Will All-Flash Arrays Save Sinking IBM?

IBM (NYSE: IBM  ) has been facing a worrying revenue cliff that has led to its revenue taking a plunge for eight consecutive quarters. Last quarter, IBM's revenue fell 3.9% to $22.49 billion -- a five-year low. The company's net income tanked 21.4% to $2.38 billion, while EPS plunged 15.4% to $2.29.

IBM has, however, been frantically searching for new growth areas to stem the revenue decline. From the look of things, the company is succeeding in its mission. IBM has found new and abundant growth in the cloud arena, and more recently, the SSA, or solid state array, storage business.

Solid state arrays
IBM acquired Texas Memory Systems, a flash storage products manufacturer, in 2012 in a bid to ramp up its flash storage offerings. The acquisition is now paying off handsomely, as IBM was ranked the world's largest SSA vendor in 2013 by Gartner, courtesy of its FlashSystem line, which helped SSA revenue grow 278.1% to reach $164.2 million. Interestingly, EMC (NYSE: EMC  ) sprung to fourth position from a standing start of zero SSA revenue in 2012.

Source: The Register

According to the Gartner report, the SSA market grew 182.1% in 2013 to reach $667.3 million. IBM now owns 24.6% of this market, after dislodging Violin Memory (NYSE: VMEM  ) from the No. 1 spot.

Source: The Register

All-Flash Arrays gaining acceptance
The solid state disk, or SSD, market is much bigger than the SSA market. Gartner estimates that the SSD market reached $10.99 billion in 2013, after growing 53.1%. This can be pinned to the fact that SSD technology has been around for a few decades, while all-flash arrays only appeared in the late 90s, and the SSA market did not take off until 2008. Initially, the majority of ''Big Storage'' vendors focused on building hybrids of flash and disks. Many used flash-caching, which uses 3%-5% flash and a lot of spindles, while others preferred tiering.

The problem with this approach is that flash/disk hybrids perform more like disks and less like flash, yet cost nearly as much as pure flash storage, thus offering users little incentive to switch. It was not until 2012 that manufacturing all-flash memory paired with new-out-of-the-block software specifically written for solid state gained wide acceptance. IBM acquired pure flash storage maker Texas Memory, while EMC acquired ExtremeIO around this time.

Gartner estimates that the SSA market will grow to $3.5 billion through 2017, or a CAGR of 73%. However, this could be a conservative estimate, as there are some compelling reasons why the SSA market could grow much faster than Gartner's estimate. PCIe SSDs are typically considered the leading-edge SSD products. But, comparing Tier 1 performance PCIe SSD storage with SSAs, the SSAs offer comparable performance at a much lower cost.

Flash Arrays vs. PCIe Flash Cards

Performance

  • 400,000 IOPS
  • <1ms latency
  • Flash management executed on dedicated CPUs in array
  • Up to 500,000 IOPS
  • 100s ms latency
  • Flash management executed on host CPUs

Cost

  • $5-$10/GB usable (HA + RAID + dedupe)
  • $10/GB raw, per server
  • $20/GB HA (either mirrored in a server or between servers)

High Availability and Serviceability

  • Active/active clustered HA controllers
  • Hot-swap flash modules and controllers
  • HA via mirroring two cards in a server
  • No cross-server HA mode

Software

  • Dedupe, compression, thin provisioning, VMware integration
  • RAID, HA, data integrity, snapshots
  • Flash management
  • Mirroring
  • Flash management

Suitable Workloads

  • All major enterprise applications
  • Small database applications that can fit in the card, and where high availability is not required, or is handled by the application
  • Non-persistent database files

Source: Pure Storage

Other than their low cost, another big factor that might contribute to the proliferation of SSAs is their suitability for use in wide enterprise applications. In contrast, PCIe SSDs are only suitable for use in small databases and non-persistent files.

To buttress my point, Microsoft inked a deal with Violin Memory in April that will introduce Violin Memory's Windows Flash Array to servers in a bid to speed up popular Microsoft applications. Violin's Flash Array is a 64TB storage array, modified to run Windows Storage Server 2012 R2, and includes RDMA, or Remote Direct Memory Access, and SMB, or Server Message Block, direct on the flash array.

Beta tests carried out on the flash array have revealed performance gains for Hyper-V, SQL Server, and Microsoft VDI. According to Enterprise Strategy Group analyst Brian Garrett, what the two companies have accomplished could have far-reaching implications for the future of flash storage, since it might do away with the need for app servers.

The bull case for IBM
The SSA market grew at a 182% clip in 2013. The market is, however, still small (just $667.3 million in 2013), and it would not be difficult for it to grow 100%, or more, through 2017. At that growth rate, the SSA market could be worth $10.7 billion in 2017.

If IBM manages to maintain at least 25%-30% market share of the rapidly growing SSA market, the company could realize revenue of $2.7 billion-$3.2 billion from SSAs in 2017. Only IBM and Pure Storage managed to grow at a faster clip than the overall SSA market in 2013. If this trend continues, IBM could realize far more revenue from SSAs than the aforementioned projections, thus easily offsetting the company's current revenue decline.

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