NetApp Shows Storage Sales Growth, But The Big Gains In Q2 2017 Came From ODM, IDC Reports

The storage market continues to shift away from traditional storage vendors and towards the hyperscalers like AWS (Amazon Web Services), with one exception: NetApp.

IDC this week reported that total second quarter 2017 enterprise storage sales grew by 2.9 percent compared to the same period of 2016, reaching $10.8 billion. That modest growth was the first overall growth the industry has seen for several quarters, IDC reported.

However, the growth in the business has shifted away from the traditional leaders in the business, with NetApp the only traditional vendor to see a significant increase in storage sales. The original design manufacturer, or ODM, part of the market grew by 73.5 percent year-over-year.

[Related: IDC: Public Cloud Giants Push Server Business Recovery; Legacy Vendors See Mixed Results]

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Total worldwide storage capacity shipped in the second quarter rose 16.5 year-over-year to 65.3 exabytes, IDC reported.

IDC also estimated sales of all-flash storage arrays reached over $1.4 billion in revenue during the quarter, up 37.6 percent year-over-year. Sales of hybrid flash arrays rose 19.6 percent to reach $2.1 billion for the quarter.

IDC breaks its quarterly storage sales results into two types. The worldwide total enterprise storage systems market, which includes storage sold both as a part of a server and external to the server, saw 2.9-percent year-over-year growth to $10.8 billion.

It was this part of the market where the ODM direct vendors saw their 73.5-percent year-over-year growth, as the servers installed in the hyperscaler data centers typically include internal storage.

The second type is the worldwide external enterprise storage systems market, which only counts storage sold external to the server. Here, total revenue fell 5.4 percent to $5.3 billion.

The enterprise storage market is going through some major shifts, said Liz Conner, research manager for Storage Systems at Framingham, Mass.-based IDC, in a prepared statement.

"Traditional storage vendors continue to expand their product portfolios to take advantage of the market swing towards all-flash and converged/hyper-converged systems. Meanwhile, hyperscalers saw new storage initiatives and event-driven storage requirements lead to strong growth in this segment during the second quarter," Conner said.

On the total enterprise storage systems side of the business, the two traditional leaders suffered from a huge downshift in business, opening the way for NetApp and the ODM direct vendors to increase their share.

Hewlett Packard Enterprise, along with its China-based joint venture New H3C Group, led the market with $2.2 billion in sales, giving it a 20.1 percent share. HPE sales, however, fell 13.2 percent over the same period last year. The HPE sales included those of Nimble Storage, which HPE acquired earlier this year.

Dell EMC's storage sales fell 26.7 percent year-over-year to $2.0 billion. As a result, HPE re-captured the number 1 spot from Dell EMC, despite its drop in sales.

NetApp kept its number 3 market share position with sales of $695 million, up 16.7 percent over last year. That made NetApp the only branded storage vendor among the top five companies to see growth.

Following NetApp were IBM, with $556 million in sales, down 0.4 percent, and Hitachi and Hitachi Data Systems, with $413 million in sales, down 3.8 percent.

The "other" vendors collectively sold $2.5 billion in total enterprise storage, which was up 9.5 percent.

However, for the category, the ODM direct vendors were the real winner in the second quarter with collective sales of $2.5 billion, up 73.5 percent.

Things looked quite different when it came to worldwide external enterprise storage sales, which excluded storage that was sold internal to servers.

Dell EMC kept its number 1 spot with sales of $1.5 billion, but that represented a year-over-year drop of 22.3 percent.

NetApp wrestled the number 2 spot from HPE in the second quarter of 2017. NetApp's sales rose 16.7 percent to $695 million, while HPE's sales fell 9.2 percent to $622 million.

Unlike Dell EMC and HPE, NetApp does not have a server business, so it doesn't enjoy the sales pull-through that servers can provide when sold with storage.

IBM's external storage sales grew 0.3 percent to $540 million. Hitachi and Hitachi Data Systems had $400 million in external storage sales, down 4.5 percent.

The "other" vendors collectively sold $1.6 billion in storage, which was up 7.8 percent year-over-year, IDC said.

It's no surprise that NetApp is doing so well, said Glenn Dekhayser, field chief technology officer at Red8, a Costa Mesa, Calif.-based solution provider and long-time NetApp channel partner.

"NetApp has gotten the story on storage automation," he said. "Its Data Fabric message has caught on. The market has caught up to NetApp's Data Fabric message on data mobility, but the other vendors really have no similar message. NetApp made a big bet on Data Fabric, and won."

NetApp has also executed well on its acquisition of all-flash storage vendor SolidFire, as well as with its Data Ontap operating system, which the company has integrated with a wide range of its other platforms, Dekhayser said.

"Customers are starting to get real value out of this stuff," he said. "People thought NetApp was dead. But they were wrong. Now the only deals NetApp loses are the ones they are not brought in on."