 o some solution providers, plummeting RAID prices represent just another step toward lower margins. To others, they're key to an opportunity to bring fault-tolerant computing to everyday clients who wouldn't normally be able to afford the storage technology.
Ron Kramer, for one, sees the glass as half-full. As far as he's concerned, high-availability systems that were once the sole province of Fortune 1000 companies are now easily sold to SMB customers running Microsoft or Unix. "[RAID] is affordable now," said Kramer, CTO of All Computer Solutions, Petaluma, Calif. "It's really giving us a tremendous competitive edge." According to sources at RAID provider Mylex, an independent business unit of IBM that the vendor recently agreed to sell to Milpitas, Calif.-based LSI Logic, a RAID solution can be implemented for as little as a few cents per day per gigabyte of data. The current pricing trend, in fact, serves as a potent reminder to the market of what RAID originally referred to (redundant array of inexpensive disks), although the "I" today stands for something else completely (independent). Downward-spiraling prices, combined with advances in Microsoft server and database software, has resulted in price/performance advances. For channel players, that's led to additional sales opportunities. "Two years ago, we were able to deliver fault-tolerant computers for $50,000 to $125,000," Kramer said. "Today I can deliver a fault-tolerant transactional [solution] that won't fail for a $25,000 entry point. You couldn't deliver something like this in a Tandem [Computer] environment 10 years ago for less than $1 million. . . . We've taken this whole personal computing model and really built it into a business-solid technology solution, and we've made it affordable to the masses."
Phil Bullinger, vice president and general manager at LSI, takes exception to the description of RAID as a commodity. "It's a technology that's becoming required. People can't afford to be without their data," he said. "Falling [average selling prices] aren't necessarily attached to commoditization. Silicon prices are falling, and falling [prices] are indicative of higher levels of product integration." Bullinger said the word "commodity" makes him think of a product that's widely available in common implementations. But in the case of RAID, "there's intense competition around delivering higher levels of technology," he said. LSI's purchase of Mylex earlier this year offers ample testimony to the company's conviction that RAID solutions hold potential for profit. The deal, expected to close as a cash transaction during the quarter ending Sept. 30, would bring to LSI Mylex's RAID controllers, subsystem hardware and software technologies, and long-standing relationships with solution providers. As an independent company through the late 1990s and an independent business unit of IBM for the past three years, Mylex has developed strong ties to the channel. IBM itself had grand plans for the Mylex RAID business in 1999, when it bought the then-independent company for $240 million. But while the computer giant saw opportunities for growth in that part of its storage business in the midst of the dot-com explosion, the downward spiral of RAID pricing, combined with a sudden halt in business spending, changed the company's thinking. IBM decided to sell Mylex to LSI as it began to divest itself of low-margin businesses, including its hard-disk operation. Neither company has disclosed what LSI paid IBM for the RAID business. As for Bullinger and Leader, both declined to speak in detail about the purchase of Mylex since it hasn't yet been completed. "We see the Mylex acquisition as very synergistic with our business," Bullinger said. "They have a strong distribution business. That brings with it momentum, relationships and expertise. We're quite excited about the forward-looking prospects." But even before its purchase of Mylex, LSI had been banking on the RAID market, seeing a correlation between the rapid expansion of the Internet and the growing need for storage technology to support data and multimedia applications. Last year, LSI bought MegaRAID, the RAID business of Norcross, Ga.-based American Megatrends, for $245 million. That gave LSI not only American Megatrends' RAID technology but also 200 of its employees, which include 120 hardware and software engineers. LSI executives said the MegaRAID business should enable LSI to provide additional storage interface solutions and drive additional growth. "We see [unit] volumes ramping very nicely," Bullinger said. "As RAID technology becomes more and more ubiquitous, we see very strong markets for our products." Even so, LSI may have to wait a little while before cashing in on its optimism. Industry analysts have said the sluggish economy and high-tech market may take until next year to improve. According to a recent study by Gartner, the overall RAID market is expected to decline by almost 2 percent during the current year, although a best-case scenario of 4.9 percent growth remains possible. But some vendors and solution providers remain optimistic, an outlook that's reinforced by continually declining RAID prices.
Photography by Eddie Milla for CRN |
Added Joe Leader, director of distribution sales at LSI: "We're seeing [orders] of our product well exceed the drops in price. The attach rate is growing higher and higher."
