The storage business is no longer about hardware. It is no longer about seek time or capacity. The next frontier is storage management software. Much of the activity today in the VC community around storage is investments in storage resource management, virtualization, and various categories of software to catalog, monitor, optimize, and protect storage resources. In addition, the economic climate is driving end users to be more concerned with how to maximize the value of assets they already own. This is often a conversation about software. The new software technology being developed today has the potential of upending the whole pecking order in the storage business. Once functionality moves away from the hardware and into software, storage hardware will officially drift into the realm of commodity. Storage will be purchased on price, capacity and delivery terms, and those who built their business on storage hardware will feel the pinch. The sooner solution providers can increase the percentage of storage revenue coming from software, the better positioned they will be for the future.
This move to focus on software will also help develop service capabilities. Traditionally, it has been complex software that drives the growth of services. Clear Sight Consulting has seen real-world examples of anywhere from a 2-to-1 and as much as a 5-to-1 ratio of professional services revenue driven by a single dollar of software. Look at EMC as an example. EMC anticipates that more than 40 percent of its revenue will come from software and services. Invest in software today.