Not entirely. But some partner umbrellas are safer than others.
Technology spending forecasts are like the weather: Just when you think the skies are clearing, lightning strikes.
Take, for example, the storage market. Some players are highly insulated from the economic storm. Mike Ruettgers, EMCs executive chairman, was upbeat during a press conference in Europe on March 22. And Veritas Software CEO Gary Bloom was equally optimistic during an exclusive interview with Sm@rt Partner
Still, thunderclouds dominate the sky, and some storage companies wont survive to find shelter. In recent weeks, tape-drive maker OnStream shuttered operations; Exabyte slashed its workforce by 24 percent; Texas Instruments closed a chip plant for disk drives in Santa Cruz; Brocade, Emulex and Quantum issued earnings warnings; and service providers like Storage Networks are encountering some bumps, according to storage-market analysts.
Few people expected the storage downturn to come so quickly. "I think we were surprised that even storage is vulnerable, [considering] the importance of storage in the IT network," says John Webster, a senior analyst at market research firm Illuminata.
Take a Raincheck
These days, many customers are delaying expensive storage-area network (SAN) initiatives. SANs take months to design and deploy, and often require platform-specific hardware or specialized software.
For some customers, SANs are difficult to cost-justify at a time when many businesses are trimming corporate travel, halting free coffee and canceling other perks to retain cash.
Nevertheless, customers still need to manage and protect mounds of data. Thats where point solutions come in. Instead of building a full-blown SAN, many customers are layering network-attached storage (NAS) or cross-platform backup software onto existing systems. So far, this shift has been subtle. But market watchers predict cross-platform storage specialists like Veritas will weather the economic storm better than most.
"I see [Veritas] in an extremely strong position," says Webster. "They have a very large and loyal customer base, and as hardware becomes more and more commoditized, the importance of software grows."
Veritas CEO certainly agrees. During a recent conference call with Wall Street analysts, Bloom maintained his bullish outlook for this year, predicting that company revenue will grow 40 percent to 50 percent. Business prospects can change by the hour, but Bloom reiterated his confidence last week.
"Its Veritas against the economy," says Bloom. "As we reported on March 5, our most recent guidance call, we continue to stay ahead of the economy with our growth. Even if the economy does come up and bite us a little bit, I think well weather it much better than most because were expanding on so many fronts."
Three key factors have so far insulated Veritas and its partners from much of the recent storm. For starters, Veritas focuses on software. Unlike Sun Microsystems and other rivals, Veritas doesnt worry about excess hardware inventory or used dot-com servers saturating the market.
Second, Veritas is pushing into new geographies like Japan, Korea and other Asia-Pacific locales. Today, only 2 percent of Veritas revenue comes from Japan; Bloom hopes to rapidly push that figure closer to 10 percent.
Finally, Veritas is branching out beyond its Solaris and Windows heritage. The companys foray into the HP-UX market generated $100 million in new revenue last year, and a similar raid on the IBM AIX arena is expected shortly.
Veritas also is bolstering its partner ranks. The company recently hired Kris Hagerman, a Silicon Graphics veteran, as VP of strategic alliances.
Still, Bloom cant put away his storm gear just yet. As this story went to press, the Dow Jones Industrial Average was trading 20 percent below its all-time high. Translation: The bear market is here, and many companies are further tightening their belts.
Several prime Veritas customers, including Motorola, Oracle and Texas Instruments, are cutting costs through layoffs and potential budget cuts.
"The buyers, as in the CEOs and the CIOs, start looking around in their community and realize everybody else is cutting back," says Bloom. "That could impact everyone."
Many storage players are feeling the chill, particularly storage service providers (SSP). International Data Corp. predicts that the SSP market will grow from $153 million in 2000 to $10.7 billion in 2005. But many SSPs wont live to see the market boom (if it ever happens), because they dont have partnerships with large data center providers like Exodus Communications, Qwest and WorldCom.
Traditional storage companies also are feeling the pinch. Quantums DLT & Storage Systems Group, for one, issued an earnings warning early last week. The company expects Q4 revenue to drop 20 percent from Q3. Quantum CEO Michael Brown blames the shortfall on the economy and says Quantums business model remains fundamentally strong.
No Shock Here One bright spot for Quantum is its Snap Appliances unit. Products from that group generated $116 million in revenue during Q3, up 41 percent for the corresponding quarter last year.
Quantum remains bullish on the Snap product line, which targets the NAS market. "In this economic environment, were poised to capitalize from this situation," says Sara Spivey, VP of marketing at Snap Appliances. "People are scrutinizing every dollar, so were not immune to a downturn. But we are a more attractive alternative. My hope is that no matter how severe it gets, we feel it less."
Other vendors are hip to the NAS trend. Major players, including Dell Computer and Microsoft, are moving rapidly into the NAS market. "Dell will take any storage appliance they can factor into their direct model and drive that towards commoditization," says Illuminatas Webster. "The organization that is giving Dell the most help is Microsoft. Microsoft is really coming down forcefully initially on the NAS appliance market."
Microsoft has formal storage agreements with Compaq, Dell and Maxtor. The software giant is taking the core Windows 2000 code base and making modifications for the NAS market, Webster says.
Instead of waiting for Microsoft to attack, Quantum is positioning low-cost Snap appliances against more pricey NT file servers. Snap delivered that very message last week in Washington, D.C., during the FOSE trade show for government agencies. Jim Simon, director of channel marketing for Snap, says NAS products are ideal for government agencies, which often have limited budgets and lots of data.
Come to think of it, that describes all storage customers these days.
Jerry Rosa and Ed Sperling contributed to this article