July 6, 2000 1:25 PM PDT

IBM, Compaq team to grab storage crown

The enemy of your enemy is your friend.

Compaq Computer and IBM have put aside their own rivalry to join forces against mutual foe EMC in the high-end storage market. IBM and Compaq will resell some of each other's hardware and software and will work to make sure all of the products work together, the companies said today.

Over the undisclosed duration of the agreement, the two companies will invest a total of $1 billion to make sure IBM and Compaq storage products work well together, Linda Sanford, general manager of IBM's storage division, said in a conference call today.

This goal of interoperability, long demanded by customers, has proven elusive for the high-end storage market, which features a technique called storage area networks (SANs). IBM and EMC have been squabbling over standards for SANs, which centralize storage into islands separate from the servers that tap into the stored data.

But the companies' willingness to spend $1 billion to get their products to work together indicates just how remote full standardization is.

"The base level is already in place," said Howard Elias, general manager of Compaq's storage products. However, higher-levels standards for sharing data or managing the components of the SAN still are missing.

IBM and Compaq insisted their standardization efforts aren't independent of those of industry groups whose job it is to pull together numerous companies to create standards everyone can agree on.

"This does not subvert the efforts of the Fibre Channel Industry Association or the Storage Networking Industry Association," Elias said. "We now have two leaders in the industry who guarantee (their) products will work together. Two is the start."

This is the second time major players in the storage industry have allied against EMC. Hewlett-Packard agreed to sell Hitachi Data Systems' top-end storage server after HP dumped its partnership with EMC.

Illuminata analyst John Webster said the deal is significant--more so because of the promise of desperately needed interoperability than because of the financial effects of the companies selling each other's products.

"You can go to the market with statements about interoperability, but it doesn't really have the force you could put behind it unless you do some other thing like cross-license equipment," he said. "That really says you're serious."

On the hardware side of the deal, IBM will sell Compaq's midrange Storageworks 8000 system, while Compaq will resell IBM's "Shark" storage system to Compaq server customers who also need to attach to IBM S/390 mainframes and the company's proprietary AS/400 servers.

The deal gives IBM a comparable product to EMC's midrange Clariion line and gives Compaq a comparable product to EMC's high-end Symmetrix line, Webster said.

"It is not our intent to compete head-to-head against IBM or EMC for mainframe-only storage environments," Compaq's Elias said. "That's a relatively small and somewhat declining market. What is growing is when a customer wants to share storage between mainframe and (Unix or Windows) systems."

On the software side, Compaq will add Tivoli enterprise management software to its offerings, along with existing products from Computer Associates and Veritas, Elias said. IBM will license Compaq's VersaStor software, which frees servers from worrying about the particulars of the various storage systems they communicate with.

EMC, unsurprisingly, said it was unruffled by today's alliance, saying customers won't see much in the way of new features or products as a result of the partnership. Spokesman Mark Fredrickson also derided the efforts of server sellers such as IBM, Compaq, HP and Sun Microsystems to set storage standards, saying the companies have been too attached to keeping customers locked in to buying storage products from the server seller.

"The server vendors are the biggest impediment to truly open storage networks," Fredrickson said. Now, though, "they are losing market share in what they used to consider a captive base of customers."

EMC claims the mantle of "openness," using the rationale that its proprietary SANs can connect to IBM mainframes, Unix servers and Windows machines. "We came out in 1995 and said the storage industry should be open," Fredrickson said.

Compaq's Elias, though, criticized EMC's FibreAlliance effort to set SAN management standards as no more open. "What EMC did with FibreAlliance was get their best friends together, then say, 'We are open as long as everybody supports our way of doing things,'" Elias said. "We are doing the exact opposite."

With the explosion of non-PC devices connecting wirelessly to corporate data centers and the Internet, the demand for storage has never been greater. This, coupled with the dwindling profit margins for PC systems, has Compaq, IBM and other PC makers increasing their commitment to storage.

And storage sales are booming. The market for storage management software, for example, grew 47 percent in 1999 over the previous year, according to Dataquest. The market research firm predicted revenue of $14.7 billion in 2004, up from $4.2 billion last year.

EMC led the storage software management market last year with 18.2 percent share, compared with 17.3 percent for second-ranked IBM/Tivoli, according to Dataquest.

EMC's revenue grew by 84 percent, as the company took the No. 1 position from IBM/Tivoli, which in 1998 had 21 percent market share compared with EMC's 14.5 percent.

 

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