Storage Market Shrinks...As It Grows? -- Expect continued consolidation as demand increases, study finds

By Luc Hatlestad
7 March 2005
VARBUSINESS

One of the key buzzwords in the IT industry this year will be consolidation. In addition to such megamerger deals as Oracle-PeopleSoft and Symantec-Veritas, plenty of smaller companies also will join forces in 2005.

Johna Till Johnson, president of Nemertes Research, New York, highlights one of those deals in a recently released report. She says McData's impending acquisition of Computer Network Technology (CNT) exemplifies the ongoing trend of storage consolidation and virtualization across data centers. McData, which develops Fibre Channel-based storage-area networks (SANs), bought CNT for roughly $235 million. CNT provides channel-extension storage solutions for mainframes.

Johnson says the deal highlights the ongoing growth in the storage market; 85 percent of the respondents to a recent Nemertes survey said they plan to increase their storage requirements during the next 12 months, with most growth rates rising between 10 percent and 40 percent. The acquisitions show how solutions-not just companies-are consolidating as well; enterprise demands dictate that vendors offer a broad technology portfolio, rather than being merely a SAN or NAS vendor, she adds.

Finally, the McData-CNT deal shows the emergence of services in the storage sector as hardware becomes increasingly commoditized. Facing big-name competitors such as Cisco, EMC, Hewlett-Packard, Hitachi, IBM and Network Appliance, Johnson says the CNT acquisition raises questions about the long-term standalone viability of relatively small players, such as Brocade, which also has been mentioned as an acquisition target, possibly for HP or Cisco. She says even McData-CNT itself might still be ripe for the picking. Johnson's advice? Remain flexible and evaluate your overall storage strategy because more consolidation is sure to follow.

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