Is Dell Creating Its Own New Storage Market?

Dell’s announcement that it is investing a whopping $1.4 billion in cash to acquire EqualLogic is one of the more noteworthy storage news items in the last 12 months.

EqualLogic is the largest independent iSCSI storage array maker, trailing only the big companies that also do many other things: EMC, NetAPP, Hewlett-Packard, Sun Microsystems, IBM, and others.

Dell, as conservative an investor as one will find in the IT world, is paying a surprisingly high price for one of many data storage companies it could have acquired. EqualLogic certainly is noted for its high quality products and engineering talent; its reputation within the industry is outstanding.

And its strong relationship with VMware will be a major plus for Dell, which just signed a partnership agreement with another virtualization provider, XenSource.

But spending $1.4 billion—about 15 times the company’s earnings—is more than simply a generous offer to a nice little Nashua, N.H., company. It is the view of a number of industry observers that this is the confirmation of a clear trend: iSCSI is on the upswing and the days of Fibre Channel are numbered.

The fact remains, however, that Fiber Channel connectivity, which became prevalent in large storage systems in the last 15 years or so, will be around for a long while—nobody is disputing that.

Numerous companies over the last 20 years have invested six- and seven-figure capital spends in Fibre Channel systems, and they generally work very well in production, once they’re up and running. Those companies will certainly want to get their money’s worth before pulling up all those roots and planting a new IP-based system.

Click here to read more about Dell’s $1.4 billion buyout of EqualLogic.

But Fibre Channel is high-maintenance, expensive, tricky to install and complicated to deploy. It can be difficult even for experienced storage administrators to handle.

iSCSI—which is much more cost-effective than traditional wired FC (Fibre Channel) systems—is also more flexible to use, thanks to its virtualized architecture that pools data across many disks and enables storage arrays to share resources and load-balance workloads. It is only in the last 18 months or so that iSCSI systems—such as EqualLogic’s PS Series of SANs (storage area networks)—have become high-performance enough to handle huge enterprise workloads for financial, health care, government, and other high-demand vertical markets.

Dell, the darling of the SMB and home user, sees this as its opportunity to really make a difference in the SMB and home-user storage market. And that is to bring Internet protocol storage systems to the common user.

Many iSCSI storage systems are at the point-and-click, drag-and-drop configuration stage. If Dell and EqualLogic can put their heads together on this and come up with a low-cost, do-it-yourself, no-brainer-type of IP-based SAN, small businesses everywhere will sit up and take notice.

“This [news], more than anything else, is a strong validation of iSCSI as the wave of the future,” Tony Asaro, principal analyst for Enterprise Strategy Group, told eWEEK.

“Now, I wouldn’t go so far as to say this signals the end of Fibre Channel, no way. We’ll have FC in systems for a long, long, time. But when a company like Dell invests that much money into a company like this, it’s a very strong vote for iSCSI, no question.”

Dell understands the SMB and home user market like no other large computer company, Asaro said.

“Think about it—most small businesses and home users haven’t heard of EMC and NetApp,” Asaro said. “But they have heard of Dell, and Dell has a generally good rep. If Dell can make it ‘stupid easy’ for a small business person to set up a data storage system—and it will do it—then I’d have to say that Dell isn’t just jumping into a market controlled by others; it will be creating its own market.”

It’s not every day that a company can create its own market. Apple did it with the iPod and iPhone; can Dell do it with iStorage?

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