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Wednesday, November 01, 2006

Seeing What's Next Part III, Overshot Customers

In 'Seeing What's Next' Clayton describes signals indicating that a group of customers have been overshot and some of the industry changes that might result. The key signal is customers who lose interest in new features and are unwilling to pay extra for them, and who just want the product to be cheaper and easier to use. This sure sounds like what's happening with midrange and volume disk arrays. Customers used to pay a lot to get RAID arrays from a trusted supplier like EMC who could make it reliable, and they might even pay extra for features like snapshot and replication. Not anymore. Today most customers assume RAID technology has matured to the point where it 'just works' and features like snapshot are like power windows - just assumed to be there.

Another signal of overshoot is the emergence of new standards that disaggregate parts of the value chain. This has happened at both the datapath and management interfaces. Five years ago when you bought an array, you had to get that vendor's driver stack which included their multipathing driver, and in the case of EMC included HBAs with custom firmware. Today, there is a standard for multipathing built into Solaris, available for Linux and in development for Windows, and you can use standard Qlogic or Emulex HBAs from your favorite reseller. At the management interface, SNIA has now standardized this so you can buy an array from your favorite RAID vendor and plug it into a separate third-party SAN management tool. The result, a RAID array has become an interchangeable, plug-compatible component like a disk drive.

The next indicator of overshoot is the emergence of a new business model that emphasizes convenience and low price. Sure enough, just this morning I saw an announcement regarding Dell's arrays that they OEM from EMC. Five years ago you had to create a relationship with EMC to use their products, use their support, use their management software, and install their HBAs and stack on your servers. Today you go to a click-through order form on a website, a UPS truck delivers them, and you plug just the array component into your datacenter.

One type of change Clayton predicts when there are overshot customers is what he calls displacing innovations. This is an innovation that introduces a new product that plugs into points of modularity (aka standard interfaces). We are seeing this as well with the emergence of virtualization devices that sit between the application servers and storage arrays. Pirus (acquired by Sun), StoreAge (just acquired by LSI), Crosswalk, and Incipient are a few of the startups in the space. Cisco and Brocade are adding this capability, and pNFS is an emerging open standard to move this higher-level virtualization out of the array. The result is RAID trays effectively become what disk drives were ten years ago - the commodity hardware that holds the data behind a higher-level virtualization device.

I think that's the key clue to what's next. RAID arrays become what disk drives were ten years ago. Twenty years ago I developed disk firmware in Digital's disk engineering group. In the early nineties, once the disk interface standardized, it wasn't worth competing with Quantum and Seagate and we moved up the value chain to do RAID instead. Now the next cycle is happening. HP, Sun, and IBM, move up another level and OEM the whole RAID array. EMC has already stated they plan to become a software company so it won't surprise me if and when they start OEM'ing the basic RAID arrays.

This creates OEM opportunities for the RAID vendors who want to complete in this commodity market. Because this looks so much like what disk drives went through fifteen years I think the role models are companies like Seagate the won in that disruptive cycle. They very precisely standardized form factor and functionality so they could be second-sources for each other at the big OEMs, got very good at high-yield, high volume manufacturing, reduced their product cycle times, and relentlessly drove down cost with each cycle. Who wins this battle? I don't know. Maybe one of the existing RAID suppliers like LSI or Dothill wins. On the other hand, Clayton's books explain that one of the natural laws of business is that companies try to move to the next level of value so maybe one of today's disk drive companies becomes the next big supplier of RAID trays. Like Clayton says, don't use his book to pick stocks. Use it to see higher level trends in the industry. Maybe this is one.