Revenue growth is a key metric that will be used to assess the success (or lack thereof) of the 3Par acquisition.  In order to accelerate top line growth, HP cannot just replace EVA and XP sales with 3Par; they must find new avenues for the technology.  Some options include:

• Managed Service (Cloud) providers:  3Par developed unique technology to address this market and 7 of the top 10 infrastructure-as-a-service providers relied on their storage.  HP must continue to pursue managed service providers including HP’s own ES division (formerly EDS).  The credibility and relationships that HP brings as an computing infrastructure provider could enable them to accelerate market penetration and establish an integrated leadership position in this hot market.
• Net new customers: HP must leverage their existing brand and market presence to aggressively sell 3Par technology.  3Par was an early supporter of VMware’s storage APIs and HP could position the new technology as a VM optimized storage platform which would align nicely with their blade server agenda.   To be successful, they must find new opportunities where these message would resonate. 
• Improved competitive positioning: The new technology could allow HP to battle more effectively with competing storage providers.  In this scenario, HP does not necessarily need to create new opportunities, but be more competitive in existing ones.  For example, if today HP wins 30% of competitive situations then you would expect that to increase with 3par.  If their win rate increased to 60% then they would double their revenue.  However, this improvement will take time and will likely be less impactful than the first two.

Revenue growth is critical, and must be considered in the context of profitability.  Profits impact the bottom line and represent the difference between the revenues generated and associated costs.  Every sale (assuming that it is profitable) generates margin, and so net new revenue will increase margin dollars.  However, HP has an opportunity to improve margin percent or, alternatively, reduce costs.

As previously discussed, replacing EVA and XP sales with 3Par will have a limited revenue impact.  However, there is potential for margin improvement by replacing XP sales with 3Par.  XP technology is manufactured by Hitachi Ltd in Japan and HP purchases complete arrays which they re-brand and deliver to end users.  Thus, HP’s cost for the XP is higher than it would be for a wholly owned technology like EVA and now 3Par.  The result is reduced profitability on XP sales.  If HP could replace XP sales with 3Par technology with no revenue change, then you would expect margins to increase which would translate into bottom-line profit improvement.  Thus, HP has a near term incentive to convert XP business into 3Par business and aggressively promote 3Par in lieu of XP.

In summary HP has made a substantial statement about the potential for 3Par by bidding over $2B for the company.  They clearly believe that they can drive increased revenues and profits by integrating the technology into their storage portfolio.  This post highlighted some areas where HP could recognize immediate benefits; however, it is yet to be seen whether HP can realize these gains.  Their success depends on the ability to effectively integrate 3Par’s technology and people into its storage group.

Related posts:

1. Why HP will prevail over Dell in the 3Par bidding war

Both Dell and HP believe that a 3Par acquisition will generate additional business value, and they both must realize that the losing party will be placed in a difficult situation.  I believe that HP has more to gain by acquiring 3Par and more to lose by failing to do so.  Here is my assessment of the gains and losses by each bidder:

HP gain if they win:

HP has a broad storage portfolio and 3Par’s products would replace/augment the EVA and XP product lines.  EVA was developed by HP, and many storage people suggest that it is desperately in need of a major upgrade.  The XP is an array from Hitachi Data Systems in Japan and is resold by HP.  Thus HP is an interesting position of selling a relatively old, high margin product, the EVA and a newer low margin product, the XP.

The 3Par situation presents an opportunity for HP to alter the situation.  The acquisition would provide cutting-edge technology which could help address EVA’s challenges and provide much improved margins versus the XP.  Of course, HP may continue to sell EVA’s and XP’s, but a 3Par solution could help jump start enterprise array sales and take market share from not only the competition but also from EVA on the low end and XP on the high end.  Long-term, it would not surprise me to see 3Par technology replace the XP for all but the most complex environments and replace high end EVA.

In summary, HP has the opportunity to redefine their enterprise disk array solutions with an acquisition.  This is critical given the needs of re-invigorating the EVA and increasing margins on the high end.

HP loss if they lose:

I can only imagine the competitive FUD (fear, uncertainty and doubt) coming from other disk vendors if they lose.  By bidding so aggressively, HP is stating that they really want 3Par and implicitly indicating that they need to replace their current solutions.  I am sure that HP will argue that the bidding is not a referendum on their currently technology, but competitors will attack this point mercilessly which could impact storage sales.

If HP does want to replace their storage technology then 3Par is critical because there are few alternatives.  The remaining storage players often have great technology but lack the scalability, reliability and performance of the 3Par offering.  In this scenario, HP would need to aggressively pursue a new acquisition candidate to address the intense FUD that would be flung their way.

Dell gain if they win:

Dell has a partnership with EMC on the high end to sell CLARiiON (CX) disk arrays.  It is not clear how many of these arrays Dell sells, but I believe that it is a relatively small number.  Selling a CX system is much more complex and detailed than Dell’s traditional fulfillment model.  The 3Par acquisition represents an opportunity for them to replace the CX product line with a wholly-owned product and to add a sales team experienced in selling storage into large accounts.  Thus, they would better a address a market segment where they currently have a limited footprint which would result in incremental revenue.

Dell loss if they lose:

A failed acquisition will result in status quo for Dell.  They will still be able to attack the enterprise space with EMC’s CX product line, but will lack the technology and enterprise sales talent that 3Par would bring.  EMC has been highly successful selling CX technology and so I believe that Dell could effectively sell against HP/3Par on a technology basis.  The real challenge is the loss of the enterprise sales talent and customer base that 3Par would have brought.  However, I believe Dell could build a larger and more aggressive enterprise storage sales team focused on CX technology which would enable them to compete aggressively with HP/3Par and generate incremental revenue.

From a FUD perspective, Dell is at less risk since they do not own a technology that competes with 3Par.  If competitors tried to attack the failed acquisition, Dell could simply (and reasonably, in my opinion) respond that they saw an opportunity to own enterprise storage technology at a fair price and so pursued 3Par.  They could position the loss of 3Par as a situation where the bidding got out of hand so they decided to stick with their current provider.

Conclusion:

In my opinion, HP has more to gain and lose in this bidding war than Dell.  The addition of 3Par will enable them to instantly improve their storage offerings while minimizing potential FUD from the competition.  Dell, in contrast, could gain greater access to a market segment that they already address through their EMC partnership.  Dell certainly would miss out on sales talent and a customer base, but I believe that this is something that they could address using other methods.

Related posts:

1. HP acquires 3Par: Now what?
2. EMC and Data Domain: It was the best of times, it was the worst of times
3. Deduplication Strategy and Dell/Ocarina

• Intrinsic growth – Growth inherent in the environment as users create new data.
• New applications – Companies implement new applications to meet changing business requirements.  These solutions could replace existing technologies or could be net new additions.  Either way, they often generate more data to protect and retain.
• New data types – In today’s multimedia-centric world, there has been a dramatic increase in the number of audio, video and image files being created and protected. These files are much larger and more difficult to compress than traditional content.
• Merger & Acquisition – As M&A activities occur, the acquiring entity must expand their IT infrastructure to absorb the acquired systems and processes.

The combination of these elements drives data growth and creates data backup, recovery and retention challenges.  Growth is constant and the image below (click for a larger view)  is a reminder of how data storage and protection has changed. It also brings the question: Do you want one system that can grow with your environment or many small ones that won’t?  If the latter, then how about I sell you 20 3380′s to replace your 50TB disk array?

Image source: TheFutureBuzz.com, via @sfoskett

No related posts.

Deduplication is an important technology in the datacenter and reduces power footprint and cooling requirements.  However, it typically brings a performance trade-off during read or write operations due to the additional processing required to re-hydrate or deduplicate data.  The benefits of the technology are compelling and we have seen multiple large companies promote different deduplication strategies.  Their approaches fall into two broad categories:“best of breed” (BoB) or “one size fits all,” (OSFA) and the choice of approach has a major impact.  Let’s look at each strategy individual.

One size fits all

This approach is best exemplified by EMC’s Viper project and HP’s StoreOnce initiative.  The idea is to create one global deduplication technology that is used across all applications and hardware.  In theory, this allows for deduplication with consistent results and the ability to move deduplicated data from one system to another with out having to re-hydrate data.  The idea is a bold one, but has some challenges in implementation.

The fundamental problem is that both data characteristics and the requirement for read/write performance vary widely.  For example, compare the performance and SLA requirements of an Oracle database to a user file backup.  Not only are these data types completely unrelated, but they are also written to storage in a very different ways.  Given these variations how can you use one deduplication algorithm?  Deduplication technology is complex and must be designed to solve specific problems.  A generic algorithm is just that and will likely provide mediocre results across the board.

These vendors have chosen a difficult path and their challenge is to create a flexible deduplication algorithm that will work effectively across all data types and business SLAs.  Having seen deduplication development first hand, I can tell you that it is extremely complex and creating a generic solution that works across all tiers of storage and types of data and provides compelling results is extraordinarily challenging if not impossible.  It will be interesting to see how these vendors address this.

Best of breed

This approach is best exemplified by Dell and their recent acquisition of Ocarina.  In this model, a vendor assembles a range of data reduction options to meet different needs.  For example, a supplier might offer an in-band compression option that would minimize the performance impact and provide an adequate but limited data reduction benefit for performance sensitive customers.  They would also offer a backup-specific deduplication solution to minimize backup windows, recovery times and storage footprint.  By offering these options, the vendor could provide solutions that meet a range of customer needs.

The challenge with the BoB approach is that you do not gain the interoperabilty benefits of OSFA.  Moving data from one environment to another will require the re-hydration and re-deduplication of the data, potentially impacting performance.  Although this creates inefficiencies, it does provide the benefit of optimized data reduction that best aligns with business requirements

Summary

Based on my experience with deduplication in the secondary storage arena, the BoB approach is the way to go.  The OSFA model promises a level of simplicity with one algorithm used universally; however, it also creates substantial development and management complexities due to varying data and business requirements.  The vendors promoting this approach position it as a long-term strategy and so it is unlikely to appear any time soon.  This means that it is unclear if/when the vision will come to fruition and it is certainly possible that it may never live up to expectations.

The BoB approach provides an immediate time-to-market benefit.  There are suppliers providing a range of data reduction options today that fit nicely into this model, and Dell appears to be pursuing this approach with Ocarina for primary storage and various partners for backup deduplication.  The challenge is that it can add to management complexity and force re-hydration as data moves between solutions.  However, even with these limitations, I believe that this is the best approach available today.  It provides the flexibility and optimized performance that customers’ need to meet their varying business requirements.

The Future

Long-term, I believe that we will see a combination of these two models.  The simplicity of OSFA is beneficial, but business requirements will mandate the improved performance and data reduction characteristics of BoB.  The best strategy is to define two or three broad tiers of data and use appropriate data reduction methods for each.  The data reduction algorithms will likely vary by tier and may range from simple compression to sophisticated deduplication approaches.  An important consideration is manageability and scalability of each tier and SEPATON will play an important role by providing a highly scalable platform for protecting, storing and retaining secondary data. SEPATON has spent a great deal of time solving the deduplication conundrums in the secondary storage area – with our ContentAware approach, we can deliver both the speed and simplicity of the OSFA approach and the flexibility and efficiency of the BoB approach. Take my advice. BoB is the way to go.

Related posts:

1. TSM and Deduplication: 4 Reasons Why TSM Deduplication Ratios Suffer
2. TSM Target Deduplication: You Get What You Pay For
3. DeltaStor Deduplication, cont….

Three years ago, CDP was hot.  It was a major industry buzzword and several companies were founded focusing exclusively on technologies that claimed to enable CDP functionality.  CDP enabled instantaneous backup, recovery and roll-back of critical data and some predicted that it would replace traditional data protection.  CDP upstarts made voluminous statements about the technology and the future, but they had miniscule installed bases particularly when compared to the traditional backup application vendors.  The challenge for the CDP providers was convincing end users to replace or augment existing backup infrastructures.  This was a task challenge since end users had substantial investments in backup software, hardware and knowledge.  Although CDP provided customer value, it was only practical as a complementary solution to traditional backup and CDP functionality should be embedded in existing backup applications.  As a result, most dedicated CDP companies were either bought or went away, and we now see backup ISVs including CDP functionality.

The dedicated VMware backup market is analogous to CDP.  The vendors are selling solutions that only protect virtualized servers.  The applications are effective, but enterprises have a range of computing assets and this approach forces them to maintain separate backup infrastructures for physical and virtual environments.  Does this approach make economic and business sense?  In the short term perhaps, but in the long-term the answer is no.  Companies are looking for ways to improve IT efficiency and flexibility.  Forcing separate data protection silos conflicts with this goal. 

The other point to consider is that traditional backup ISVs are rapidly improving their virtualization support.  Clearly the trend towards virtualization is real and these large ISVs recognize that enhanced support for virtual servers is a critical competitive differentiator.  The recent release of the vStorage APIs for Data Protection was an important milestone which enhanced VMware’s native backup functionality.  It leveled the playing field by providing universal access to the same feature set, and was rapidly adopted by the large backup ISVs.  The dedicated VMware backup providers adopted these technologies too, but the new technology weakened their competitive position.

Dedicated VMware data protection applications face a difficult path.  Like the CDP solutions before them, they are competing with large backup ISVs that have substantial installed bases and more corporate resources.  At the same time, the traditional backup companies are devoting substantial resources to enhancing their existing platforms to provide improved VMware protection.  Today’s dedicated VMware only backup application providers must find radical new methods to innovate or risk disaggregation just like the CDP companies before them. 

Related posts:

1. Agent-based VMware Backups
2. Poll: VMware backup methodology
3. Pondering VPLEX and backup

To summarize, storage pooling allows data to be segmented into discrete pools that do not share deduplication.  Data sent to one pool will only be deduplicated against information in that pool and will not co-mingle with other data.  Additionally, pools provide configuration flexibility by supporting different types of disks with different performance profiles.  Pools also benefit from SEPATON’s DeltaScale architecture which allows for dynamic capacity and performance scalability.  Pools are a no-cost option with our latest software release and customers have the ability to implement them in the way that best meets their business requirements.  Some of the benefits include:

Service levels

The logical separation of pools enables end users to provide differing levels of service.  Pools can be configured with different node and storage configurations thus allowing an administrator to provide different ingest and density metrics for each pool.  However, the environment is still managed in one system image and can scale capacity or performance.  This prevents system sprawl as is common with many of our competitors.

Multi-tenancy

Pools prevent ingested data from comingling with data in other pools.  This is vital for those environments where data segregation is critical.  A classic example is a service provider who wants to offer accelerated backup as a service.  They must keep each customer’s data separate, and an S2100 with Storage Pools will cost effectively address this challenge and provide system scalability to meet future growth requirements.  With competing solutions, the service provider would need to implement separate systems for each customer.  The management complexity would increase rapidly and it gets even more difficult as data grows.

Another benefit of storage pooling is that it ensures that one pool’s capacity does not impact another’s.  If an appliance is segmented into pool A and B and A fills up, pool B will not be affected.  The benefit is that in a pooled system, the operator can provide consistent capacity and performance to each pool and not have to worry about how growth in one pool will impact another.  Of course, the rapid growth in the first pool may provide a revenue opportunity for the service provider and they can benefit from SEPATON’s dynamic capacity scalability.

Charge-back

Separating data is valuable, but it is critical to understand system utilization to enable effective chargeback.  The new release also provides capacity reporting to allow users to quantify the capacity used by each pool.  This allows for effective chargeback since you can clearly delineate storage usage.

Future Protection

Disk technology is always changing.  In the world of SATA, we continue to see increasing densities and new controller technologies.  For example, HDS recently announced an upgrade to their AMS series of disk arrays and SEPATON is shipping the new technology in our platform.  Inevitably, future innovations will occur and as they do, Storage Pools will allow the different disk technologies to co-exist in a transparent fashion and allow for data migration.

Single System Image

Most importantly, Storage Pool technology relies on SEPATON’s core appliance technology.  The ability to dynamically scale capacity and performance is a hallmark of SEPATON’s DeltaScale architecture.  The same functionality extends to Storage Pools thus allowing end users to grow the system as needs change while maintaining single system manageability and detailed reporting.

In summary, storage pools is a new technology that brings a range of new features to SEPATON’s platform.  The functionality is unique in the deduplication appliance space and when combined with SEPATON’s dynamic scalability can provide tremendous customer benefits.

Related posts:

1. IBM Storage Announcement
2. A little bit off topic – deduplication and primary storage
3. Deduplication 2.0

There are some bright points in SCCG forecast.  They suggest that LTO drive revenue will grow at a 2.47% compound annual growth rate (CAGR) through 2014 while tape revenue will decline by a 2.21% CAGR. Clearly they believe that LTO will continue to dominate the market and outperform all other formats.

Analysis

Disk-based backup has emerged as the preferred target for backup, and deduplication has further improved the business case by reducing storage footprint and cost.  However, tape still has a meaningful place due to to its density, portability and power efficiency.   It is ideal for longer term retention and archival and purchases will continue as indicated by the growth in tape hardware sales.

SCCG suggests that the total market for tape automation was $1.6B in 2009. This represents a substantial revenue opportunity for companies who can drive innovation. Many tape suppliers have re-focused on disk technologies and there is potential for innovative to vendors differentiate their solutions through unique hardware, software and firmware functionality.  These added features could enable the company to grow faster than the market.

Finally, I also believe that the 2009 numbers are understated.  2009 was a difficult year for IT and most companies were forced to reduce expenditures.  These reductions negatively impacted projects throughout the datacenter including tape-centric ones.  Mellor suggests that a consistent 25% annual decrease in tape spending will lead to tape irrelevance in four years; I believe that the 25% decline is an aberration and that the future outlook is not nearly so bleak.  In fact we have already seen a number of storage and tape-centric companies report improved earnings and profits in 2010.

Conclusion

In summary, it is not surprising that 2009 was a difficult year for tape sales.  The combination of a poor economy and the continued move to disk-based solutions impacted the tape market.  However, tape still has an essential role in long-term retention and archive and will maintain its importance into the foreseeable future.  I believe that forecasts of the death of tape or even its near-term irrelevance are over-stated, and that tape will be with us for many years to come.

Related posts:

1. W. Curtis Preston on physical tape
2. Tape is not dead!
3. Musings on the Spectra Logic T-Finity Announcement

Benefits of Agent-Based Backup Models:

Transparent to existing processes – The agent-based approach is exactly the same as the traditional physical server model and so most backup administrators are familiar with the process.  With this approach, each VM has a separate client backup license and transfers its to the backup server over the LAN.

Granular restores – Each VM is backed up at the file level.  Therefore, standard incremental and/or full backup policies apply and file-level recoveries are possible regardless of OS.

Application consistency – Backup vendors provide a variety of server agents that ensure that specific applications (like Exchange, SQL or Oracle) are quiesced prior to backup.  These same agents can be used inside the VMs to ensure that running applications are in a consistent state during backup.  A consistent backup ensures the fastest and most reliable recoveries.

Challenges of Agent-Based Backup Models:

System resources – The process of backing up a VM can be I/O and CPU intensive – a situation that is exacerbated by backing up multiple VMs on the same host simultaneously.  The agent-based approach creates the challenge of managing the backup process to minimize simultaneous VM backups.  The proliferation of VMs can make this process highly complex.

Software licenses – This approach requires a client license for every VM that is protected plus the end user must purchase and install new client licenses every time a new VM is provisioned.  The management of client licenses can rapidly become challenging.

Bare metal recovery – One of the benefits of VMware is the ability to duplicate VMDK files easily to allow for the rapid creation of new VMs.  Ideally, a VMware backup would enable this functionality by providing an image-based backup and recovery feature.  Unfortunately, the traditional agent-based model does not meet this requirement.  Agent backups are file-based and so the only recovery possible is at the file level.  If a VM fails and must be recovered, then the traditional restore process of installing the OS, then the desired application and finally recovering the data will apply.

It is clear that there are benefits and challenges to the agent-based backup approach.  This model is very familiar to most backup administrators since it is nearly identical to a physical server backup process.  The approach ignores some of the advanced features in VMware such as the VMware API for Data Protection (VADP).  However, the mature application support of the agent-based model still makes it appropriate for some data types, and will maintain its relevance long into the future.

Related posts:

1. Poll: VMware backup methodology
2. Will dedicated VMware protection solutions go the way of CDP?
3. Pondering VPLEX and backup

Related posts:

1. Agent-based VMware Backups
2. Pondering VPLEX and backup
3. Will dedicated VMware protection solutions go the way of CDP?

As discussed previously, EMC/Data Domain was unable to create a true global deduplication solution so were forced to use OST to do the heavy lifting. Ironically, they could only support Symantec NetBackup and BackupExec with the new feature because NetWorker did not offer an advanced D2D interface. The BOOST announcement addressed the issues, but raises new questions. Specifically, BOOST is positioned as an EMC only solution, and it is unclear if the API will be shared with other vendors. In my opinion, this creates a challenge for EMC/Data Domain and NetWorker. Let’s look at how the situation impacts a variety of interested parties.

End users:

Choice is critical. Customers’ needs vary widely and want the flexibility to choose the right solution for their environment. OST supports a range of choices from SMB-centric solutions to large systems targeted at enterprise datacenters. The offerings vary on numerous metrics including price, performance, scalability and reliability. SEPATON’s VTL offerings provide the fastest performance with the ability to ingest data at over 17 TB/hr and we will provide similar performance leadership with OST. If you want the highest performance D2D backups while using NetWorker, then Data Domain is your only choice. Fortunately, SEPATON’s VTL performance is maintained in NetWorker environments and so customers will have a high performance Fibre Channel option. But if you want an IP-based backup, then BOOST’s exclusively support of Data Domain is limiting. If you want choice and the ability to compare different solutions on an even playing field, you can’t have it with NetWorker. This puts the application at a competitive disadvantage versus NetBackup.

NetWorker:

BOOST brings a much needed improvement to NetWorker’s disk-based backup functionality, but unfortunately these benefits are limited to the Data Domain platform. If you compare NetWorker and NetBackup, the openness of OST is a clear advantage. Of course this is just one of many features, but it appears that NetWorker has not improved its competitive positioning in this area.

EMC:

EMC has historically been a storage centric company, and BOOST’s exclusive support of Data Domain reflects this heritage. By opening the API only to their own products, EMC is giving Data Domain a competitive advantage in IP-based backup performance. From EMC’s perspective this is good because it could drive up adoption and lock in of Data Domain. This may well be true for existing NetWorker customers; however, for customers thinking about moving to NetWorker, this “lock-in” limitation could hurt adoption.

In summary, EMC’s strategy with BOOST is all about vendor lock-in. They do not want to support third party platforms or an open architecture; instead they are forcing customers to purchase Data Domain solutions. Clearly driving more Data Domain sales is good for EMC, but the lack of choice is bad for customers. At best, BOOST maintain NetWorker’s competitive position versus NetBackup. OST’s support of multiple platforms is a compelling differentiator and competing software ISVs will compete aggressively using the mantra of openness. I believe that the lock-in strategy will ultimately hurt NetWorker marketshare and competitiveness.

Disclosure: SEPATON is an EMC NetWorker partner and we fully support NetWorker environments both with VTL and deduplication.

Related posts:

1. Data Domain & GDA – Bolt-on to the rescue
2. DeltaStor Deduplication, cont….
3. EMC one-ups NetApp