EMC Is Looking to Become a Top Solid State Arrays Player

EMC (NYSE: EMC  ) is one of the traditional storage companies that have embraced the tidal wave of the rapidly morphing storage industry. Gartner's numerical navel-gazers have delved into solid state arrays and found that EMC sprung to fourth position in SSA revenue in a standing start. The company recorded a revenue of $75 million from SSA revenue in 2013, up from virtually zero in 2012, overtaking rival NetApp (NASDAQ: NTAP  ) in the process.

Source: The Register

Stagnating sales
Storage sales have stagnated as many enterprises ponder their technical roadmaps. According to the IDC, high-end strorage sales fell 25% in the first-quarter of fiscal 2014. EMC suffered an 8.8% revenue slump, due to its heavy reliance on its high-end Symmetrix line. NetApp suffered a smaller 2.8% decline due to its lower high-end exposure.

Top 5 Worldwide External Disk Storage Systems Vendors, Q1 2014 (Revenue in Millions)

Vendor

1Q14 Revenue

1Q14 Market Share

1Q13 Revenue

1Q13 Market Share

1Q14/1Q13 Revenue Growth

1. EMC

$1,640

29.1%

$1,798

30.2%

-8.8%

2. NetApp

$854

15.1%

$879

14.8%

-2.8%

3. HP

$498

8.8%

$501

8.4%

-0.7%

3. IBM

$497

8.8%

$642

10.8%

-22.5%

3. Hitachi

$493

8.7%

$529

8.9%

-6.8%

Others

$1,659

29.4%

$1,599

26.9%

3.7%

All Vendors

$5,642

100%

$5,949

100%

-5.2%

Source: IDC

IBM reported the biggest external disk storage revenue slump--22.5% during the quarter. This is perhaps a reflection of the company's gradual exit from the external disk storage market to all-flash arrays.

It's important for companies such as EMC and IBM to find new storage markets with better growth runways. And both companies are doing that admirably.

EMC revamps its product lineup with new storage arrays
EMC has introduced space-saving upgrades to its XtremeIO all-flash arrays to reflect the industry trend that involves broadening the use of the high-performing but costly storage tier. With the battle to become the top all-flash arrays hotting up, EMC is trying to gain a competitive edge upfront by prioritizing features that help to maximize the usable capacity. Maximizing available storage remains a top priority for SSA vendors because the cost of solid-state drives per GB remains very high relative to hard disk drives.

EMC made the following announcements June 8:

  •  A revamp of the EMC VMAX3 family of systems--this will help users move away from hardware to enterprise data services. EMC acquired TwinStrata to help embed the cloud into VMAX3 systems.
  • Upgrade of the Isilon OneFS platform.
  • New features and configurations for its XtremeIO all-flash arrays. The company's flash portfolio now includes low-cost configurations that will improve density per storage rack as well as price/performance ratios. This includes features such data compression improvements, in-memory options, and configurations that will cover a wider market with a 5TB Starter X-Brick. EMC also outlined the availability of its software-defined ViPR 2.0 and ViPR SRM 3.5. The software will be available as an appliance.

The new EMC flash arrays will help it compete better with leading flash companies such as Pure Storage and SolidFire. Pure Storage already has compression and deduplication, while SolidFire has compression, scale-out and deduplication that are designed for a cloud-oriented play.

What is the growth potential for flash arrays?
According to the Gartner report, the SSA market grew 182.1% in 2013 to reach $667.3 million. EMC now owns 11.5% share of this rapidly expanding market. Gartner estimates that the SSA market will grow to $3.5 billion by 2017, or a CAGR of 73%.

However, this could be a pretty conservative estimate. There are some compelling reasons, why the market could grow much faster than Gartner's estimate. PCIe SSDs are typically considered the leading-edge SSD products. But, when you compare Tier 1 performance PCIe SSDs storage with SSAs, you notice that SSAs offer comparable performance, but 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 which 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

Flash arrays can also be used in a wide variety of enterprise applications, while PCIe SSDs are only suitable for use in small databases and non-persistent files.

The bull case for EMC
The SSA market grew at 182% CAGR in fiscal 2013. If the market manages to grow at a CAGR of 100% through 2017, it will reach $5.34 billion by 2017. EMC grew from zero SSA revenue in 2012, to $75 million in 2013. With the company launching new high-performance products to keep up with the SSA giants, its SSA growth might outpace the SSA market, and reach around $700-$800 million, or more per year by 2017.

The company's current annual run rate of external disk revenue decline is $633 million, which implies that SSA revenue growth will offset its revenue decline in about 3 years.

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