Storage Winners and Losers: Hedging Your Bets

Ten years ago high performance computing (HPC) vendors included the likes of Cray, SGI, Compaq/DEC, NEC, and several other companies. Today for large servers we are primarily down to IBM, Intel-based platforms, and the emerging new Cray, Inc. This huge change for HPC over just 10 years is characteristic of almost everything we use in the data center, from HBAs to tapes to RAID, you name it.

Let's examine exactly why some storage companies fall while others rise and explore the process of what happens to the winners and losers of the technology race. It's surprising just how straightforward the process really is (baring a few bits of randomness here and there) and how it can be applied to almost all of our industry segments.

What Is the Mark of a Winner?

While picking future technology winners and losers is no simple task, there are a few points that I believe are universal constants in our industry:

1. The “haves” (big companies with deep pockets but not necessarily the best technology) tend to win over the “have nots”:
   1. They win when times are bad as companies become more risk adverse
   2. They also win over a short time period, as they can price the “have nots” out of the market (I live in an area where a single airline dominates the market, and they continually price the competition out of the market)
2. The “haves” often buy “have nots” when they (the “haves”) are far behind technologically
3. Long-term R&D capital expenditure is critical to staying as one of the “haves”. Over the short term a company can market around a mediocre product, whereas long term that just doesn't work
4. Not understanding the market, customers, and/or the competition can quickly turn a “have” into a “have not”

The market is unforgiving. Consider a couple good examples of companies that missed huge opportunities:

Xerox - The Palo Alto Research Center not only had the mouse, but also a windowing operating system — where would Apple and Microsoft be today without Xerox? And how would Xerox have fared if HP hadn't come out with a home printer? Without its introduction, Xerox might not have fallen from grace.

Control Data Corporation (CDC) - This company decided that no one needed a computer faster than the CDC-7600 and then let one of its founders and the inventor (Seymour Cray) of all of its computers leave — two moves that basically put the company out of business in the late 1980s.

These are just two of the companies that missed the mark in the 1970s and 1980s. CDC is effectively gone and is completely out of the computer business today, and Xerox, a giant of those days, is still struggling (although less than they were 18 months ago) as a much smaller company.

My point is that this is a continual cycle. We've seen the cycle occur in the 1970s, 1980s, and during the dotcom bubble of the late 1990s, and we will continue to see it over and over again. This cycle is part of progress and part of our human evolution.

Page 2: HBAs – A Case Study