Survey Predicts Flat Storage Spending in 2006

According to the survey of 100 CIOs, storage spending will remain at 10.1 percent of overall IT budgets, the same as 2005 and up from 8.9 percent in 2004.

Storage spending will remain relatively flat in 2006, remaining at about 10 percent of the overall IT budget spending, according to a report by Merrill Lynch & Co. issued this week.

The Wall Street brokerage firm surveyed 100 CIOs—75 from the United States and 25 from Europe—on a variety of IT topics, including trends in spending on storage technology.

According to the survey, storage spending will remain at 10.1 percent of overall IT budgets, the same as 2005 and up from 8.9 percent in 2004.

Much of the growth in 2005 was fueled by regulatory compliance demands by such legislation as the Sarbanes-Oxley Act, as well as the growth in the amount of data created and falling prices.

Given the rise in storage spending in 2005, a flat 2006 indicates a deceleration in storage spending overall, according to the report, issued by analyst Richard Farmer.

A deceleration would put the storage space on pace with the overall IT spending, which would lead to an even more competitive storage market marked by tighter profit margins.

/zimages/6/28571.gifClick here to read more about compliance challenges in the storage market.

EMC Corp. and IBM are poised to make out best in this environment, due in part with partnerships with other large vendors, Farmer said in his report.

About 31 percent of the CIOs say Hopkinton, Mass.-based EMC will pick up more of the spending share, which stands at about 23 percent now, according to analyst firm IDC, in Framingham, Mass.

The share could be considered even larger if EMCs partnership with Dell Inc. is factored in. Dell resells EMCs high-end storage lines, and those EMC machines account for a large percentage of Dells overall storage revenue, the report said.

The partnership gives Dell, of Round Rock, Texas, the high-end storage devices it was lacking before, and EMC the access to the midrange and low-end that it didnt have before.

A quarter of the CIOs also said IBM, which has about 12 percent of the market, will gain share, the Merrill report said.

IBM will benefit from its re-branding relationship with Network Appliance Inc., of Sunnyvale, Calif.

The deal will give NetApp access to regions and verticals that it didnt have before, which will help both companies.

The report also pointed out that both Hewlett-Packard Co. and Sun Microsystems Inc. are in the process of revamping their storage offerings.

Eighteen percent of the CIOs said the upgraded EVA storage line from HP, of Palo Alto, Calif., is better than the previous version, with an additional 2 percent saying it appeared to be as good. Seventy-nine percent, though, said they were unsure.

The storage line was one of the weaker performing units under previous HP CEO Carly Fiorina.

Improving it was a priority for Mark Hurd when he took over for Fiorina in April 2004.

Sun, of Santa Clara, Calif., is reworking its storage line after the purchase of Storage Technology Corp. in June 2005 for $4.1 billion.

Suns acquisition of StorageTek wont change the buying habits of tape products of 32 percent of the CIOs, though the other 68 percent said they were unsure.

That said, 4 percent indicated that they intended to buy more disk products because of the deal.

/zimages/6/28571.gifCheck out eWEEK.coms for the latest news, reviews and analysis on enterprise and small business storage hardware and software.