Note: This analysis was conducted purely by Wikibon using August 2010 data from the public domain. It's conclusions are solely the responsibility of the Wikibon community and may not reflect the analysis of other third party sources.
IDC is the leading provider of storage market share data and Wikibon has been eagerly hoping the firm would publish storage share data for virtualized environments. To date, this information has not been made publicly available by IDC. Virtualization is rapidly changing the IT landscape and Wikibon has put forth the premise that virtualization could disrupt the storage market from a share perspective.
It has been our belief that organizations which aggressively virtualize servers would choose to virtualize backend storage as well. Our expectation was that organizations would increasingly migrate to storage platforms that were fundamentally built on virtualized architectures, such as 3PAR, Compellent, XIV and NetApp. While these firms appear to be growing faster than the market as a whole, our original premise does not appear to be holding true. Specifically, EMC seems to actually be gaining, not losing share in virtualized environments and increasing its marketshare lead.
In a recent survey, ESG asked an interesting question about the primary storage vendor in VMware virtualization environments. It would be reasonable to expect that the storage vendor who is regarded as the primary storage vendor will increase market share over time. To our surprise, EMC leads the storage pack in VMware installations by a wide margin and is now claiming to be #1 in virtualization. At VMworld 2010, the company prominently displayed several banners making this claim.
However the responses to the ESG survey question above are essentially a measure of perception and not marketshare. Lacking any clear third party data on VMware penetration rates, we wanted to try to take the ESG data one step further and attempt to project actual share data and penetration rates within VMware environments.
Our analysis, while limited, suggests that the results of the ESG survey may actually be a reasonable proxy for penetration rates in VMware shops. The following analysis looks at two sets of data, including ESG survey data and IDC marketshare figures. We essentially mashed the two together, making sensible adjustments and identifying caveats in the conclusions. The data analysis suggests that our initial premise - which stated that EMC would likely lose share in VMware environments - was incorrect. Specifically, while EMC’s overall storage marketshare is 26% worldwide, in VMware its share jumps to nearly 34%, far ahead of other suppliers. Based on this new data, our assessment is that EMC is probably increasing its penetration in VMware environments and is very well positioned to gain share as VMware grows.
We believe EMC’s success in virtualization generally and VMware specifically is due to three primary factors, including:
- EMC’s investment in VMware integration across its very wide and deep storage portfolio;
- EMC’s majority ownership in VMware gives the company huge incentives to find strategic and tactical advantages in VMware environments;
- As virtualization penetration increases, I/O becomes more critical – EMC is the low risk choice for customers.
Impact of VMware on Storage
Two major changes have been introduced to improve backup and recovery with VMware, and to accelerate the hardware performance of arrays.
With the introduction of VMware APIs for Data Protection (VADP) and Change Block Tracking (CBT), VMware has greatly improved backup and recovery functionality. On a virtual machine, the virtual disk block changes are tracked from outside of the virtual machine in the virtualization layer. When a backup is performed, only the blocks changed since the last backup need to be transmitted. The software backup vendors can now retrofit effective support for VMware environments to their traditional backup products. The current list of backup products that support VADP is available on Wikibon.
With the advent of server virtualization and the growth of VMware, a number of storage vendors have invested in capabilities that will enhance VMware performance with external storage arrays. VMware has announced support for storage-based hardware acceleration in ESX/ESXi 4.1 or later through vStorage APIs for Array Integration (VAAI). EMC, NetApp and 3PAR have been early supporters of these APIs and GA for support of VAAI is due this quarter and in some cases is available today from certain suppliers, including EMC and 3PAR.
Vendors have been promoting hardware, software and services packages based on these advances. There is significant interest in the acceptance of these new approaches, and which vendors are regarded as the leading storage suppliers for VMware. Earlier this year, Wikibon collaborated with dozens of its end users to determine the value of integration in VMware environments which proved to be substantial. We believe tight integration initiatives will confer advantages to those vendors that aggressively invest in VMware integration.
Overall Storage Market Share Data
Market share is often difficult to determine and subject to specific definitions and analyst interpretations. IDC is the ‘gold standard’ for market share data and uses factory revenues as one measure of market share for external storage, which is the revenue resulting from storage shipped directly out of the factory to the channel. For example, Hitachi uses HP to distribute its high-end storage arrays, Dell distributes some of EMC’s product line, and IBM distributes NetApp’s arrays. Table 1 shows IDC data as published by ZDnet for second quarter 2010 market shares for the top five vendors and all others.
Noteworthy in the table is the solid growth of the market due to an easy comparison to the prior year’s quarter (2Q 2009 was near the height of the recession). According to the IDC data, the growth of EMC year on year is much higher than the overall market. In recessions, the rich often get richer because they can invest more resources.
Primary Storage Vendor Data
ESG recently did a survey in which one of the questions asked was roughly: “who is your primary storage supplier?” This question was asked of respondents who had selected VMware as their primary virtualization software. The results of 102 respondents to this question in the survey are shown in Figure 1.
The raw data in figure one shows significantly more people saying that EMC is their primary VMware vendor (40%) than the market share data in Table 1 (26%). However, if a comparison is to be made between the two, the data needs to be corrected due to the fact that there is a shorter tail (i.e. smaller “Others” category) in the ESG data (see Table 2 – “Others”).
Comparison of Market Share Data and Primary Storage Vendor Data
In Table 2, The columns are as follows:
- Column “a” shows the top 5 vendors in both the ESG survey and the IDC data (EMC, IBM, HP, Dell and NetApp) and the rest of the vendors in the “Others” row.
- Column “b” shows the percentage data from the IDC 2Q Market Share data in Table 1.
- Column “c” shows the ESG survey data in Figure 1 for the top five vendors, and the remaining vendors in “Others”. There is a very big difference in the % of “Others” in the two sets of figure; 14.7% for the Storage Vendor question and 28.7% for the IDC factory revenue data. To compare the two figures, the primary vendor data needs to be corrected using the higher “other” figure (28.7%) found in the IDC market share data.
- Column “d” is column “c” correct by the formula (1-28.7%)/(1-14.7%) = 84%.
This correction is applied to the top five vendors.
- Column “e” calculates the points difference between columns “d” and “b”.
For EMC the corrected primary vendor figure in column "e" is now 7.9% higher than the figure for 2Q market share. This is significantly different (p<0.05). Put another way, if the leadership data translates directly into market share, EMC would have a market share of 33.6%. Part of NetApp’s difference of -7.3% may be explained by the fact that IBM is an OEM supplier for NetApp equipment.
IBM, HP and Dell are all server vendors, and initially most of the savings come from improved server utilizations and reduced server costs. It would be expected that there would be some storage “drag” from server-driven virtualization projects. This is shown by the fact that the sever vendors are in line with their market share numbers.
The remaining storage vendors are struggling for recognition and have much lower recognition of being a primary storage vendor than their market share would predict.
Caveats and Considerations
There are several caveats and considerations users should assess in this analysis, including:
- We’ve mashed up the ESG North American survey data with IDC worldwide figures and as such the conclusions drawn are preliminary in nature.
- We’ve assumed that the answer to ESG’s “Primary vendor” question is an indicator of likely purchase and consequently market share. This assumption needs further testing.
- IBM, HP and Dell are server leaders and may get a back draft from their VMware practices.
- The data refers to storage delivered in installations that have VMware installed and have servers virtualized. The storage may or may not be virtualized (Storage virtualization is a completely different topic and is not addressed by this data).
- While NetApp systems may well be installed in VMware shops, it’s likely that many are running in file mode and not running ESX or vSphere and as such respondents didn’t associate NetApp with being a primary VMware vendor.
- This begs the overall question of how should storage marketshare in VMware installations be counted.
The analysis shows that EMC is a clear leader both in market share and in being perceived as the primary storage vendor in virtualization environments. EMC is well positioned to increase storage market share as the percentage of storage under virtualization increases over the next five years. The server vendors (IBM, HP and Dell) would seem to be keeping pace and retaining market share. However, all the other storage vendors have much lower leadership figures than would be expected from their worldwide market shares. Storage vendors will have to focus strongly on showing the benefits of their products and services in virtualized environments, especially VMware.
Action Item: Storage decisions will be increasingly made to support virtualization environments. Storage executives will need to ask how storage arrays will be integrated into virtualized environments and integrated into the data protection software environment. The answer will determine leadership going forward.
Footnotes: Note 1: For this analysis we define leadership as market share penetration within VMware installations.
Note 2: Figure 1 and Table 2 were updated 10/20/2010 as a result of additional data provided by ESG in October 2010.