Storage Slowdown

Kumar was not alone in wondering what happened to the storage market, which once was the darling of the IT industry but has suffered the same financial cutbacks as the rest of high tech.

As public storage vendors report mixed results for the most recent quarter, solution providers are sharply divided over prospects for the storage market in the second half of the year.

While sales of RAID and SAN hardware are down for SanServe, a solution provider based in Roseville, Minn., sales are growing for other products such as CA's ARCserve family as clients refresh their backup systems, said Todd Huntley, president of SanServe. "Everyone around us says it should be bad, and we hear it's bad, but we're just not seeing it yet," Huntley said.

Brandon Lambert, practice leader for systems and storage at Greenwich Technology Partners, a White Plains, N.Y., solution provider, said he expects storage spending to pick up by the fourth quarter, but not before.

"Customers are looking for people like us to come in and look at how to [better utilize what they have now," Lambert said. "This doesn't help sales at all."

Current storage hardware is now being more efficiently used to stretch budgets, said Dan Carson, vice president of marketing at Open Systems Solutions, a Yardley, Pa.-based solution provider. "The amount of data collected has not diminished," he said. "The number of e-mails has not decreased. But customers are finding new ways to use storage management software to better utilize their hardware."

CA's storage revenue dropped to $85 million for its 2003 fiscal first quarter ended June 30, down from $108 million for the same quarter last year. CA's average contract length for the quarter was 2.75 years, down from four years a year ago.

"Storage is clearly soft for us. I think it's also soft for the rest of the marketplace," Kumar said during the conference call.

While sales from CA's two-tier channel showed a single-digit decline for the quarter year over year, its one-tier sales, where CA has focused its channel-preferred sales compensation strategy, grew more than 100 percent for the quarter and are on track to grow 100 percent sequentially in the second fiscal quarter, said Mark Milford, senior vice president and general manager of North American channels at Islandia-based CA.

Revenue for CA's main storage software rivals,EMC, Veritas Software and Legato Systems,also fell compared with the same quarter last year.

Kumar blamed the weakness in channel storage sales in part on hardware storage sales. But Patrick Martin, president, CEO and chairman of StorageTek, Louisville, Colo., disagreed with Kumar, saying that pent-up demand is ready to lift spending.

"There will come a time where needs will grow," Martin said. "For instance, there's now a law on the books requiring that [corporate e-mails be stored for six years. This is a new, growing requirement."

George Symons, vice president of product management and development at Legato, said businesses are still in a just-in-time buying mode, causing third-quarter 2002 sales to be flat. Excess capacity will still hurt hardware sales by the fourth quarter, he said, but by then software sales will pick up as businesses look for better ways to manage their storage.