NEWS ANALYSIS: Huawei sees a slowdown in storage sales as an opportunity to undercut on pricing terms, bring in new-gen equipment, and steal customers from the Big 3.
China's Huawei Technologies has laid out a clear challenge to EMC (and thus to its soon-to-be owner, Dell), IBM and NetApp: It intends to break into the top tier of storage hardware and software providers in the world within three years.
"We don't want to just be No.1 in China ... we want to be [in] at least the top three in the world by 2018," Huawei storage product line president Fan Ruiqi told the Reuters
news service Dec. 8.
Ruiqi was referring to the global market for internal and external data storage, which amounted to $36 billion in calendar year 2014, according to industry researcher IDC.
This is an interesting challenge, and not only to the three top market leaders. Huawei is not primarily a storage provider; it is a Chinese multinational networking and telecommunications equipment and services company headquartered in Shenzhen, Guangdong.
Company will supply data centers and cloud services
Like its counterparts Verizon, AT&T, Orange and others, Huawei built its own data centers years ago, and, with the advent of data center converged servers, networking and storage, found out that it now has lots of data center real estate it could put to work. It intends to use that capacity for cloud storage -- competing directly with Amazon, Microsoft, Google and others -- as well as start producing storage hardware and software for enterprises.
A tall order, for sure. But as astounding as its goal to break into the top three might seem, there is some common sense in the statement.
If you fact-check the storage market over the last few years, you will find that while the storage industry itself continues to grow in single digits (about 7 percent each quarter), more of the sales have been spread across more vendors -- especially those who specialize in solid-state, NAND flash storage.
While all of the market leaders -- EMC, IBM and NetApp -- now provide solid-state storage options for their customers, they also have a lot of older, established customers that have used spinning-disk storage for years and haven't moved as fast to new-gen storage as newer companies have. If their use cases don't require fast turnaround times and lightning-fast data movement and replication, they don't feel a compelling need to forklift old systems out and plop down new (and more expensive) ones in their place.
Big 3 not selling as much solid-state storage as newcomers
Thus the top three vendors haven’t sold nearly as much NAND flash storage as they would like.
If a company anywhere in the IT industry is only treading water, it's falling behind. Huawei clearly sees this opportunity to come out of the blue, undercut everybody on pricing terms, bring in new-gen equipment, and steal away customers -- especially multinationals -- from the big three.
Many newer companies seeking storage are moving directly to subscription-based public cloud storage on Amazon or Rackspace and don't need their own on-premises storage system. If they do decide to buy storage, the sales have become more democratized among many providers, which include hot smaller companies such as Pure Storage, Nimble, SanDisk/Fusion-io, Tegile, Violin Memory, and others.
With all the new competition, IBM's storage sales have been slipping, as have NetApp's; EMC's have gone flat the last two years after more than 24 quarters of double-digit sales in the 2000s. Huawei thinks that if it can maintain 50-plus percent year-on-year quarterly growth rates, it could move into a top three spot.
Huawei accounted for about a quarter of China's storage market share in the second quarter, ahead of EMC and IBM, but its global market share is a mere 3.3 percent, far behind EMC's 32 percent, IBM's 11.7 percent and NetApp Inc.’s 10.6 percent, according to Gartner Research.
Huawei already has multinational storage customers
The company provides enterprise data-storage solutions to entities in both public and private sectors such as the People's Bank of China and e-commerce giant Alibaba Group Holding.
To grow its market share, Huawei told Reuters
that it plans to target financial institutions, governments and telecom carriers for data storage, a business Ruiqi said is expected to yield at least 60 percent year-on-year growth this year from 55.6 percent growth in 2014.
Ruiqi didn't reveal revenue details, but he said growth in Western Europe from countries such as Italy and Spain was particularly strong.
Ruiqi said he expected Huawei's revenue from data storage to reach at least $2 billion by 2018.
Who knows? If all goes according to plan, three years from now we might see Dell EMC, HP and Huawei as the world's top three storage suppliers.