Falling Prices, Regulations Drive SAN Market - InformationWeek

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Falling Prices, Regulations Drive SAN Market

A study by market-research firm iSuppli says the market has been growing at a 30% annual rate and should maintain that pace for the next few years.

Spurred by rapidly dropping prices and by federal legislation mandating better record-keeping, the storage area network enterprise market has been growing at a 30% annual rate and appears poised to maintain that pace, according to a study by market-research firm iSuppli.

While virtually all large companies have installed SANs, the market is just dawning for midsize and smaller companies. "SAN demand is increasing," said Denise De Leon, senior storage analyst at iSuppli, "because the costs of a SAN are much cheaper today than they were just five years ago, when SANs were only considered by large enterprises. Today, SANs are being deployed by just about every size business, including about 10% of smaller enterprises [with revenues of] between $100 and $300 million. These enterprises and midsize firms represent the largest growth opportunity for networked storage."

De Leon noted that Microsoft and other software providers have long viewed this market as a major growth opportunity, particularly for regulatory-compliant software packages for vertical markets. For instance, the Health Insurance Portability and Accountability Act requires the establishment of an IT infrastructure to be in place by April 2005. HIPAA mandates the safeguarding of patient records.

Also driving IT managers to bolster their SAN installations is the Sarbanes-Oxley Act, which De Leon said has a direct impact "on the storage IT industry and how data is managed, archived, retrieved, and authenticated." In her survey of storage industry hardware and software vendors, she found that the vendors view Sarbanes-Oxley as "a potentially huge sales boon, similar possibly to the way Y2K was viewed."

De Leon also found an interesting trend in IT shops: They tend to view all data--not just critical information--as important data that should be backed up, encrypted, and protected. "Intellectual property is transmitted via E-mail, so several companies are tackling E-mail first," she said. "Other programs such as word processing, spreadsheets, images, databases--in other words, all information--[are] now viewed more stringently as an asset prone to theft or loss" and will be protected.

As for SAN market share, the iSuppli survey says EMC is the leader with 26%. Hewlett-Packard is next with 25%, and IBM is third with 18%. Following the top three are Hitachi (8%), LSI Storage (7%), Sun Microsystems (7%), and Dell (6%).

The iSuppli report said the SAN fiber channel-port market has been growing at a 30% annual rate over the past three years. The market-research firm expects that growth rate to continue for five years, with 13.6 million units expected to be shipped in 2008. A total of 3.5 million units were shipped in 2003. While the unit shipments are expected to remain at the 30% growth rate, price erosion should restrain revenue growth to about 15% annually.

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