Why Politics and Storage Don’t Mix

When politics and storage collide, the results are too often unpredictable and unnerving.

Politics and storage make strange bedfellows. Just this past weekend, the mere suggestion that balance-of-trade-positive China might buy Seagate, Western Digital, or another manufacturer of disk drives touched off a hailstorm of polemics, editorials, and blogs. The matter was put to bed on Monday when Seagate CEO Bill Watkins made a clear statement in the Wall Street Journal that his company wasn’t up for sale, period.

A call to Seagate’s press relations department met with quick response, "We don’t know where the rumor came from. We don’t comment on rumors. There is no substance to this report, whoever made it. It must have been a slow news day." The tone of the PR person was rote, almost bored.

The interesting thing is that just the suggestion that China might someday own a large share of the disk drive market stimulated an almost ferocious response from the political sphere. There was a suggestion that such a sale would compromise national security. Speculation ran rampant that if the Peoples Republic got hold of U.S. disk drive intellectual property, they would leverage this special know-how to hardwire spyware into disk drives, enabling all of the information recorded onto disks in the American Heartland to be echoed back to Beijing, feeding their intelligence processes.

Other voices suggested that the PRC might flex its newfound muscle in the disk market by tightening up disk drive supplies to squeeze more cash out of Western governments as well as corporate and private consumers. Others suggested that the Chinese would use their mighty manufacturing clout to flood the market with cheap disks—as they are trying to do with cheap automobiles—in order to devastate the profits of other manufacturers.

Preposterous as some of these scenarios sound, they reflected two things: first, a misunderstanding of the way things are, and second, a lack of knowledge about the way things have been for quite awhile.

Truth be told, the acquisition of a disk drive maker by China would not create a radical market shift, nor would it compromise national security. To paraphrase the old adage about military secrets, technology secrets are the most fleeting of all.

As Cisco Systems learned a few years ago, the Chinese are quite adept at reverse engineering (or just copying the design specifications they are provided) and at manufacturing knock-offs of existing devices. When Huawei cloned a Cisco switch using pilfered Cisco IOS software (and I mean "cloned" since even the bugs in IOS were replicated exactly in the Huawei gear), it quickly rose to market preeminence in Asia. Today, Huawei still dominates the region, Cisco having settled its legal case back in 2003 with the Chinese firm admitting to thievery by some rogue elements within the company.

Back to Seagate: the U.S. drive manufacturer already operates production plants in China, and it is safe to assume that the Chinese already have all the specs they need to build Seagate knock-offs and to begin a drive business of their own. If they wanted to leverage technology know-how to their political or economic advantage, they could clearly do so. In response, capitalism would dictate that U.S. technology firms ramp up low-cost disk replacements, such as solid state disk or carbon nanotubes, in order to compete. Such an acquisition by China could provide just the kind of stimulus needed to push folks off spinning rust, especially for longer-term archival data.

Moreover, it is worth mentioning that virtually all technology today is a product of a global production process. The GSA Schedule, which is referenced in most government purchasing, used to exact a penalty if more than 50 percent of the components in products being sold to the federal government were manufactured in foreign countries. The original law that governed this, The Buy American Act of 1933, was subsequently modified in 1979 by the Trade Agreements Act (TAA), which exempted most data processing and telecommunications equipment from such penalty provisions.

The rationale for the exemption was simple: hardly a computer or telco switch was being built in the 1980s (or today) that did not already have substantial componentry from Taiwan, Japan, Korea, Malaysia, Thailand, or the PRC. Why should taxpayers pick up the extra tab for the inevitable deployment of globally-manufactured technology?

Today, one might ask a similar question about the costs of the storage gear being procured by the government: why is the federal government (e.g. the taxpayer) paying a premium for brand-name arrays that use exactly the same commodity disks in their chassis as their inexpensive "white box" competitors such as Promise Technologies or Adaptec Snap Server? Concerns about potential Chinese greediness ignored the huge price gouging that we are seeing every day in products shipping from three-letter companies right here in the U.S.A..

Bottom line in the case of "Seagate-gate:" there was never really anything here to be concerned about. Politics just made everyone crazy, as it always does.

When politics and storage mix, the results are too often unpredictable and unnerving. Take, for example, the current flap around e-mail retention. In the White House, the Presidential Records Act requires that all documents be retained for historical research. In the corporate world, various regulations, laws, and evidentiary rules create the same mandate. The implementation of these rules is, however, uneven.

For example, the White House is not being aggressively pursued for its "inadvertent deletion" of hundreds of thousands (some reports suggest millions) of senior management -e-mail messages this year and in previous years. E-mail archiving, everyone seems to agree, is hard work and systems are prone to problems.

This defense hasn’t proven as effective in the ongoing Intel-AMD antitrust lawsuit, where Intel wasn’t able to pony up about 1,000 e-mails sought by federal prosecutors in the case. The failure of Intel to deliver subpoenaed e-mail is being viewed as one of the first tests of the new evidence rules added to the Federal Rules of Civil Procedure last December that required organizations keep close tabs on "electronic documents" that might become evidence in future litigation.

The non-specific requirement is generally thought to pertain to all kinds of electronic content—from instant messages and productivity application files, to digital photos and videos, and especially to e-mail. Because one never knows what data might be pertinent in a legal action, many companies have publicly complained that the new rules require archiving just about everything.

Saving everything is exactly the kind of mandate that the storage industry likes to see. This adds credence to the position adopted by IDC in its Expanding Digital Universe report released this past spring: that data is growing much faster than the paltry 20 to 30 percent per year that University of California, Berkeley researchers argued a few years ago. IDC says that data "under management" by companies is growing at 200 times that rate—including archives and backup—and expects a "storage gap" (too much data, too little storage) to occur beginning this year. If you need to store forever everything that might be requested as evidence in a federal circuit court case, you can just imagine the joy in storage land. It’s like the old Doritos advertisement, "Crunch all you want, we’ll make more."

The irony of this situation is that when documents are requested pursuant to an investigation, providing them in a timely fashion to the litigator might produce as much political fallout as not providing them. Ask Sun Microsystems.

In July 2005, the GSA said that it was canceling Sun’s federal purchasing contract because of allegations that Sun was overcharging government customers. Sun avoided cancellation then by agreeing to drop some of its prices to bring them in line with pricing that commercial customers were receiving. Last week, the issue raised its head once again, with Sen. Chuck Grassley (R-Iowa) seeking to have GSA contracts with Sun cancelled—again because he believed the feds were being overcharged and that Sun was not cooperating with the investigation.

Sun responds that Grassley is misinformed when he claims that the company has not responded to requests for information from GSA investigators. In public statements, Sun reports that it has delivered tens of thousands of documents, plus transactional data covering billions of dollars in sales, on deadlines that, they argued, seemed to be designed to ensure the requests could not be fulfilled.

If the Sun claims are true, it may prove that it doesn’t matter whether you can deliver requested electronic content within mandated timeframes or not. Politics and storage don’t mix.

Your views are welcome: jtoigo@toigopartners.com.