In late 2022 TBR published Top 3 Predictions for IT Infrastructure in 2023, which detailed our expectations for user consoles in OEM, managed services and the overall storage market. Click here to download your free copy of this report.
Navigating 2023’s Storage Landscape: Loyalty, Innovation and Shifting Demands
Last fall as we made our predictions for 2023, TBR anticipated that storage vendors would invest in providing the most flexible platforms to stand out in an increasingly competitive market. As we close out the third quarter of the year, this prediction has proved to be true, with vendors rolling out innovations across management, integration, consumption and managed services to defend market share.
There are a number of market factors impacting the competitive landscape. First, data storage has traditionally been a market with strong customer loyalty. Barriers to switch storage providers have been high because of the significant investments companies have made in talent, software and services to align to specific storage systems. However, as evolving market needs such as multicloud integration and increasing use of flash storage proliferate, customers are re-evaluating their storage platforms, thereby creating opportunity for vendors to capture share from peers.
Furthermore, storage hardware vendors are facing difficulty in driving growth, not only because of customer loyalty and intense competition but also because of slowed enterprise demand in 2023. Dell Technologies (Dell), Hewlett Packard Enterprise (HPE), NetApp and Pure Storage all reported double-digit storage hardware revenue declines in the first quarter of 2023. The drop-off in demand adds pressure to win competitive takeover deals to help slow revenue declines and protect profitability.
Finally, disruptive vendors are adding pressure to incumbents with targeted strategies to push into enterprise storage accounts. Although Pure Storage reported revenue declines, the company remains a disruptive force in the storage market. Pure Storage initially made headway by targeting non-mission-critical Tier 2 workloads. Having proved itself among its existing customer base, Pure Storage has expanded to target larger customers and higher-performance workloads with new form factors and aggressive pricing.
In 2Q23 Pure Storage announced that its all-flash portfolio can now address the entirety of customers’ storage use cases. Lenovo, another disruptive vendor, has significantly grown its storage business in recent quarters, while others have reported declines.
Although Lenovo has a notably smaller storage business — TBR estimated Lenovo’s storage revenue at $400 million in 1Q23 compared to market leader Dell’s $3.6 billion in the same quarter — Lenovo’s ability to drive growth is not going unnoticed by peers. Lenovo is establishing itself in the entry-level storage price points and intends to work its way up into more premium segments as it builds recognition in the space.
Hybrid Cloud Strategies Are at the Forefront of Storage Innovation
One of the key ways storage vendors are responding to the hypercompetitive market conditions is by improving the interoperability of storage systems and enabling hybrid or multicloud capabilities. This trend is largely customer driven, as buyers seek to escape siloed architectures in favor of greater interoperability, which vendors have embraced to varying levels by expanding partner ecosystems and product strategies.
Vendors can no longer rely on keeping customers locked into their own tech stacks; instead, they must embrace neutrality and build connections for customers to move their data across various locations, whether it be on premises, colocated or on public cloud.
For example, NetApp continues to add features to BlueXP, the multicloud storage management platform it launched in late 2022 that aims to help customers manage their on-premises and cloud data. NetApp also deepened its partnership with Google Cloud, which now provides a fully managed Cloud Volumes Service based on the NetApp ONTAP operating system.
Dell has taken a similar approach as NetApp by putting its storage OS on Microsoft Azure and Amazon Web Services (AWS) public clouds in an effort to keep customers entrenched in its storage technologies while also enabling hybrid cloud experiences.
Lastly, HPE has also fully embraced hybrid cloud strategies through its GreenLake portfolio, with expanded AWS services and new private cloud offerings for enterprises and smaller businesses.
Incumbents are Responding to Increased Competition with Channel Investments
Storage vendors are matching technology innovation with investment in go-to-market strategies, particularly in the channel space. Storage vendors must not only woo their end customers with product innovation but also win favor among channel partners to gain entry into new accounts. Channel partners are critical to reaching a broader customer base whether vendors are expanding geographically or into new customer segments, and as a result vendors are competing to stand out with the most attractive programs.
Recently, Dell announced a new channel plan focused on incentivizing sellers to make storage deals via channel partners, and also relaxed its partner requirements to quadruple the number of eligible partners. NetApp has also refreshed its partner program with a focus on enabling partners to offer services and solutions, which will likely align with partners’ desires to add value on top of transactional sales and expand recurring revenue streams.
Competition Will Continue to Ramp Up as We Move into 2024
Although vendors are optimistic some pressure will be alleviated by enterprises loosening their purse strings in the coming months, competition for winning share will remain and market leaders will jump on the next round of emerging tech trends to evolve storage portfolios. While the themes of building a multicloud-friendly storage environment dominated 2023, the next question will be how vendors can address the influx of demand for AI solutions.