Storage Wars: HP Gaining on EMC, IBM and NetApp

The Track is Fast...

HP Storage, despite going through a transition, is holding or gaining share in key markets. Specifically, the growth of 3PAR in particular, as well as IBRIX and LeftHand Networks has been enough to offset the transition in HP’s legacy storage business (EVA, XP, MSA). This was the key takeaway from an analyst call today to review HP’s quarterly results.

Fresh off HP Discover Vienna, VP of Marketing for HP Storage Craig Nunes and GM and SVP David Scott provided analysts with a business update (as HP does each quarter). The most important piece of information for me was that HP is gaining, not losing share despite being in a major transition.

The rule of thumb historically is don’t bet on companies in transition. But it appears that HP has integrated 3PAR much faster than anyone expected and is growing fast enough to offset any declines in its legacy storage business. The obvious question is that if HP is holding or even gaining ground during a transitional period, what happens when the company stabilizes its base?

Presenting data from HP’s financials, IDC and Gartner, HP’s Scott shared the following:

  • HP Storage had a big FY Q4 with:
    • 11% growth for total external disk storage
    • Triple digit growth for 3PAR
    • HP cited IDC data that suggested HP gained in sequential marketshare while EMC, NetApp and IBM all declined in the quarter
    • In the highly profitable high end of the market (systems more than $250K) HP had growth of 71.3% and a nearly 3% gain in share

This last point is particularly important in my opinion, as it is a leading proof point in the marketplace and a main reason Donatelli fought so hard to get 3PAR. The high-end price bands accounts for about $1B in revenue, generated from the most demanding customers (e.g. financial services) and it provides the highest margins. This segment also drives additional software and services revenue—and backup dollars. HP is attempting to change the rules of the high-end block-based storage game, which has been dominated for years by EMC, IBM and HDS. EMC in particular took this market from IBM and has around a 50% marketshare.

HP’s 71% growth includes its XP line (OEMd from Hitachi) and as such it suggests that 3PAR is growing very rapidly even in the high-end segment, which has been a slower growth market for years. The point is the only way to grow in this space is to rapidly gain share. For years, HP has been a minor player in the expensive price bands and probably still has less than 10% marketshare. But, at these growth rates, HP is tracking IBM and HDS and knowing Donatelli he has EMC in his sights.

For its part EMC will not sit idle. It will fight tooth and nail for these customers. Interestingly, HP’s Scott cited some competitive wins on the call and specifically called out VMAX in one case. This is a high stakes game and no doubt EMC will counter with some proof points of its own. But the fact remains, 3PAR is skyrocketing much faster as part of HP than it ever could as an independent. HP’s overall storage business performance bears watching closely to determine 1) Can HP sustain its share gain?; 2) What is the magnitude of the gain?; and 3) Can it grow share dramatically with assets other than 3PAR?

Additional notes from the HP Storage Quarterly Analyst Call

Craig Nunes

Q3 lookback (May through July) – publicly introduced converged storage and tied storage innovation directly into HP’s converged infrastructure strategy.

Big Ibrix push – announced 1 millionth snapshot

5th generation EVA – 100,000 customers

Event with the 100,000th system delivered at Cal State University in Monterey Bay (Nunes joked he’d whish’d it had been to a customer in the Caribbean).

Introduced Virtual System – a converged system platform – integrated virtualization platform – “the only real alternative to VCE”

Introduced a couple programs – “Get Thin Guarantee” and HP Cloud Agile Program – (Note: these were both 3PAR programs that were brought over). My POV: 3PAR had better marketing than HP and it’s good to see some of the program mojo coming to HP.

At the end of the quarter, HP was gearing up for V10000, Peer Motion Federation Software announcement that came in September.

David Scott

Financials in FYQ4 – very pleased to see strong growth – 11% in external disk systems, triple digit 3PAR (again); 4% growth in the total storage business overall. New growth is offset by EVA and decline in tape. Overall HP storage revenue up 10% in the channel.

CYQ3 results just published by IDC – HP up and EMC, NetApp and IBM declining. IDC showed HP gained share .3% in the qtr and yr/yr;  Gartner HP share gain seq. at .6% – Gartner reported IBM and NetApp down w/EMC up slightly.

Only one large vendor that lost share yr on yr and sequentially – NetApp – Scott posited that NetApp’s lack of true integration / converged infr. Was the cause.

My POV: It’s unclear that NetApp is under pressure because of the trend toward vertical integration but it’s an interesting theory. My personal opinion is that NetApp and Tom Georgens are in a race to expand the NetApp TAM because the company is now large ($5B+) and is facing extremely challenging compares (2011 to 2010). NetApp has been on a quest to expand its market, buying Bycast and Engenio, and doing deals with the likes of Commvault and Quantum. This expansion mindset is naturally challenging for the channel, which has gone from supporting a one-product company (ONTAP) to supporting five OSes, overnight (ONTAP, Engenio, Bycast, Commvault and Quantum StorNext). In my opinion, NetApp’s sales channel will be naturally less productive during this transition until it trains up the field and establishes the critical skills mass in each segment. NetApp in my view will figure this out and make other moves that will support its continued growth.

High End Segment – $300K and higher segment – Gartner – 71% growth for CYQ3 (yr/yr) and a 2.9% market share gain – prior to debut of V-class 10000

P100000 V-class and Peer Motion – “The New Tier 1” – Peer Motion for LeftHand and 3PAR – transparent, non-disruptive data mobility – no appliance necessary – native capability in the array. Defining a critical capability for Tier 1 environments. My POV: This is a source of academic debate in the Wikibon community—i.e. what defines Tier 1. In the final analysis, 3PAR is not there yet but it’s knocking on the door.

HP announced what it claims is a news world SPC-1 benchmark record – 450,212 IOPs – 80% utilization versus HDS 269,507 IOPs with 59% Utilization with a $/usable TB at $13 versus $45 for HDS. My POV: Benchmarketing – this is a game of leapfrog.

Momentum for V-Class and penetration into EMC strongholds –

Example – 1 large service provider purchased 7 V-Class. EMC stronghold – head to head against VMAX. Adaptive optimization – sublun tiering capability. Big 15PB of storage versus EMC which had to bid 30PBs (2X) to compete – even w/the EMC TP technology.

Another example – Vclass win in a non-HP account in the UK. EMC and Dell shop – again the account looked at VMAX and VNX – HP won w/2 v800’s – key capability was multi-tenancy – critical need for disaster recovery – and get thin guarantee program was a key factor.

Backup and Recovery – No StovePipes

Beyond 3PAR and LH – new offerings for the next wave (deduplication 2.0) B6200 enterprise class backup device as well as integration of StoreOnce into HP Data Protector. One technology from software to small appliances to large enterprise class system – no stovepipes.

Addresses many gaps materializing in the first wave of Deduplication. Gen 1.0 – no HA, poor restore performance. B6200 autonomic restart and restore performance is w/o compromise. HP claims 7X higher than Data Domain

HP integration play –> Combining HP SToreONce with Ibrix to enable massive scales out. 8 nodes today – arch limit is much greater – platform shipping next week to large pharma in NE (my speculation Pfizer—big HP account or Glaxxo?)

New Midrange converged infrastructure platform – X5000 – leverage 3U HA Server cluster with array controllers and 32TB of shared storage for Windows Server – CIFS and NFS optimized for MSFT environments – Scalable to 128TB and 26,000 users – native antivirus software collocated on same 3U chassis. Competes against NetApp FAS 2040 and EMC VNXe 3300.

Storage Wars: VCE – integrated stack – HP Virtual System

HP claiming One SKU. One Call. One Company – Best of Breed components combined with integration – IT-as-a-Service – upgradeable to cloud system – available for VMware and Hyper-V and for HP-UX virtualization solutions.

Cloud systems matrix now enables automated provisioning?

Seeing interest in hybrid public/private delivery model.

My POV: I’ve said for a while that this is a two-horse race between HP and VCE. I actually think however that NetApp is doing a good job in this space given that it’s not a big whale. I see IBM stepping up its game in this space too (buying BNT and finally announcing some offerings)– it’s early days for the converged infrastructure game. HP’s advantage is its scale, one-stop shop and services prowess. It also has a more open attitude toward integrating non-VMware assets (e.g. Hyper-V) and this will serve it well in many markets. I acknowledge that’s a two-edge sword that makes its job harder but for HP it’s the right call – for EMC and Cisco it would be a hindrance.

Announced Savvis as an external provider bursting to savvis. Others pending within the cloud agile program

Allows customer to define a service catalogue

HP 3PAR will often be on both sides of the transaction

More than 10PB of HP 3PAR storage at Savvis

Example – HP wins – had HP Servers and EMC storage – EMC proposed VCE w/VMAX – vmware, hyper-v, xchange and SQL. HP chose to compete w/Cloud System Matrix w/service automation that one the deal at a large euro telco

Thoughts on HDD shortage – Thai accounted for 40% of HDD production. Impact on flooding is still to be determined – magnitude and duration – not clear. Already seeing shortages, especially in high capacity sas and sata drives. HP’s massive supply chain – HP leveraging it’s supply chain to maximize access. Output will be much lower than demand. Increases in drives and components of up to 20% or more. HP will be increasing prices of drives to cover cost increases. Unclear when things will improve—this will continue well into 1st half of this year. My POV – thoughtful discussion about a serious problem – could this help flash technology close the gap with HDD even faster?

Back to Craig Nunes

Momentum – very active in driving new programs – better deal reg. ; restructuring comp for the channel and partner service offerings as part of HP Service 1 program – important b/c around 70% of product revenue is driven thru the channel. Very aggressive in getting the news out about HP Storage momentum. 12 press releases from Aug to Oct. Customer oriented – 7 public customer announcements and 14 case studies. Debut of Puss in Boots – X-ESSN release “Puss in Boots Comes Alive with HP…” Dreamworks.

Big driver has been a wave of IP announcements – Converge Storage and Systems – V-Class, Peer Motion, Hypervisor Integrated Snaspshots, Hyper-V virtual system – Automated provisioning, StoreOnce announcements – all this product and system momentum has paid off huge in media interest. Q4 had 1.5X more media mentions than Q1. Growing sequentially.

My POV: The bottom line for me is that HP, under Donatelli’s direction, has completely changed its storage mojo by bringing to HP an EMC-like execution ethos. But HP is way more complicated than EMC ever was when Donatelli was there and the market has changed considerably. By leveraging HP’s integration assets (compute and networking), and its global reach and supply chain, HP is attacking with new weapons that are working in the marketplace. Is it sustainable? I think the 3PAR momentum most definitely will continue. StoreOnce right now is in its early stages but there’s a big backup market out there with, you guessed it, EMC as the top dog. To me, in many regards HP simply has to show up and compete and it will gain 5 points of share (by the way that’s $1B and change). Beyond that it must find new ways to innovate and stay ahead of the pack.