The fourth calendar quarter of 2019 was a tough one for the storage industry, particularly for the major storage brands. Those vendors, who are counted by IDC in the total worldwide enterprise external OEM storage system sales, saw an ever-so-slight dip of 0.1 percent revenue in the fourth quarter, according to the latest edition of IDC's Worldwide Quarterly Enterprise Storage Systems Tracker.
However, sales of ODM (original design manufacturer) storage builders to the hyperscale cloud market saw a huge bump in sales, a fact which shows the movement of data from on-premises storage infrastructures to the cloud is continuing.
Even more ominous for the branded storage vendors, particularly those based in the U.S., is the continuing rise of China-based Huawei despite that company having little or no sales in the U.S. market because of U.S. government pushback against the Chinese company.
In yet another major shift, the IT industry seems to be getting ready to say goodbye to the hybrid flash array market as sales of those products start falling.
The data storage industry is market by the development of some of IT's most sophisticated products, but is very much an industry in flux.
To get a feel for what's happening, and to look behind the numbers, turn the page.
Big Storage Shift: On-prem To On-line
IDC focused on two major categories of storage. External OEM storage systems refers to branded storage systems external to servers and sold direct or indirect to business users. ODM, or original design manufacturer, storage is storage which is sold directly to hyperscale cloud providers' data centers.
For the fourth quarter of 2019, IDC estimated that total global external OEM storage system revenue declined 0.1 percent compared to the fourth quarter of 2018 to $US7.9 billion. However, ODM storage sales to hyperscalers rose 38.2 percent year-over-year to $US6.5 billion.
In terms of capacity, IDC estimates that fourth quarter 2019 OEM external storage solution shipments reached 21.2 exabytes, which is up 9.4 percent over last year. However, total capacity shipped in the ODM category in the fourth quarter rose 64.5 percent over last year to reach 70.8 exabytes, IDC said.
Taken together, this indicates a strong shift in sales from traditional channels for on-premises storage to more of a cloud focus.
Paul Maguranis, IDC's senior research analyst for infrastructure platforms and technologies, said in a statement that the external OEM market was essentially flat in the fourth quarter while ODM direct sales saw the strongest growth in five quarters.
"ODMs witnessed double-digit year-over-year growth this quarter for revenue, units, and capacity shipped and accounted for 58.9% of capacity shipped for the entire storage market, up from 46.8% this time last year," Maguranis said.
Big Storage Shift: Hybrid To Flash
The move to all-flash storage arrays is continuing.
IDC estimated that fourth quarter 2019 sales for the total all-flash array market reached $US3.23 billion in revenue, which was up 8.4 percent compared to the fourth quarter of 2018.
Meanwhile, total sales of hybrid flash arrays, which combine both flash-based capacity and spinning disk-based capacity, fell 2.8 percent over last year to reach total revenue of about $US3.04 billion, IDC said.
IDC estimated the combined Dell and EMC storage business drew revenue for the fourth quarter of 2018 of $US2.18 billion, down 6.4 percent over the $US2.34 billion the company saw a year ago.
Dell Technologies last month reported its full fiscal year 2020 financials, during which it said fourth fiscal quarter storage sales fell 3 percent year-over-year to $US4.49 billion, with full year storage revenue essentially flat at $US16.84 billion.
Dell's storage business consists of multiple incompatible storage lines, but the company has been talking for about a year about "Midrange.next," the code name for a new line of storage which is aimed at combining some of its existing lines and providing a more unified approach to the market. Midrange.next was originally scheduled to be available by the end of 2019, but the company last month said the launch was yet again delayed until this spring.
Hewlett Packard Enterprise
HPE had the second-highest storage revenue during the fourth quarter of 2019, coming in at $US802.5 million, which was down 4.5 percent from the $US840.3 million the company had a year ago.
HPE itself earlier this month reported that its storage revenue during its first fiscal quarter 2020, which ended January 31, was $US1.3 billion, which was down 7 percent year-over-year when adjusted for currency. The company also reported 18.1-percent operating margins, which was down 60 basis points from last year. HPE's hyper-converged infrastructure sales were up 6 percent over last year, while sales related to big data were up 45 percent over last year, both adjusted for currency.
HPE is counting heavily on its new HPE Primera line of storage arrays to bring back momentum in storage.
IBM appears to be making a comeback after multiple years of declining storage revenue. The company was one of only two top-five vendors to show growth in the fourth quarter of 2019, IDC said. Big Blue's storage sales in the quarter rose 5.9 percent to $US721.8 million to help it overtake NetApp as the third-largest storage vendor in revenue terms.
IBM in January reported revenue for its fourth fiscal quarter 2019, which ended December 31, grew three percent year-over-year driven by the release of its new high-end DS8900 line of arrays.
IBM in February made a bold move to unify its two non-compatible, non-mainframe storage lines--Storwize and the Flash Systems A9000--and replacing them with a single new FlashSystem family as a way to simplify its storage line. The company did so thanks to its focus primarily on a common storage operating system.
NetApp, which until early last year was the fastest-growing of the major storage vendors, has over the past few quarters struggled with falling sales, and the fourth quarter was no exception, according to IDC. IDC said NetApp's fourth quarter 2019 storage revenue was $US704.8 million, down 16.3 percent from last year.
NetApp last month said that, for its third fiscal quarter 2020, which ended January 24, its total revenue was $US1.40 billion compared to $US1.56 billion in the same quarter of the previous year. Net income on a GAAP basis was $US277 million, or $US1.21 per share, up from last year's $US249 million, or 98 cents per share. On a non-GAAP basis, net income was $US265 million, or $US1.16 per share, down from last year's $US305 million, or $US1.20 per share.
NetApp has seen a string of executive changes in the last year, most recently last month when it said its Chief Financial Officer Ron Pasek will soon retire. However, the company earlier this month showed it is addressing growth with the acquisition of Talon Storage, a developer of software that consolidates data from multiple remote and branch offices into a centralized location from which it is managed and then made available to users outside the central office.
China-based Huawei was the fifth-largest storage vendor in the fourth quarter of 2019, with sales of $US616.2 million, up an impressive 28.2 percent from storage sales from the same period last year of $US480.5 million. That growth is quite impressive given that the company has little or no storage sales in the U.S. due to U.S. government concerns over potential ties between the company and the China government.
Huawei in February launched its OceanStor 5G-Era storage systems targeting carriers and enterprises looking to prepare for data growth as they adopt 5G communications and the new apps that 5G will likely bring including 4K and 8K video and virtual or artificial reality.