How the 'Down' Macroeconomy Will Impact the Data Storage Sector - Page 3

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 J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 13 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...