The storage software industry has seen its first quarterly sales decline after more than five years of solid growth, according to a report from market researcher IDC.
First-quarter 2009 revenue for the industry sank 5.2 percent to $2.8 billion from the previous year. The slump has impacted several key vendors, including Hewlett-Packard, EMC, and IBM, all of which sell storage software to enterprise clients.
"The combination of the normally slow first quarter for most companies with the continued economic climate was displayed in this quarter's results," Michael Margossian, research analyst for storage software at IDC, said in a statement. "A majority of companies displayed either negative or very low year-over-year growth."
The software storage industry includes areas, or submarkets, such as data protection and recovery, archiving, data replication, and storage device management. Most of those segments were battered by the weak business climate.
"On a yearly basis, a majority of the sub-markets declined from the previous year's first quarter," Laura DuBois, IDC's research director for storage software, said in a statement. "Predominantly affected were the Device Management, Replication, and Infrastructure markets, all segments closely aligned with the storage systems themselves."
Among the top five players, HP was hit the worst with quarterly sales of $97 million, a 21.5 percent drop from $123 million the previous year. EMC watched its revenue fall 14.5 percent to $612 million, from $716 million a year earlier. Only Symantec eked out a small gain, with sales of $531 million, 2.5 percent higher than the year-ago quarter's $518 million.
The sales decline for the major companies has rippled through the entire software storage industry. But IDC expects the market to bounce back once the top five recuperate.
"The overall Storage Software market was pulled down by the underperforming large companies that make up a bulk of the submarkets," said DuBois. "Once they start to recover, they will bring the entire market up with them."
The software report follows IDC's accounting late last week on the first quarter's poor performance in the disk storage business.
Everyone in the technology industry should be sure to read this recent article in BusinessWeek that discusses current problems with the Silicon Valley business model and ideas for improvement. The article suggests that VCs and many firms are too concerned with short-term financial exit strategies rather than real investment in R&D.
Just after I read this article, I happened to meet with Symantec about a new project coming out of its internal incubator called Go Everywhere. Go Everywhere is an online workspace that actually aggregates other services from Web sites like Box.net, Google, and Zoho. In other words, Symantec is using its IT management skills to consolidate available Web resources into a manageable personal online workspace for business users. Pretty cool stuff.
This is not your father's Symantec. The company is branching out, experimenting with R&D dollars, and using the Web to build a beta program--a far cry from its reputation for antivirus and backup alone. What's more, Symantec readily admits that Go Everywhere may never become a product, but it remains willing to invest. The company figures it needs to take risks like this to find its next growth area.
In these uncertain times, it is easy to streamline budgets, cancel projects, and lay off employees, but it take real guts to invest in the future. For the good of the industry, I hope more tech firms and VCs follow Symantec's lead.
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Symantec is going to collaborate with VMware to sell its disaster-recovery products for virtual environments.
For mutual customers, VMware ESX will be integrated with Symantec's Veritas Cluster Server (VCS) disaster-recovery product. Support will be provided through TSANet, a database that participating vendors use to coordinate support responses, and exchange support information.
"VMware is pleased to see Symantec deliver solutions like VCS that integrate with and complement the value of VMware virtualization," Shekar Ayyar, vice president of infrastructure alliances at VMware, said in a statement on Tuesday.
Symantec's VCS is designed to protect applications from unplanned downtime through local fail over of virtual machines, or failover between clusters in a remote location. VCS is integrated with VMware vCenter, and is designed to supplement VMotion, used for reducing planned downtime, and Distributed Resource Scheduler, used for active workload management.
Tom Espiner of ZDNet UK reported from London.
Back in the late 1970s, communications provider MCI was on the verge of bankruptcy when suddenly it received a visit from Lady Luck. First, MCI won the right to provide long-distance services in opposition to AT&T and the Federal Communications Commission. In March 1980, MCI then became the first company to compete with AT&T in the residential long-distance market. By 1981, MCI had pulled a complete turnaround. Rather than teetering on the financial precipice, MCI sales approach $1 billion.
The MCI story has many components, but the company's early success went beyond litigation, legislation, and timing. Early on, MCI built a number of flexible internal systems for order entry, sales, and customer billing. As a result of these systems, the company was able to craft loads of specific marketing programs for different types of customers. Alternatively, AT&T was hamstrung by monolithic inflexible internal systems that took months to customize for each program. MCI knew it didn't have the network or resources to outdo AT&T, so it excelled in an area where it could build an advantage--customer-focused IT.
Fast-forward to today and the lessons learned in the MCI example are still applicable. Lots of services vendors understand this, but I'm impressed with the way Symantec is actually executing here. Symantec is not a new comer to software as a service (SaaS), cloud-based services, or whatever the term du jour it is that we analysts use for managed services. Symantec acquired Riptech in 2002 and has been a leader in managed security services since. This experience was crucial for Symantec as it learned how to provide integrated services management capabilities to large and discerning customers.
Symantec is in the process of extending its footprint with its Symantec Protection Network, a portfolio of services for services and storage. All new and future services are built on top of an extended integrated services platform, providing customers with a single management console for ordering, billing, monitoring, and reporting on all Symantec services. Developing this infrastructure probably delayed the introduction of individual services, but when it's completed, Symantec will have the flexibility to add services, create bundles, customize offerings, and integrate third-party services to capitalize on dynamic market opportunities. At the beginning of this month, Symantec acquired MessageLabs, a leading provider of secure messaging services. Today, MessageLabs stands alone, but as Symantec integrates the MessageLabs services into its customer-centric business platform, it will be able to offer attractive new services bundles to a base of 19,000 customers at the click of a mouse. Talk about reducing your cost of sales!
To telecom veterans, discussions around billing and operational support systems are an old story dating back to the 1970s and MCI. Unfortunately, with all the tech industry ga-ga over SaaS and cloud-based services, many would-be service providers are bound to rush willy-nilly into services without the proper back-office foundation. Over the long-term, this strategy will always result in failure.
It's nice to see that some companies like Symantec have learned valuable lessons from the past.
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