The market for virtualization generally and VMware specifically is exploding. Every major IT organization Wikibon speaks with is pursuing a strategy that more tightly integrates infrastructure to support applications; virtualization is at the heart of this effort. Senior IT and business management should understand that virtualization and cloud computing represent the single most important re-architecting of the information infrastructure in the modern history of computing and the impacts of this trend will completely transform IT service delivery.
Earlier this year, Wikibon published research which resulted in the following finding:
An organization with $1B in revenue that spends 4% of that revenue on IT will save $20M over a five-year period by pursuing an integrated virtualization approach. That figure will nearly triple over the period of a decade.
Storage Architectural Innovations
The introduction of virtualization on servers has meant significant changes to the storage system. Specifically, in the past several years suppliers have focused on five areas of innovation:
- Improving ease of use (e.g. virtualization, virtual ports, etc)
- Delivering thin technologies (e.g. thin provisioning, thin copies, etc)
- Introducing policy-based tiered storage
- Introducing flash technologies
- Generally introducing automation throughout the architecture
These innovations are supportive of a general virtualization theme and are rapidly becoming fundamental elements of major storage architectures.
Leadership Through Integration and Execution
Before Storage Area Networks (SANs) were introduced in the 1990s, block storage was directly attached to servers. At the same time, network-attached storage (NAS) was applied only for very low performance workloads. As a result, it was very difficult to utilize storage well, and moving information around to meet availability or capacity needs was next to impossible.
The introduction of SANs and high function arrays, along with the emergence of high-performance NAS and Ethernet networks separated storage management from server management, and enabled much higher levels of performance, availability and utilization to be achieved. Sophisticated tools have been developed at the storage level to monitor performance and provide additional storage services such as copy and replication services.
The roadmap for integrating storage into the virtualized infrastructure journey has to focus on greater flexibility to meet rapidly changing demands. Storage itself is increasingly being virtualized to make storage invisible. The days of carving out LUNs, masking, and presenting storage to hosts, or configuring NAS and mounting filesystems for use in virtualized environments are coming to an end as storage and virtualization, in a variety of forms, is becoming increasingly prevalent.
The point of integration for VMware has become the vStorage APIs for Array Integration (VAAI) which will offload storage services to the array, and pave the way for further VMware/storage integration.
EMC has announced that it will ship product with VAAI integration operational on day 1 of VAAI general availability (early September 2010). Only 3PAR to our knowledge will be shipping product with functional VAAI integration in September as well which is one of the many reasons Dell and now HP have bid more than $1B for the company.
New Market Data
Wikibon has been seeking data on VMware penetration rates to determine the degree to which virtualization is a disruptive force in terms of market shares and other factors by which leadership is measured. It would be reasonable to infer that virtualization innovators such as 3PAR, Compellent and others are stealing share from larger, more established players in VMware environments. But this doesn’t appear to be the case.
Enterprise Strategy Group (ESG) recently released information to suggest that EMC, IBM, HP and Dell have established leadership in storage within VMware accounts. EMC is cited by about 40% of those surveyed as the primary storage infrastructure vendor (see Figure 1). According to research firms such as IDC, EMC has approximately 30% overall share in the disk storage systems market.
Selected ESG survey results were released to the public domain in August 2010 and the research company granted permission for Wikibon to publish a limited set of data from the study. The survey respondents were based in North America and numbered more than 400. Slightly more than 100 with answered a question to the effect of “Who do you consider your primary storage vendor for VMware?”
The following key points are noteworthy:
- The data is based on a limited sample but is more than large enough to show some statistically valid trends. ESG has extensively invested in survey-based research over the past decade and has gained a reputation for providing high quality original research.
- The ESG data is a measure of perception of primary vendor, not market share. However one would expect a strong correlation between the two.
- EMC was cited by twice the number of respondents than the next closest company (IBM)as the 'primary vendor' in a VMware environment
- HP, IBM and Dell are all significant suppliers of servers and have large VMware server virtualization practices which they presumably can leverage to bundle storage into deals.
- NetApp had a surprisingly small presence given its focus on VMware and recent high growth rates. This may be because of EMC's large presence and server-driven nature of initial virtualization exercises.
- 3PAR didn’t show up on the list.
- ESG asked that we use a subset of the data that was originally published (with some vendors taken out and included in "Others") and with additional caveats
The Rich Get Richer
The IT business is becoming an oligopoly where a few large, established players dominate. It appears that large companies such as EMC, HP and IBM have the balance sheet power to purchase innovative companies to complement their R&D spending and use this tactic to maintain leadership. We saw this in 2009 with EMC outbidding NetApp for Data Domain and now HP potentially outbidding Dell for 3PAR. As well, Dell’s purchase of EqualLogic and HP’s acquisition of LeftHand Networks have bolstered the companies’ respective positions in VMware shops.
While size does not guarantee success, it appears that larger companies will continue to use acquisitions as an effective mechanism to maintain leadership. The outcome of the 3PAR acquisition bears watching. Somewhat surprising is that EMC’s VMware leadership has not seemed to falter despite the numerous small, innovative companies playing in the VMware space that have been acquired by competitors. Is some of this leadership due to the fact that EMC owns the majority of VMware? Undoubtedly that is a partial contributor but VMware takes great pains to keep the playing field in the ecosystem as level as possible.
NetApp is a wildcard that is especially interesting. It is both large and the company is growing much faster than competitors. The loss of Data Domain hasn't slowed down the firms growth rate and its commitment to VMware is impressive. Nonetheless, while surveys like this tend to be lagging, not leading indicators, the size of the ESG survey appears to be large enough to legitimize EMC’s #1 position in VMware.
The chess moves continue and no doubt VMware will continue to be in the center of the game.
Action Item: Recent survey data from ESG combined with key integration milestones appear to put EMC as the number one firm in VMware penetration. While the result is not a shock, the size of its lead is notable and bears watching. Observers should look at 1) execution on integration (e.g. VAAI delivery); 2) EMC's ability to unify highly disparate product lines and 3) competitive moves from other established players (e.g. HP/3PAR) as indicators of the sustainability of this lead.
Footnotes: * See Projecting VMware Storage Market Shares for further analysis