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
Widespread fragmentation is stalling the growth of the IIoT and making it difficult for partners to work together. The number of software platforms, apps, hardware and connectivity standards is creating paralysis among businesses that are afraid of being locked into a solution. EdgeX Foundry is unifying the community around a common IoT edge framework and an ecosystem of interoperable components.
"MobiDev is a software development company and we do complex, custom software development for everybody from entrepreneurs to large enterprises," explained Alan Winters, U.S. Head of Business Development at MobiDev, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
In his session at 21st Cloud Expo, Carl J. Levine, Senior Technical Evangelist for NS1, will objectively discuss how DNS is used to solve Digital Transformation challenges in large SaaS applications, CDNs, AdTech platforms, and other demanding use cases. Carl J. Levine is the Senior Technical Evangelist for NS1. A veteran of the Internet Infrastructure space, he has over a decade of experience with startups, networking protocols and Internet infrastructure, combined with the unique ability to it...
"Space Monkey by Vivent Smart Home is a product that is a distributed cloud-based edge storage network. Vivent Smart Home, our parent company, is a smart home provider that places a lot of hard drives across homes in North America," explained JT Olds, Director of Engineering, and Brandon Crowfeather, Product Manager, at Vivint Smart Home, in this SYS-CON.tv interview at @ThingsExpo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
"IBM is really all in on blockchain. We take a look at sort of the history of blockchain ledger technologies. It started out with bitcoin, Ethereum, and IBM evaluated these particular blockchain technologies and found they were anonymous and permissionless and that many companies were looking for permissioned blockchain," stated René Bostic, Technical VP of the IBM Cloud Unit in North America, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Conventi...
"Akvelon is a software development company and we also provide consultancy services to folks who are looking to scale or accelerate their engineering roadmaps," explained Jeremiah Mothersell, Marketing Manager at Akvelon, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
Coca-Cola’s Google powered digital signage system lays the groundwork for a more valuable connection between Coke and its customers. Digital signs pair software with high-resolution displays so that a message can be changed instantly based on what the operator wants to communicate or sell. In their Day 3 Keynote at 21st Cloud Expo, Greg Chambers, Global Group Director, Digital Innovation, Coca-Cola, and Vidya Nagarajan, a Senior Product Manager at Google, discussed how from store operations and ...
Large industrial manufacturing organizations are adopting the agile principles of cloud software companies. The industrial manufacturing development process has not scaled over time. Now that design CAD teams are geographically distributed, centralizing their work is key. With large multi-gigabyte projects, outdated tools have stifled industrial team agility, time-to-market milestones, and impacted P&L stakeholders.
Gemini is Yahoo’s native and search advertising platform. To ensure the quality of a complex distributed system that spans multiple products and components and across various desktop websites and mobile app and web experiences – both Yahoo owned and operated and third-party syndication (supply), with complex interaction with more than a billion users and numerous advertisers globally (demand) – it becomes imperative to automate a set of end-to-end tests 24x7 to detect bugs and regression. In th...
"Cloud Academy is an enterprise training platform for the cloud, specifically public clouds. We offer guided learning experiences on AWS, Azure, Google Cloud and all the surrounding methodologies and technologies that you need to know and your teams need to know in order to leverage the full benefits of the cloud," explained Alex Brower, VP of Marketing at Cloud Academy, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clar...
"There's plenty of bandwidth out there but it's never in the right place. So what Cedexis does is uses data to work out the best pathways to get data from the origin to the person who wants to get it," explained Simon Jones, Evangelist and Head of Marketing at Cedexis, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
SYS-CON Events announced today that CrowdReviews.com has been named “Media Sponsor” of SYS-CON's 22nd International Cloud Expo, which will take place on June 5–7, 2018, at the Javits Center in New York City, NY. CrowdReviews.com is a transparent online platform for determining which products and services are the best based on the opinion of the crowd. The crowd consists of Internet users that have experienced products and services first-hand and have an interest in letting other potential buye...
SYS-CON Events announced today that Telecom Reseller has been named “Media Sponsor” of SYS-CON's 22nd International Cloud Expo, which will take place on June 5-7, 2018, at the Javits Center in New York, NY. Telecom Reseller reports on Unified Communications, UCaaS, BPaaS for enterprise and SMBs. They report extensively on both customer premises based solutions such as IP-PBX as well as cloud based and hosted platforms.
It is of utmost importance for the future success of WebRTC to ensure that interoperability is operational between web browsers and any WebRTC-compliant client. To be guaranteed as operational and effective, interoperability must be tested extensively by establishing WebRTC data and media connections between different web browsers running on different devices and operating systems. In his session at WebRTC Summit at @ThingsExpo, Dr. Alex Gouaillard, CEO and Founder of CoSMo Software, presented ...
WebRTC is great technology to build your own communication tools. It will be even more exciting experience it with advanced devices, such as a 360 Camera, 360 microphone, and a depth sensor camera. In his session at @ThingsExpo, Masashi Ganeko, a manager at INFOCOM Corporation, introduced two experimental projects from his team and what they learned from them. "Shotoku Tamago" uses the robot audition software HARK to track speakers in 360 video of a remote party. "Virtual Teleport" uses a multip...
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, whic...
SYS-CON Events announced today that Evatronix will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Evatronix SA offers comprehensive solutions in the design and implementation of electronic systems, in CAD / CAM deployment, and also is a designer and manufacturer of advanced 3D scanners for professional applications.
Leading companies, from the Global Fortune 500 to the smallest companies, are adopting hybrid cloud as the path to business advantage. Hybrid cloud depends on cloud services and on-premises infrastructure working in unison. Successful implementations require new levels of data mobility, enabled by an automated and seamless flow across on-premises and cloud resources. In his general session at 21st Cloud Expo, Greg Tevis, an IBM Storage Software Technical Strategist and Customer Solution Architec...
To get the most out of their data, successful companies are not focusing on queries and data lakes, they are actively integrating analytics into their operations with a data-first application development approach. Real-time adjustments to improve revenues, reduce costs, or mitigate risk rely on applications that minimize latency on a variety of data sources. In his session at @BigDataExpo, Jack Norris, Senior Vice President, Data and Applications at MapR Technologies, reviewed best practices to ...
An increasing number of companies are creating products that combine data with analytical capabilities. Running interactive queries on Big Data requires complex architectures to store and query data effectively, typically involving data streams, an choosing efficient file format/database and multiple independent systems that are tied together through custom-engineered pipelines. In his session at @BigDataExpo at @ThingsExpo, Tomer Levi, a senior software engineer at Intel’s Advanced Analytics gr...