NETWORK STORAGE SOLUTIONS: A Good Growth In Store

Partners expect network storage business to grow by over 50% in the current fiscal. This optimism is shared by IDC too which predicts that the overall storage systems market will grow to $250 million by 2005 at a CAGR of 76%. Given this rosy picture, vendors are going all out to provide the right training to solution providers for proper implementation and post-sales support.

The mood is upbeat in the  NAS (network attached storage) and SAN
(storage area network) market as more business verticals are willing to embrace
these solutions to enjoy long-term benefits. And it is the SMEs who are leading
the pack.

According to IDC, the Indian storage industry was pegged at $119.6 million at
the end of 2003, a growth of 16% over $103.1 million in 2002. In terms of
storage volumes, the market stood at 3762.2 terabytes in 2003-end, a growth of
about 65% over 2239.4 terabytes the previous year.

IDC predicts that the overall storage market will grow to $250 million by
2006 at a CAGR of 76%. According to this research agency NAS products will
account for 32% and SAN 49% of the marketshare in the total storage pie.

If these figures are anything to go by, then there is no doubt that India’s
network storage market is in for a healthy growth in the next couple of years.

Historically, telcos and the banking industry were the biggest investors in
this technology. But currently, SMEs contribute almost 45% of the networked
storage business, especially for entry-level solutions.

Avijit Basu, Country Manager, Network Storage Solutions Group, HP India finds
it heartening that the SMB space is gearing up to accept entry-level network
storage solutions. He believes the Indian market has started to realize that
disaster recovery solutions are an integral part of any organization and they
don’t want to risk on that front. "And this is making possible for
vendors like HP to make inroads in the SMB space and other public
organizations," says he.

Keeping this in mind, HP will be focusing more on this segment in the current
fiscal. It will also try to consolidate its position in verticals like BFSI,
SMBs, telco and the government and public sector. "The consumption in
terabytes has increased by 45% in JFM over OND. I expect the market to grow by
at least 50% in the next six months," feels Avijit.

Agendra Kumar, County Manager, Veritas Software says that the SAN and NAS are
growing at roughly 70% on a year-on-year basis. He too bets on SMEs as the
biggest spenders on storage this year.

GROWING NEEDS FUEL GROWTH

Enterprise data storage needs are doubling every 12 to 18 months. Inversely
IT budgets are decreasing, squeezing storage budgets as well. With this
decrease, customers want to make the best use of the storage capacities that
they have.

It is estimated that most customers are currently only using 35% of their
existing storage capacity because a lot of information is located in islands
that are not networked together. Enterprises are now looking at how to get more
out of their existing storage solutions, and are examining services offered by
storage companies minutely, before going for it.

Also, the increased implementation of applications such as ERP, CRM and data
warehousing software across enterprises has contributed to the growing storage
market in India. These applications involve tremendous data analysis and
distribution, all of which require storage.

The growth in the year 2003 came in from the banking and financial services
sectors, insurance, telecom, manufacturing, high-performance computing and
government sector. "This year IBM would help channel partners explore newer
customer segments which have so far not been ventured into by traditional
channels. These newer areas offer immense potential for partners to broaden
their set of customers. Some of these segments which IBM has identified
areweather forecasting, online medical research, human genome sequencing,
business intelligence, security, petroleum exploration, crash testing, digital
media and next-generation film making," adds Shailesh Agarwal, Country
ManagerStorage Solutions, IBM India.

The company would help partners tap these areas by educating them about these
segments and train them on the solutions which IBM offers specifically for these
segments.

PARTNERS HUM A HAPPY TUNE

With more corporates looking at investing wisely on IT, Tarang Daptardar,
Product Manager-Enterprise Systems, Ontrack Solutions find buyers putting their
money on technologies like NAS, SAN and other backup devices. He also clears the
common misconception of NAS and SAN as competing technologies, adding that these
are instead complementing technologies.

Ontrack has many clients who go for both of these solutions. Verticals like
manufacturing, BFSI are some of the aggressive adopters for these solutions. The
company’s focus on storage also reflects from the fact that any proposal that
Ontrack gives to the clients to meet their IT infrastructure needs, storage
remains a key ingredient of the proposal.

In 2003-04, Ontrack did nearly $1 million business through pure sale of
storage products, which is roughly Rs 5 crore and over 12% of its turnover. In
this fiscal, the company is targeting to double its revenue from storage to
achieve $2 million. "If one takes into account the associated solution and
service revenues, storage would contribute nearly 20% of our overall
turnover," says G Balakrishnan, Director, Ontrack Solutions.

While noting that customers are showing an increased acceptance of the
storage technologies, Col Balwinder Singh, CEO, Targus Technologies feels that
they are also conscious of what they should invest their money on. This in turn
is doing good to the partners who have put some serious focus on this business.

Targus’ revenues grew by more than 50% in 2003-04 compared to last fiscal.
Almost 17% of the company’s business comes from storage and in 2003-04 it
clocked Rs 8 crore from storage. "I have absolutely no doubt that in the
next couple of years, the storage market is going to grow further," he
states, pointing out that vendors are also taking more interest in rendering
training programs to partners on the correct solutions for the different
customers.

RK Malhotra, CEO, OA Compserve says "Network storage is one area which
is witnessing phenomenal growth since last on year. We usually concentrate on
getting high-value projects and since margins are considerably high in this
business, expertise of the partner is the key to success. Banking and financial
sector, telecom and SMEs are some of the segments, which are aggressive on this
front and it is expected that there would be many more verticals that would open
up to storage solutions." The company grew at 40% in fiscal 2002-03 as
compared to the fiscal before and Malhotra is hopeful that in the current

fiscal the growth would be more than 50%.   

Until last year, Liberty Automations did not have a very aggressive focus on
storage. "We were taking up one-off projects around it. But many queries
have been coming in recently. Hence, this year, we have consciously decided to
ramp up our focus in this space," says Rajiv Sethi, CEO, Liberty Automation
Systems.

He further adds, "The reason why we took some time to get in this domain
in a full-fledged manner is that, the orders typically are preceded with a long
gestation period which could be anywhere between five to seven months. So only
now that we have readied ourselves to face such realities, we are confident of
getting some good business in storage."  

Rajiv feels that vendors are currently quite supportive in helping them sell
more of such solutions. They go on joint calls with the partners, engage closely
with the customers, and communicate with Liberty regularly on technological
developments.

According to him, the reason why one can see a strong surge
in the requirement of solutions like NAS, SAN, tape drives is that there’s a
huge amount of online, real-time information and data flow that is happening
around and within any enterprise. "Companies are also actively putting DR
plans in place. So in view of this, solutions like these are bound to take
center stage in the near future," Rajiv points out.

Sushant Panda, Executive  Director and VP-Services and
Infrastructure, Lauren Technologies feels that the call-center and BPO business
is booming and the overall IT investments are picking up. "So there’s
every reason for this business to pick up in the current year and contribute
significantly to our overall turnover as well as profitability," adds he.

Avinash Pitale, Director, Omnitech Infosolutions informs that
his company clocked a revenue of Rs 8 crore from storage business in 2003-04 and
is expecting to increase company’s storage revenue to 25% of the overall
turnover in the coming fiscal. "Verticals like media and broadcasting are
expected to be key drivers of NAS kind of solutions while BFSI again will drive
SAN business," Avinash adds.

By the end of this fiscal, Avinash feels that the government
sector will also open up for SAN and NAS solutions, which would make business
more exciting. One of the primary reasons for partners like Omnitech to get more
aggressive with storage solutions is the fact that one can make 10 to 12% margin
in this business which hardly any other business offers.

CHANGING FACE OF STORAGE

Tape-based storage is going high-tech with high-speed automated tape
storage. In the past, enterprise storage was limited to Direct Attached Storage
(DAS). However, companies have now moved on to NAS and SAN solutions.

In the SME space, storage consolidation implementations and consolidated
backup solutions are most sought after. Large enterprises seek comprehensive
disaster recovery solutions and storage virtualization to manage huge amounts of
storage in an increasingly multi-vendor environment and storage management
solutions to increase productivity.

According to Shailesh "Virtualization is the latest step in IBM’s
roadmap to deliver storage infrastructure products that can help improve
customers’ total cost of ownership." The storage virtualization solutions
will be a key component for customers evolving to an on-demand operating
environment, and has been designed to give them enhanced flexibility to meet the
storage and data integration needs of their business applications. IBM India
expects virtualization solutions to further gain momentum among customers this
year.

Another significant technology advances that is expected to make a large
contribution to the growing success of network storage is iSCSI. This technology
allows data to be transported to and from storage devices over an IP network.
Using iSCSI, the concept of network storage can be taken anywhere that IP can
go, which as the Internet proves, is basically anywhere. "Technologies like
fiber channel and iSCSI are a big factor in how fast people are able to afford
and implement network storage solutions," Agendra points out.

SME SMARTS UP

Vendors as well as partners are increasingly realizing that SMEs offer great
potential for network storage solutions business. Especially since most have
traditionally been users of DAS, there is an opportunity to move them to
entry-level network storage solutions. Customers are concerned about what
happens if their company needs to downsize, right size or up-size.

Giving SMEs the real flexibility to managing their data infrastructure is
really important because many organizations don’t know what their company will
look like six months from now. They want to use what they’ve invested in more
effectively.

Shailesh points out that to reach the latest high technology products to the
remotest customer at an affordable price, IBM has launched the ‘Storage Volume
Drive’. IBM through its distributors and value-added partners is helping
customers

derive value out of IBM storage solutions.

IBM is offering entry-level SAN solutions and tape solutions through its
network of partners. The objective of this program is to target sales in the
entry-level storage segment (LTO tape and media/entry-level SAN). "This
program is aimed at reaching customers in some of the remotest locations with
latest storage technology at affordable prices. Additionally, through this
program, IBM is working closely with its business partners to identify and fast
close leads, to reap the potential of the previously untapped SME market,"
says Shailesh.

Deb Dutta, MD, APacBrocade says, "As part of its strategy, Brocade has
low-end product line to cater to the cost-sensitive SME market. In addition to
that our company creates attractive bundles along with storage vendors and their
channel partners to proliferate networked storage technology in the SME segment.

According to him, Brocade has an ongoing initiative to come out with special
SME bundles to make networked storage a simple to sell, buy and implement
solution.

Deb feels that the SAN market in the country will grow by 20% and the NAS by
5% on a year-on-year basis.

According to Arun Rawtani, Country Technology Solution Group Manager, EMC
India, "SMEs are very investment-sensitive and focused on securing a higher
return on investment while maintaining low total cost of ownership. NAS and SAN
provide increased price/performance, simplicity of implementation and
management, higher availability and greater flexibility in data

access."

Arun feels that in the present scenario most of customers are moving towards
an environment where both NAS and SAN co-exist. That is because most customers
do not want to replace their SANs (on which mission critical applications like
ERP, databases, and CRM’s run). However they would like to add NAS like
flexibility to their SANs. 

Srikant Chakrapani, Consulting Director, Hitachi Data Systems says that as a
storage solution providers HDS take a different approach towards addressing the
customers’ storage needs because information storage is serious business.
"We spend time with our customers and understand their storage requirements
to assess what kind of a storage solution will they be needing. With this kind
of collaborative approach we have been able to address our customers needs in a
better manner," Srikant says.

Besides HDS have a strong focus on the SME segment in India. Last year the
company launched Thunder 9500 V series of storage solutions, which particularly
addresses the needs of the SME customers. The price points for such solutions
starts at about Rs 20 lakhs and goes up to Rs 2 crore for the mid-range
solutions.

HDS has introduced the concept of virtual storage ports and Host Storage
Domains in the Hitachi Freedom Storage series of products Lightning and Thunder
storage systems that are equipped to overcome virtualization challenges. In
addition, HDS and parent company Hitachi are taking an open, network-centric
approach to virtualization.

This open approach would provide enterprise storage customers with the choice
of best-of-breed solutions, and lend itself to collaboration among multiple
storage technology providers. In the next few months, HDS will be rolling out
the details of

this virtual network storage management layer.

BRACING UP FOR MARGIN PRESSURES

Most of the partners around the country are of the belief that storage
solutions are going to grow at a phenomenal rate in the coming few years. But
the only worry for them is that since more and more channel partners are coming
into the picture the margins are going to get squeezed. Today some of the
partners are earning as high as 20% margin in this business but this seems
highly unlikely in the next one year.

According to M Venkateshwar Rao, MD, SV Electronics, "I fear that with
the entry of more and more players in the storage market, margins will
drastically fall and this is not a good sign for us. But there can be no doubt
that those who are in this business for more time they will have better
expertise and thus would have the edge over newer partners."

SV Electronics clocked Rs 80 lakh from storage solutions in 2003-04, which
was a 100% growth from the previous fiscal. Sharing Venkateshwar’s sentiments,
Srikant, GM, SP Software says, "Now we are earning around 10 to 15% margin
but in the next one year, as more and more partners will start entering this
business, I see this margin falling to around 5% which is not that encouraging.
But I guess there is pressure in every business and the most efficient ones
sustain and we are prepared for the competition."

SP Software’s has been in this business for last six months and in these
two quarters the company clocked Rs 20 lakh and it is hoping to close the coming
fiscal with Rs 1 crore in its kitty.

Says Tarun Seth, CEO, Micro Clinic India, "It is a well known fact that
when any technology is showing signs of getting accepted more and more players
want to try their hands out. But one should understand that it is only those
partners who will

do well those who have good training to implement such solutions. I feel that
vendors today are making sure that partners

should have well-versed knowledge before venturing into storage solutions."

Most of the partners say that their revenues in the storage space have gone
up by more than 50% in 2003-04. And if this trend continues then there can be
hardly any doubt that we can see many other players too joining the party.
However margins in the storage space will remain to be relatively higher than
other run-of-the-mill product lines and partners having good technical expertise
will rule the roost.

ATANU KUMAR DAS with inputs from GOLDIE
in Mumbai

KEY CHARACTERISTICS

NAS

• Connects directly to the network and allows client access to data without
  going through an application server
• Supports file sharing in heterogeneous networks running different
  operating systems
• Uses dedicated, real-time operating system and file system that resides in
  and is locally managed by the NAS server
• Is relatively easy to deploy and manage

SAN

• Provides
  servers with shared access to a common storage pool and one or more
  common tape libraries for backup and restore services
• Utilizes
  a separate fiber channel network specific to storage
• Performs
  data storage transfers between servers and storage devices over the
  SAN, thus reducing the load on the LAN
• Allows
  remote location of hard-disk storage subsystems and tape libraries