Microsoft's Next Storage Play

So far, Microsoft has made the biggest splash with the success of Windows Storage Server 2003. It has also captured a significant share of the network attached storage (NAS) and iSCSI markets, both of which represent relatively low-end, low-cost storage solutions.

The question now is whether the company can also establish itself in high-end storage networking and management--a tough but lucrative market dominated by EMC and Network Appliance.

How Committed?

Some analysts question whether Microsoft has either the desire or the ability to grab a piece of the enterprise storage networking market. Others, however, warn against underestimating the company's ability to seize the initiative by introducing inexpensive, easy to use SAN management and information lifecycle management (ILM) offerings. In addition, Microsoft is working hard to sell iSCSI as a viable alternative for enterprise SANs, potentially giving the company another lever with which to pry open the enterprise market.

Microsoft representatives have remained largely silent on these issues, other than to reiterate the company's support and enthusiasm for the storage market. Given the fact that storage technology has been a lucrative growth market, this makes perfect sense. For Microsoft, however, storage could also represent another front in its war against Linux and open source software.

For IT managers, Microsoft's increased presence in storage is good news: With software vendors standardizing on interfaces provided by Microsoft and iSCSI hardware support rapidly expanding, prices are dropping while product choices and competition increase for both NAS systems and storage-area networks (SANs). As always, however, storage vendors are casting a wary eye--with good reason--on Microsoft's interest in the enterprise storage market.

NAS, iSCSI Steppingstones

Microsoft first entered the storage market in 2001 with Windows-Powered NAS, the precursor to last fall's Windows Storage Server 2003. Since then, Microsoft and its hardware partners have jumped to the top of the NAS market, at least in units sold. In the first quarter of this year, Gartner Inc. reports that Windows-based NAS boxes from Dell, HP, Iomega and other vendors totaled 53 percent of all units shipped worldwide, with sales mostly in the low end of the market below $15,000.

But NAS was only the start for Microsoft. In June 2003, the software giant debuted iSCSI initator software for its server products and is now leading a charge into the mid-market, where it's pushing sales of low-cost SANs running on iSCSI rather than Fibre Channel, the high-end connections on which large enterprises run their SANs.

While debate rages over iSCSI's robustness, it's only a matter of time, some vendors say, before Microsoft introduces its own SAN management software.

With new federal regulations such as HIPAA and Sarbanes-Oxley Act demanding the storage of ever more data, analysts say a foray into information lifecycle management can't be far behind for Microsoft, which isn't sharing any ILM plans for now.

In the meantime, the company is moving fast on iSCSI. In July, Microsoft and its hardware partners -- which now includes 53 firms with iSCSI disk arrays, tape libraries, gateways and routers that have been tested for Windows compatability -- kicked off two "road shows" to promote iSCSI SANs across the country.

Nancy Hurley, a senior analyst with the Enterprise Strategy Group, said critical pieces are still missing for iSCSI SANs to work, such as disks that support the network protocol on the front end. As a result, Hurley and Meta Group analyst Rob Schafer, senior program director of infrastructure strategy, think iSCSI isn't ready for prime time.

Meanwhile, in the field, companies such as Boulder, Colo.-based LeftHand Networks are busy selling and installing Windows-based IP-SANs that users say are robust, low-cost, easy to run -- and offer the potential for firms to bypass NAS altogether in favor of a SAN.

SANs, NAS Not Either-Or Issue

Today, however, companies generally deploy an iSCSI storage network alongside rather than in place of a NAS system or Fiber Channel SAN, the way LeftHand client and early adopter Denver Health did in 2001.

The public health agency, which runs a hospital with 4,000 end users, has a SAN from EMC on which it stores critical patient data. When he wanted to expand the network in 2001, Jeff Petol, chief technology officer for Denver Health, said he chose a Windows-based iSCSI SAN from LeftHand because of convenience and price -- about 20 percent less than a Fibre Channel SAN, petol said.

At first, Petol said, he wasn't convinced the network would be durable, so used it only for second-tier data storage. Today, he has 7 terabytes of data stored on his EMC SAN and 15.5 Tbytes on the LeftHand IP-SAN, which he now uses for everything, including digital x-rays. Because it was designed with Microsoft in mind, "It's just so simple to use," Petol said. "Fibre Channel SANs are very difficult to configure, manage and grow, whereas LeftHand is pretty much plug-and-play" when he needs to add more capacity.

"It's just given me a lot of flexibility. There are things I can do I can't do with EMC," Petol said. "For the price and performance, it's a really strong solution."

That, in a nutshell, is Microsoft's sales pitch for IP-SANs, which are now pushing into a mid-market range of $25,000 and $100,000 . Peter Pawlak, an analyst with research firm Directions on Microsoft, said that iSCSI would not be a mid-market play if Microsoft hadn't gotten behind iSCSI.

Make SANs Simple

Microsoft's "support of iSCSI has driven partners to start working on new products that are cheaper and easier to deploy, which is important to making SANs more affordable," said Claude Lorenson, a Microsoft technical product manager for platform technologies.

"Down the line," Lorenson said, "we would like the SAN to be simple enough and easy enough to use so a normal Windows administrator can deploy them. That's one of the goals we have."

Today, that goal is making IP-SANs a reality -- in a big, big way. From a pittance of $18.6 million in worldwide sales in 2003, IDC projects iSCSI SANs will explode to $2.7 billion by 2008 -- an annual growth rate of 170 percent.

That compares to a projected increase of 8.1 percent a year in sales of Fibre Channel SANs, which IDC expects to reach $9.2 billion in revenues in 2008. In contrast, sales of NAS systems are expected to climb 14.8 percent a year to $3.1 billion in 2008.

So far, EMC and NAS leader Network Appliance -- which, together, take in roughly 75 percent of all storage market revenues today -- say they're not worried about Microsoft's inroads, in part because sales of Windows-based NAS systems generally fall below $15,000. In that range, said Tom Joyce, NAS product manager for EMC, Microsoft competes only with Snap Appliance, the NAS unit sales leader.

Low-End Realignment

In July, Adaptec bought Snap -- a sure sign, Joyce said, that dropping prices and Microsoft's entry into the market have cut the profit out of low-margin unit sales. Analysts such as ESG's Hurley disagree, saying Microsoft's partners aren't taking anyone's business -- they're merely getting new business at the very bottom of the NAS market, where Gartner reports Windows-based products hold only a 21 percent share of the revenue.

Regardless, EMC, NetApp and Snap -- all three of which sell proprietary operating systems and software for the networks they sell -- have ceded the low-end to Microsoft and made important moves to differentiate their products.

About the same time Microsoft started reaching up into the mid-market, EMC, which targeted only the $100,000-plus high end 18 months ago, started reaching down -- something that Joyce said is no coincidence. In order to deliver a product quickly to the low end of that range, analysts say, EMC licensed Windows Storage Server 2003, which it released last fall as part of NetWin, the company's first non-proprietary NAS product.

Joyce said the interfaces Microsoft has provided in WSS 2003 -- particularly a virtual disk service (VDS) that allows any third-party software to communicate with any storage device, regardless of the hardware vendor -- create a standard that will only expand product offerings throughout the market. A new feature pack that Microsoft released in May adds to this, Joyce said, by making it possible to store Exchange 2003 e-mail databases and logs on WSS 2003.

While today's network-attached storage serves only discrete files, Exchange and other databases require feeds of lower-level block data that only a SAN system can provide. In response to the IP-SAN movement, NetApp and Snap have both introduced "unified storage," NAS units that can store and serve both file- and block-level data.

For its part, EMC has spent the past year investing $3.6 billion in three software firms -- Documentum, Legato and VMware -- in a bid to corner the market on information lifecycle management, a field where software relies on data-retention policies to know which data to store close at hand and what to route to other systems, in theory automatically, though ILM is not there today.

Most analysts and vendors agree that, sooner or later, Microsoft will get into the ILM market, probably by providing interfaces and applications for companies such as EMC to use rather than competing directly.

"Microsoft absolutely stands to play a role [in ILM] in the context of applications that run in Windows," said Bill North, a storage software analyst for IDC.

"What I expect is Microsoft will ultimately provide improved tools in the Windows environment for a product like Documentum to manage the movement of documents around different classes of storage," North said. "I don't expect Microsoft to go off and try to develop a document management application that would compete with Documentum."

Analysts and vendors are split right down the middle, however, on what Microsoft's intentions are today in the storage market as a whole, exactly how high it's aiming and what companies, if any, will face competition.

At EMC, Joyce, for one, believes companies that sell proprietary operating systems in the sub-$25,000 end of the NAS market -- including Snap and distributors of Linux -- are at risk. Higher up the chain, however, IDC's North is convinced Windows-based NAS faces an uphill battle displacing existing vendors such as NetApp and Snap.

"The proprietary environment guys are focused at the enterprise level," North said. "You don't go out and grab a white-box system and Windows Storage Server and become a trusted supplier. Storage is where the data lives--it's incredibly sticky. You don't displace an incumbent easily or quickly with another mousetrap."

High Profile In Data Center

Nor do analysts see Microsoft moving directly into the storage market. Hurley and others say Microsoft isn't interested in storage per se -- it's simply a means to keep selling Windows in the data center, where Microsoft's products is trying to keep Linux at bay. In order to do that, WSS 2003 has to play well with best-of-breed products of all types -- one reason why Microsoft's server software no longer grabs unassigned volumes the way Windows Server 2000 and NT did.

Microsoft also touts WSS 2003's improved performance with Fibre Channel SANs and NFS-based Unix files. At LeftHand Networks, Tom Major said he's looking forward to Microsoft beefing up iSCSI with true multi-pathing -- a capability expected in Osaka, the code name for the next version of Microsoft's iSCSI intiator.

But comprehensive storage management is not necessarily what Microsoft wants to do, said analyst Hurley. "If you have an all-Microsoft environment and all your NAS is all Microsoft and you're using a Microsoft-based NAS gateway into a back-end SAN, they're going to come out to manage file systems and hook up with larger enterprise solutions."

"(But) they're not going to be able any time in the near future -- and it's not necessarily their intent -- to compete with EMC or Veritas on enterprise storage management. That's definitely more where they'll cooperate," Hurley said.

SAN Discovery

Perhaps. At QLogic, a company that currently partners with Microsoft on SAN deployments, Frank Berry, vice president of marketing, believes it's inevitable Microsoft will offer its own SAN management software and applications.

Having established the VDS in WSS 2003 as a standard that allows one piece of software to manage various storage systems from HP, EMC and others, Berry said customers are already asking for a SAN management product that will allow them to discover all the components in their SAN.

"Outsiders are expecting (Microsoft) to make the logical progression from interfaces to storage applications," Berry said. "It seems natural for them."

So is providing interfaces or modules for software vendors to plug their products into Microsoft's Management Console or Operations Manager -- both of which Berry said Microsoft is likely to make possible in the near future.

Customers, Berry said, "are looking at Microsoft to make it all easier."

This story courtesy of Storage Pipeline.