How Will the Future of Data Storage and Networking Unfold?


Sep. 25 2015, Updated 8:07 a.m. ET

Continuing trends in data storage

So far, we have seen that startups are entering the data storage space with new technologies, while legacy storage vendors such as IBM (IBM) and NetApp are struggling to cope with the technological shift. We will now see how the future of storage and networking unfolds.

Technology Business Research made the following predictions for the data center industry.

  • Hardware vendor consolidation: The hardware-only storage vendors will continue to consolidate as they face pressure to keep up with the current trends. Seagate Technology (STX) acquired Samsung Electronics’ hard disk drive business in December 2011 and Avago-owned LSI in May 2015. SanDisk (SNDK) acquired PCLE storage maker Fusion-io in 2014.
  • SDS (software-defined storage): Enterprises, especially the ones in financial services, healthcare, and manufacturing verticals, will continue to transition to SDS. Tech leaders like EMC and HP will continue to build their SDS portfolio.
  • Networking companies restructure their business models: Rapid adoption of SDN (software-defined network) and cloud is putting pressure on enterprise network vendors’ sales. These vendors will either divest their non-strategic business or restructure their business model to focus on growth segments. IBM divested its server business to Lenovo in 2014 while Cisco (CSCO) realigned its business model to focus on cloud and SDN.
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New trends in data storage

Hyperconverged platform technology will mature from its nascent stage as more enterprises adopt the platform. Tech leaders like EMC and HP will enter this space, giving tough competition to startups like Nutanix, who currently dominates the market with a 52% share.

SDN competition will also heat up in the SDN market as generic off-the-shelf switch makers like Big Switch, Cumulus, and Pica8 penetrate the enterprise market and compete with proprietary solutions vendors like Cisco.

Long-term trends that are transforming storage

By 2019, SDS will replace high-end storage arrays in many data center environments, except mission-critical environments, where a system failure will lead to a failure in business operations.

We are likely to see consolidation in the networking industry consolidation. As SDN gains ground, big players will likely acquire SDN startups and switch from hardware vendors that are unable to cope with the technological shift.

The PowerShares QQQ Trust, Series 1 ETF (QQQ) has a 2.68% holding in Cisco and a 0.23% holding in SanDisk.


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