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Spending on External Disk Storage Systems is Near Flat in Western Europe, says IDC
It was the first quarter in Western Europe on record when external disk storage system vendors shipped over 1 exabyte, or 1 million terabytes of new capacity in total. This, however, represents growth of only 11% over the last quarter of 2010, as the price of capacity shot up by more than 10% over the third quarter as a direct result of shortages throughout the hard disk drive supply chain.
For the full year, the Western European EDSS market expanded to $5.34 billion, or 5.3% over 2010, despite the fragile state of European business confidence and the limited visibility. "This growth was largely driven by storage consolidation and optimization projects aimed at improving the economics of storage operations and IT overall, as well as new virtualized storage infrastructure deployments by service providers and some large enterprises," said Donna Taylor, research director for IDC's European Storage Group. "Many European organizations are looking for storage solutions that can deliver rapid cash-flow improvements, measured in months."
The data indicates increased stress on the disk storage systems market in Western Europe for the fourth quarter, slowing growth in new capacity deployments to low double digits. An increase in dollar per GB pricing of more than 10% over third quarter is a direct result of drastic disk drive price movements due to the disruption in the supply chain. The enterprise market suffered some shortages in high-density disk shipments as disk manufacturers mitigated some component shortages by producing lower density drives in order to manage volumes. IDC predicts that disk production won't fully recover till mid-year, and capacity pricing may not decline much or at all in 2012, a major challenge for the storage systems industry.
Growth in Entry-Level
Seasonally, the fourth quarter was healthy for high-end sales, with a sequential growth of 37%. However, overall activity was flat over the same quarter a year ago in the region, as strong year-end momentum in Germany, Switzerland, and Belgium was offset by some weakness in other markets such as the U.K., the Netherlands, Spain, and Sweden. IDC defines high-end as a selling price of $250,000 or more.
Demand for midrange disk storage systems (priced between $25K and $250K) was flat over the previous year, and up 25% over the third quarter in local currencies. Rolling four-quarter trending shows flat regional demand for midrange and high-end systems in Western Europe, highlighting a lack of further growth. Once again, sub-$100k midrange systems and really large deployments worth $500k or more carried the momentum, while pricebands in between were either flat or negative.
The market was elevated by increased entry-level sales (systems selling for less than $25K) in the last quarter, up 13% over a year ago. Demand was stimulated by new offerings from some of the Tier 1 players and Tier 2s. Configurations selling between $10k and 15k drove the sales.
Top Vendor Highlights
While EMC retained its lead by a comfortable margin, in large part thanks to its sizeable Data Domain business, its growth slowed in the fourth quarter, despite the continued traction of its next-generation product lines. While EMC lost some share in midrange sales due to the cut-throat competition in a stagnant Western European marketplace, the quick ramp of VNX and VNXe in particular highlights the company's execution prowess.
IBM came in second, as its sales cycle is typically weighted towards the fourth quarter. Sales mildly eroded compared to a year before, despite major upgrades across its portfolio. XIV lost share in the IBM portfolio as sales dropped in most markets, and DS8000 showed a geographically very mixed picture with huge wins in some key markets and similar losses in others. The company's star product is the Storwize V7000, which more than quadrupled in sales and now represents over 18% of IBM's Western European storage business.
NetApp was the only Tier 1 disk storage systems vendor with a double digit growth rate in the region. The company pulled off double digit growth in 13 markets, and its worst performance for the quarter was a low single digit decline in France. The company's FAS family of unified storage arrays continued to excel in the midrange pricebands of the market.
HP captured the fourth spot in the quarter, with mildly declining sales. The company has been expanding its high-end datacenter business over the past three quarters thanks to strong products with the 3Par and XP families, which continued into the fourth quarter. However, its traditional entry-level and midrange storage business declined as the company tries to transition from its legacy product lines to next-generation architectures.
Hitachi Data Systems booked a strong last quarter. While year-over-year growth was a near flat negative, underlying sales dynamics show that VSP grew the high-end business to record heights, while the midrange AMS2000 family really nears the end of its life cycle, with sales declining by nearly 30% year over year. When combined with sales of HP's XP family, which is supplied by HDS under an OEM agreement, Hitachi's platform was the number one choice of Western European enterprises for their mission critical storage needs.
Dell ended the quarter in sixth position with a mixed bag. The company's overall sales slightly declined, as growth in entry-level offset the steeper drop in midrange sales after the company pulled out of selling EMC technology last year. The company is now almost fully converted to its own IP storage products and added a substantial revenue stream after re-launching Compellent systems under the Dell brand.
In terms of overall dynamics, the U.K. lagged other major markets with a mild decline, contrasted by growth in Germany, France, and Italy. This is largely a result of a cool down effect from previous highs in the high-end segment. Rolling four-quarter constant currency trending reveals that with the exception of France, the overall activity in these major markets was flat compared to last year.
Using the same analysis, the Nordics performed rather well. Markets battling the sovereign debt crisis, low business confidence and high unemployment showed stabilization and even signs of recovery, yet at depressed sales levels.
Due to component shortages in the hard disk drive supply chain, IDC sees a major temporary disruption in capacity pricing trends this year, resulting in price increases. Now IDC predicts a low single digit decline in average per capacity pricing for the full year. As the shortages are most severe in high-capacity enterprise drives, driving up prices, IDC expects this to severely impede growth in new capacity deployments for the year. As the effect is temporary, IDC also expects many customers to postpone some of their capacity purchases towards the second half of the year and first half of 2013. Combined with still low economic visibility and exchange rate fluctuations, IDC sees low capacity growth rates in the single digits for the year, which is considered to be a conservative scenario. Should the hard disk drive supply chain recover faster than currently anticipated or the economic circumstances improve in the second half of the year, lower prices and additional spending could put prices back on the historical track earlier than next year.
IDC predicts the Western European external disk storage systems market will grow at 2% in 2012 over 2011, with spending on open networked systems forecast to expand by 5%. Generally, IDC expects activity in the high-end segment to cool off after two consecutive years of strong refreshes, while cost-effective but scalable lower-midrange systems are enjoying continued growth. Assuming that both the European and world economy gain strength and that disk capacity pricing resumes its historical pace of decline, IDC sees growth picking up in 2015 and 2016. This growth will be driven by high-end deployments on top of a robust level of spending on midrange systems due to both a mission-critical refresh cycle and investments in building and expanding private and public storage clouds. IDC predicts that this will push the Western European external disk storage systems market to $6.3 billion, or up 14% compared to 2011.
For more information on IDC's EMEA Quarterly Disk Storage Systems Tracker or other IDC storage research services, contact Research Director Donna Taylor on +49 (89) 36086 9113 begin_of_the_skype_highlighting +49 (89) 36086 9113 end_of_the_skype_highlighting or at firstname.lastname@example.org. Alternatively, contact your local IDC office or visit www.idc.com.
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