Storage: The Hard Drug of the 21st Century

By | April 27, 2011

So, following on from Western Digitals agreement to acquire HGST, the disk drive division of Hitachi, Seagate strike a deal to acquire the disk drive division of Samsung.

Granted, this is old news now, but my wife just gave birth so I feel I have an excuse to be a little behind the times.  Anyway, this is a word or two on a concern I have over these two deals…

With the above acquisitions, we will be left with two and a half drive vendors –

  1. Western Digital, with ~50% market share
  2. Seagate, with ~40% market share
  3. Toshiba, with scraps that are left over

Generally speaking, while there are 3 or 4 major players in an industry, competition can work its magic – driving innovation up and prices down.  But when it gets down to just two giants in an industry it often becomes all too easy for them to become slack.  Think drastically reduced R&D budgets leading to slowed innovation.  And at worst, things like unofficial pricing cartels.  Lack of competition is rarely a good thing.

It is looking inevitable that we will soon be down to two players in this space.  Will Toshiba be able to sell in large enough volumes to keep production costs economically viable?  Samsung certainly struggled.

Addicted to Storage

In today’s world we are addicted to oil.  It seemed to creep up on us, like the appearing of the morning dew.  But sure enough, we are addicted to oil.  We can’t (or aren’t prepared to) live without it.

The same pattern seems to be happening with storage.  We are slowly becoming addicted, and I propose that by tomorrow we will be well and truly addicted!

The Storage Syringe

Not convinced?  Ask yourself the following – which of the following do you find harder –

  1. Deleting old data, be it family photos and movies, or corporate data that you are responsible for.
  2. To stop filling your car up.

Every business I have ever worked for has felt it’s data, every single bit of it, far too important to delete. 

On a personal level I was recently forced to delete some photos and videos from my Android phone.  Wow, it was like pulling my own teeth out!

And I don’t see any signs that our addiction to storage will go away any time soon.

The Storage Barons and Drug Dealers

As soon as storage becomes like other necessities of life such as oil and air, we will find that we are at the mercy of those that control the supply – the Storage Barons.

Let’s consider ourselves fortunate that the powers that be haven’t figured out how to charge us for the air we breathe, or to effectively turn it off for those who don’t pay 😉

In tomorrow’s world, The EMC’s, HP’s, NetApp’s and even the cloud storage providers become the guys who own the petrol stations (gas stations for my friends on the other side of the Atlantic).  They supply the taps that satisfy our cravings and provide value-add, and add their mark-up, but they don’t ultimately control the price.  Thinking of it another way, these guys are the drug dealers.

The Western Digitals and Seagates become the oil companies of today.  They do the exploration (R&D) and the drilling (manufacturing), and it is they who ultimately control the price!  With such power and control come challenges.  The challenge is not to become drug gangs, exploiting their addicted buyers.

Conclusion

All just my penny’s worth.  And I’m sure that WD and Seagate are benevolent corporations that would never slip in to such a trap despite the pressure of shareholders.

Sadly I see no way for storage practitioners like myself, and no doubt many of you, to rise to power on the back of this wave and live out the rest of our lives filthy rich and powerful 🙁

Comments welcome.  Opinions expressed are my own, not my employers. 

Oh and because I’m not satisfied talking about technology in my day job, I talk about it on Twitter too.  Feel free to sign up and talk to me @nigelpoulton Sorry but Im addicted to talking about technology 😀

3 thoughts on “Storage: The Hard Drug of the 21st Century

  1. Vipin

    Hi Nigel,
    Does these acquisitions by any chance relate to upcoming SSDs?
    Whats your opinion over SSD's and SSD arrays growth market – A challenge to current disk storage technologies.

  2. Nigel Poulton Post author

    Hi Vipin,

    The deal between Seagate and Samsung certainly strengthens Seagates ties with Samsung. Samsung get approx 9-10 of the Seagate business and a seat on the Board, so the two companies will now be best pals and scratch each others backs. Probably a good deal for both companies.

    Samsung PCs and laptops will ship with Seagate HDDs and Samsung will supply Seagate with NAND flash memory chips for use in their SSD’s and hybrid drives. The deal was to buy and integrate Samsungs HDD business and not to acquire their SSD business.

  3. Gordon Fraser

    Hi Nigel,
    Are you sure that is it is really the hard drive companies that really "ultimately control the price".  Especially in the part of the storage industry that we inhabit.
    If you look at the price that an HDD company sells their product to <insert name of any high level Storage or server OEM> and then the price that they charge for putting it in a little nifty tray that fits their gear and – if you are really privileged – doing a little extra testing in it too, there is a world of difference.

    I don't have the time to dig out specific examples but seem to remember from previous looks at this that you could roughly double the cost of a drive going through this process.
    So say a £500 drive sold to <company name> would then appear in their parts list for £1000 plus.
    So taking this ball-park guestimate, lets say that they can justify the £500 markup as the cost of said nifty container, plus testing (if done), plus dealing with various OEM features demanded from HDD vendor – custom firmware & config settings.

    If Seagate increase their prices by £20 a drive say, is it really going to hurt the Server and Storage companies that much to keep prices level, or do they throw their hands up, moan about greedy HDD vendors and charge us another £40?

    So they are not so much the drug dealers but more the growers and shippers in far off countries. Bringing down and taking over rivals to increase their little share, whilst the real money is with the big time dealers on the streets of big-business.

    So yes, I am concerned too, but not that they are creating monopolies and cartels, but that the HDD industry is slowly imploding. And for all the talk of SSD taking over the world they are still extortionately expensive (and laughably error prone – when a third or more of total sectors is kept as spares that is an exceptional glist), so we need those guys now, and as we transition to an SSD future, they are the ones that have all the interface and cache algorithm know-how to make these products even better.

    So to move our analogy to one of coffee or chocolate, how about a little fair trade, with the promise in return from them that they will then be able to build more quality margin – that has lacked in certain products in recent years – back in to the HDDs so that we can all sleep better at night knowing that our data is a little safer.
    Gordon

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