Four and Out

Emphasis on loyalty rather than satisfaction may help explain why, today, it is rare to see brand-name vendors vying for top honors in rig performance, cost-efficiency, or power efficiency bake-offs.

The end of the 2012 Major League Baseball season was conclusive and abrupt. For those who don't track such things, the San Francisco Giants beat the Detroit Tigers in a "straight series" -- four games and out. Interestingly, it wasn't the Detroit Tigers, but Fox, the company with exclusive broadcasting rights to the World Series, that was the big loser in this outcome.

Not only were the ratings (roughly correlating to the numbers of viewers) for this year's series games extraordinarily low, but Fox really only makes big money (more than the basic $30M per game in ad revenue) if the series goes five games or more. In such cases, viewership (and the rates charged for advertisements) usually climbs significantly for games 5, 6, and 7.

There is also something to be said for the popularity of the teams that are slugging it out. Love them or hate them, the NY Yankees tend to be more bankable than, say, the Tigers. Arguably, this difference is all about investment in the team "brand."

All in all, Fox Sports didn't rake in anything like the bucks it had hoped for from this year's series ... and they are currently under contract with MLB to promote and broadcast eight more years of World Series at an estimated cost of $500M per year. That must be causing some consternation for Fox executives.

The parallel I see between this situation and the current storage economy is straightforward. It seems that a lot of storage being peddled today isn't delivering the performance and reliability that guarantees its longevity and fitness for purpose over the timeframe that planners want to use it. As a result, storage vendors are starting to see fairly significant declines in revenues and profits, which are, in turn, having an impact on distributors and resellers who account for much of the gear that actually finds its way onto customers' raised floors.

Most channel sales people tell me that, since the recession, companies are holding onto expensive storage investments longer. They are going from a strategy of "three to four years and out" to one of "buy and hold for five to seven years." However, those strategies aren't being supported very well by the gear coming from mainstream vendors.

Part of the problem is commoditization. The consolidation of the disk industry over the past year or two has left us with basically three providers of disk drives, which all array makers, regardless of their logos, must use. The shelves or trays in which drives are mounted also come from one of three or four vendors, as do the power supplies, the cabling, the RAID cards, the LED indicator lights, the on/off switches, and the fans.

Even the operating systems (yes, in case you haven't noticed, storage controllers are now basically servers with an OS) on the rigs are the same: boot an EMC VMAX and, if you watch closely, you will see a Microsoft Windows Server 2008 R2 copyright notice (booting one of those Clarion replacement rigs, the VNX, will display a Microsoft Windows 7 copyright notice). Between Microsoft and various distributions of Linux, most value-add features of storage hardware are now just software programs swimming around in a commodity OS environment.

There are some "innovations" from market-share-leading vendors aimed at "delivering greater value" to consumers, despite commodity kits. These have tended to focus on 1) changes to warranty agreements and/or 2) improvements in product branding.

To say that vendors are "innovating" their warranty and maintenance agreements is not to say that they are making warranties better suited to the more protracted usage models of consumers. Indeed, most of today's vendor warranties remain cruel jokes. They expire within three years of product purchase and cost as much as an entirely new kit to renew for another couple of years.

The "innovative difference" is that the vendor marketing literature now emphasizes the value of the warranty rather than the product -- if anything looks like it may go wrong, they say, the smart storage kit calls the vendor directly, and everything is taken care of without customer intervention. That may be better than HAL 9000's method for handling malfunctioning AE-35 units in the 1968 movie 2001: A Space Odyssey (no astronauts placed at risk), but it is in no way a guarantor of greater product resiliency (witness last year's debacle involving EMC's kit repair person taking down key systems of the Commonwealth of Virginia).

Branding is another area of "innovation," with leading vendors updating their logos, or returning to nostalgic versions of their logos, or tricking out their kits with neon lighting so they are aesthetically pleasing -- thereby increasing the perceived value of their kits, whether they deliver better performance and resiliency or not.

This is nothing new, of course. Back in 2009, CNBC was reporting EMC's preference for spending on "customer loyalty" rather than "customer satisfaction." Like the NY Yankees (and perhaps even the Boston Red Sox), the value of engendering fan loyalty to the franchise was perceived as much greater (in the short term, at least) than the value of actually winning any games, league pennants, or World Series trophies. A loyal fan base, after all, not only fills stadiums (with seats priced between $50 and $1,040), but also generates revenues from concessions, merchandising, and parking -- even in those seasons when the team fails to win many games.

Emphasis on loyalty rather than satisfaction may help explain why, today, it is rare to see brand name vendors vying for top honors in rig performance, cost-efficiency, or power efficiency bake-offs. Part of the explanation may be found in the time-honored truth of disk drive manufacturing -- that capacity improvements are rewarded by consumers to a much greater measure than are speed improvements. This calculus may have found its way into arrays, especially when purchasing decisions are made by non-technical business managers rather than technically-astute IT planners.

Senior management is less concerned about how fast the storage performs than how much capacity their tight budget dollars will buy. They are warned by vendors about costly capacity demand acceleration brought about by a combination of highly exaggerated data growth rates and poorly-explained-but-must-have-one big data project requirements. Cost per petabyte trumps IOPS per dollar or IOPS per watt.

Of course, there are products on the market that are breaking through performance and reliability barriers, but they are coming mainly from vendors that lack the brand familiarity and loyalty of the more established franchises. The big players tend to treat these vendors like minor leaguers whose personnel and intellectual property can be acquired as needed to shore up the pitch ranks or to strengthen the product line up. Usually, these acquisitions result in the dumbing down of the innovative technology in order to improve its fit with the vendor's existing narrative and product set.

The alternative, introducing a "disruptive play" or establishing a "star player," runs the risk of rejoining a competitive struggle that big vendors have largely decided isn't worth the work. For a brief time, HP's 3PAR rig boasted the hot hand in performance storage, delivering 450,000 IOPS on 1900 spindles. A few months later, this star was unseated by IBM's DS8870, which delivered 451,000 IOPS on 1,536 disk drives.

Bottom line: major-league storage is becoming as boring as baseball. The minor leagues have most of the cool technology, but they won't get the exposure of the Big Show unless their wares fit a perceived "hole" in an established vendor's bullpen or batting line card. In the meantime, technologically-impaired business folk will buy gear in much the same way as they buy box seats -- by team brand.

Going forward, we can only hope that audience interest will die down to the point that distributors will become unhappy with the league and start pushing minor league franchises -- you know, based on their superior product performance, competitiveness, and sheer love of the game.

Your comments are welcome: jtoigo@toigopartners.com.

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