Competitive market forces storage vendors to deal

While EMC denies that rivals in the data storage market such as IBM and Hitachi Data Systems are gaining ground, analysts say increased competition created by a slumping economy is forcing vendors to be more aggressive deal makers.

In the last quarter, prices for raw capacity in enterprise-class storage systems dropped 24 per cent, compared to an overall drop of about 35 per cent for all of 2000, according to US storage firm Enterprise Storage Group.

As the company released its first-quarter financial report last month, IBM claimed that its Shark Enterprise Storage System was biting into EMC's Symmetrix customer base. IBM said Shark server sales grew 82 per cent from last year and had penetrated 58 per cent of EMC's top accounts and 63 per cent of the top 100 global companies. It said its sales leap was largely the result of its move into Linux-based systems and the company's decisions to "shun" proprietary systems.

The competition "is looking over their shoulder, and we're breathing down their neck," said Bob Mahoney, IBM's vice president of storage networking sales.

Others said undercutting the competition has had more impact than a move into open platforms.

"Anecdotally, I know IBM is offering very competitive deals on their Shark product," said Gaylen Schreck, an analyst at Forrester Research. Schreck and others agreed that EMC is also cutting deals to beat competition in a tight market.

"They're certainly not being public with us in regards to any discounting they might be doing," Schreck said. "When it comes to signing on the line, it's another story."

EMC scoffed at what it called "fuzzy" math being used by IBM to produce its sales numbers, saying IBM was making no headway in the open systems market place.

"As far as our top accounts, nobody releases their customer lists. Any stats they use regarding that are false by default," said EMC spokesman Michael O'Malley. "EMC grew 37 per cent in Q1. That 37 per cent translates to $US610 million in increased storage revenue. No-one is even close to that."

But unlike IBM, which met analysts' expectations for the first quarter, EMC last month met its own expectations, reporting $2.3 billion in sales, only after having reduced its projections twice in two months.

At the same time that storage vendors are being affected by a tightening economy, technology is producing more efficient and inexpensive means of storing data.