How the 'Down' Macroeconomy Will Impact the Data Storage Sector

By Chris Preimesberger  |  Posted 2008-10-16 Print this article Print

title=Main Drivers of Storage: Economic Growth, Automation}

Main drivers of storage: Economic growth, automation

Richard Jones of Burton Group contended that "storage consumption (read storage market growth) is driven by two factors: economic growth and automation of business processes."

There are some dynamics at work here, given the macroeconomy, Jones said:
--The economy is slowing, thus it will slow the storage market.

--IT organizations will move from the mode of building infrastructure to support growth to modifying infrastructure for improved efficiency, which will add some growth to the storage market.

--As businesses fail or get into more financial deep water in a slowing economy, the number of legal actions tends to increase exponentially, thus storage products that are used mostly for legal discovery will see growth in the storage market.

"The second point above is one of those that is not linear with decreasing macroeconomic health," Jones said. "In other words, as things slow [down], IT organizations shift to improving efficiency. However, as the recession deepens, then even those projects get cut and survival becomes the focus, so storage spending will drop. The third point will also follow this trend to a lesser degree."

Dave Friend, CEO of online backup service provider Carbonite and a storage industry veteran, told me: "I don't have answers, just hypotheses. It's possible that consumers, small businesses and enterprises may react very differently."

"One hypothesis is that consumers are feeling the pinch (real or imagined) and are discarding any non-essential expenditures. For example, I have heard anecdotally that magazine subscription renewals are off slightly in the last couple of months. I would expect this same effect to appear at renewal time for software and services as well. So far it is still in the noise, but I'll bet it's there," Friend said. 

Carbonite, which operates its service on a monthly or yearly subscription basis, has a good baseline from which to measure things such as renewal rates and try-to-buy conversions, Friend said.

"I suspect that there is some small effect already buried in the numbers, and we're doing further analysis," he said. "On the other hand, $50 [per year, which is what Carbonite charges] is not a lot of money to keep all your documents and family photos safe. So most people may simply look at it like an insurance policy and pay up." 

When budgets get squeezed, enterprises will more than likely cancel or postpone a project because of lack of manpower to work on it, Friend said. 

"Just saving money is not always the deciding factor. They have purchasing processes, evaluations, etc. -- all of which take people. If there is a hiring freeze or staff reduction, any changes to infrastructure tend to go on hold, and that would certainly negatively impact any new purchases of storage solutions," Friend said.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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