favors the entrant. In the case of hyperscale cloud storage, incumbents face a very real threat, because hyperscale providers:

  • Have tremendous scale and balance sheets that give them the ability to outspend and outlast incumbent storage vendors.
  • Are driving the price of storage to $0.00 by investing heavily in data efficiency technologies and in "associated" revenue streams to execute this strategy.
  • Are creating offerings for low-end customers and non-critical enterprise data, but are steadily enhancing the offerings with gateways, data services, and analytics to move up-market.
  • Are exerting deflationary pressure throughout the storage market.
  • Are changing storage to an OPEX rather than CAPEX item by making it easy to consume their storage services.
  • Are attracting customers as fast as they can roll out infrastructure by the container-load!

In contrast to the innovators, disruptive hyperscale cloud providers represent a credible threat to incumbent Tier 1 storage vendors. To counter this threat, Tier 1 companies are aggressively developing and deploying data efficiency technologies portfolio-wide to massively reduce the effective cost of their storage products. This strategy has multifold benefits as it enables them to regain lost margin and share caused by innovators, to extend the life and competitiveness of legacy products vis-à-vis new entrants and hyperscale cloud competitors, and to gain competency for future third-platform,
cloud and SDS products.

Tier 1 incumbents are also adopting an "eat lunch or be lunch" product development strategy that includes funding and developing software-defined storage, converged, and third-platform products with data efficiency technologies, along with building OPEX business models that will cannibalize CAPEX product offerings.

The on-premise market share (as percentage of all storage) is certain to decline over the next ten years, while the cloud market share will increase. Incumbents can drop their effective cost with data efficiency and other tactics and relentlessly grab that on-premise storage market share to retain volumes and margins. They also have the scale to reduce operating costs (as percentage of sales) to prosper in a deflationary market, something the leaner startups cannot do.

As "innovators," the all-flash and hybrid array entrants who introduced primary data efficiency technology will be remembered for making data efficiency a mainstream product requirement, but they will disappoint shareholders and investors as the incumbent Tier 1 storage companies deliver superior data efficiency and reap the rewards of market share.  Disruption favors the entrants, so the real threats are from hyperscale cloud providers as they move up market.

Clayton Christensen's Innovator's Dilemma is a near-perfect model for describing the technical, economic, and business transformation of the storage market. As the critical sustaining innovation, data efficiency will enable incumbent Tier 1s to compete by maintaining market share and margin longer, extending cash flow and product lines, and consolidating share in the shrinking on-premise storage segment.

The smarter storage incumbents, companies like HDS, EMC and IBM, are well on the way to defining and building third-platform/cloud and software-defined storage offerings with data efficiency as they gird for the battle of their lives.

More Stories By Tom Cook

Tom Cook, Chief Executive Officer and President of Permabit Technology Corporation, is responsible for guiding the company’s strategy and vision. He has more than 20 years of experience leading growth stage technology companies. Prior to joining Permabit, Cook led and completed the sale of web application developer, Curl Corporation to a division of the Sumitomo Corporation. Prior to Curl, he was President and CEO of audio tool maker, Cakewalk Software (acquired by Roland Corporation), which he led from start-up to worldwide market leadership. He also served as a director of or advisor to more than a dozen companies and organizations.

Cook has a Master’s degree in Business Administration from the Amos Tuck School of Business Administration, Dartmouth College, and a Bachelor’s degree in Economics from Harvard University.

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


@ThingsExpo Stories
SYS-CON Events announced today that Infranics will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Since 2000, Infranics has developed SysMaster Suite, which is required for the stable and efficient management of ICT infrastructure. The ICT management solution developed and provided by Infranics continues to add intelligence to the ICT infrastructure through the IMC (Infra Management Cycle) based on mathemat...
SYS-CON Events announced today that Auditwerx will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Auditwerx specializes in SOC 1, SOC 2, and SOC 3 attestation services throughout the U.S. and Canada. As a division of Carr, Riggs & Ingram (CRI), one of the top 20 largest CPA firms nationally, you can expect the resources, skills, and experience of a much larger firm combined with the accessibility and attent...
SYS-CON Events announced today that Interoute, owner-operator of one of Europe's largest networks and a global cloud services platform, has been named “Bronze Sponsor” of SYS-CON's 20th Cloud Expo, which will take place on June 6-8, 2017 at the Javits Center in New York, New York. Interoute is the owner-operator of one of Europe's largest networks and a global cloud services platform which encompasses 12 data centers, 14 virtual data centers and 31 colocation centers, with connections to 195 add...
SYS-CON Events announced today that Cloudistics, an on-premises cloud computing company, has been named “Bronze Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Cloudistics delivers a complete public cloud experience with composable on-premises infrastructures to medium and large enterprises. Its software-defined technology natively converges network, storage, compute, virtualization, and management into a ...
In his session at @ThingsExpo, Eric Lachapelle, CEO of the Professional Evaluation and Certification Board (PECB), will provide an overview of various initiatives to certifiy the security of connected devices and future trends in ensuring public trust of IoT. Eric Lachapelle is the Chief Executive Officer of the Professional Evaluation and Certification Board (PECB), an international certification body. His role is to help companies and individuals to achieve professional, accredited and worldw...
In his General Session at 16th Cloud Expo, David Shacochis, host of The Hybrid IT Files podcast and Vice President at CenturyLink, investigated three key trends of the “gigabit economy" though the story of a Fortune 500 communications company in transformation. Narrating how multi-modal hybrid IT, service automation, and agile delivery all intersect, he will cover the role of storytelling and empathy in achieving strategic alignment between the enterprise and its information technology.
Microservices are a very exciting architectural approach that many organizations are looking to as a way to accelerate innovation. Microservices promise to allow teams to move away from monolithic "ball of mud" systems, but the reality is that, in the vast majority of organizations, different projects and technologies will continue to be developed at different speeds. How to handle the dependencies between these disparate systems with different iteration cycles? Consider the "canoncial problem" ...
The Internet of Things is clearly many things: data collection and analytics, wearables, Smart Grids and Smart Cities, the Industrial Internet, and more. Cool platforms like Arduino, Raspberry Pi, Intel's Galileo and Edison, and a diverse world of sensors are making the IoT a great toy box for developers in all these areas. In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists discussed what things are the most important, which will have the most profound e...
Keeping pace with advancements in software delivery processes and tooling is taxing even for the most proficient organizations. Point tools, platforms, open source and the increasing adoption of private and public cloud services requires strong engineering rigor - all in the face of developer demands to use the tools of choice. As Agile has settled in as a mainstream practice, now DevOps has emerged as the next wave to improve software delivery speed and output. To make DevOps work, organization...
My team embarked on building a data lake for our sales and marketing data to better understand customer journeys. This required building a hybrid data pipeline to connect our cloud CRM with the new Hadoop Data Lake. One challenge is that IT was not in a position to provide support until we proved value and marketing did not have the experience, so we embarked on the journey ourselves within the product marketing team for our line of business within Progress. In his session at @BigDataExpo, Sum...
Web Real-Time Communication APIs have quickly revolutionized what browsers are capable of. In addition to video and audio streams, we can now bi-directionally send arbitrary data over WebRTC's PeerConnection Data Channels. With the advent of Progressive Web Apps and new hardware APIs such as WebBluetooh and WebUSB, we can finally enable users to stitch together the Internet of Things directly from their browsers while communicating privately and securely in a decentralized way.
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm.
What sort of WebRTC based applications can we expect to see over the next year and beyond? One way to predict development trends is to see what sorts of applications startups are building. In his session at @ThingsExpo, Arin Sime, founder of WebRTC.ventures, will discuss the current and likely future trends in WebRTC application development based on real requests for custom applications from real customers, as well as other public sources of information,
In his General Session at 17th Cloud Expo, Bruce Swann, Senior Product Marketing Manager for Adobe Campaign, explored the key ingredients of cross-channel marketing in a digital world. Learn how the Adobe Marketing Cloud can help marketers embrace opportunities for personalized, relevant and real-time customer engagement across offline (direct mail, point of sale, call center) and digital (email, website, SMS, mobile apps, social networks, connected objects).
"My role is working with customers, helping them go through this digital transformation. I spend a lot of time talking to banks, big industries, manufacturers working through how they are integrating and transforming their IT platforms and moving them forward," explained William Morrish, General Manager Product Sales at Interoute, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
With the introduction of IoT and Smart Living in every aspect of our lives, one question has become relevant: What are the security implications? To answer this, first we have to look and explore the security models of the technologies that IoT is founded upon. In his session at @ThingsExpo, Nevi Kaja, a Research Engineer at Ford Motor Company, will discuss some of the security challenges of the IoT infrastructure and relate how these aspects impact Smart Living. The material will be delivered i...
SYS-CON Events announced today that Ocean9will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Ocean9 provides cloud services for Backup, Disaster Recovery (DRaaS) and instant Innovation, and redefines enterprise infrastructure with its cloud native subscription offerings for mission critical SAP workloads.
Your homes and cars can be automated and self-serviced. Why can't your storage? From simply asking questions to analyze and troubleshoot your infrastructure, to provisioning storage with snapshots, recovery and replication, your wildest sci-fi dream has come true. In his session at @DevOpsSummit at 20th Cloud Expo, Dan Florea, Director of Product Management at Tintri, will provide a ChatOps demo where you can talk to your storage and manage it from anywhere, through Slack and similar services ...
SYS-CON Events announced today that Linux Academy, the foremost online Linux and cloud training platform and community, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Linux Academy was founded on the belief that providing high-quality, in-depth training should be available at an affordable price. Industry leaders in quality training, provided services, and student certification passes, its goal is to c...
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.