IDC: Strong 3Q Storage Sales Driven By ODM, Hyperscalers As Branded Vendors Struggle To Recover Market Share

Branded Vendors Continue Giving Way To Hyperscalers, Other Manufacturers

The worldwide enterprise storage system market did well in the third quarter of 2017, with total revenue rising 14.0 percent over the third quarter of 2016 to reach $11.8 billion, according to IDC's Worldwide Quarterly Enterprise Storage Systems Tracker. Total capacity shipments were up 22.4 percent over last year to 72.5 exabytes.

However, as has been the case for the last few quarters, the real growth in storage sales were among the hyperscalers and the non-branded ODM (original design manufacturing) storage vendors, who collectively accounted for 46.7 percent of storage sales in the third quarter of 2017, up from 40.5 percent in the same period last year.

The enterprise storage market in the third quarter posted its first double-digit growth in several years, said Liz Conner, research manager for storage systems at Framingham, Mass.-based IDC.

"All-flash, software-defined and converged/hyperconverged systems continue to be the driving force for traditional storage vendors. Meanwhile, hyperscalers once again saw event-driven storage requirements lead to strong growth in this segment during the third quarter," Conner said in a statement.

For details on how the specific market segments and vendors did, turn the page.

Storage Industry Highlight: Flash Storage Sales

Flash storage continues to be a big driver of storage system sales as customers find more options and the difference in total cost of ownership between flash and disk-based storage becomes less and less of a factor.

Total sales of all-flash storage arrays reached nearly $1.6 billion during the third quarter, up 38.1 percent over the same period last year.

Sales of hybrid flash storage arrays, which combine flash and disk storage, reached $2.3 billion in revenue, accounting for 19.1 percent of the total storage market, IDC said.

Total Enterprise Storage Sales Boom

IDC breaks the enterprise storage business into two categories. The first is worldwide total enterprise storage systems, which includes sales of all enterprises storage, whether internal to a server or external in a storage area network.

Total enterprise storage systems revenue rose a strong 14.0 percent in the third quarter to $11.8 billion, IDC said. Three of the top five branded storage vendors -- NetApp, IBM, and Dell EMC -- saw growth in the quarter, although none of them experienced anything near the growth of the ODM direct vendors.

See the following slides for individual vendor details.

Smaller Rise In Worldwide External Enterprise Storage Systems Sales

The second category, external enterprise storage systems, focuses on sales of storage in stand-alone systems outside the server.

IDC said sales of external enterprise storage systems rose a moderate 4.1 percent to $5.6 billion. This is likely due, in part, to the strong hyperscaler storage sales where storage capacity is typically inside the servers rather than sold as external storage devices.

Again, three branded storage vendors: NetApp, Hewlett Packard Enterprise, and IBM; saw their sales grow during the quarter. Interesting enough, NetApp's growth in sales was actually higher than the growth experienced by the "others," which includes custom-built storage, OEM, and smaller vendors.

HPE Still Sort Of Number One In Sales, Still Sort Of Growing

Whether HPE grew storage sales depends on how sales were measured.

HPE is the largest vendor in terms of total enterprise storage sales, with revenue of $2.4 billion, or 20.2 percent of the total market in the third quarter of 2017. That was a slight slip of 0.2 percent over last year.

When server-based storage is taken away, HPE drops to number three in the external enterprise storage systems market at $637.6 million, which was actually up 2.7 percent over last year.

When measuring HPE sales, IDC also includes sales of the New H3C Group, a joint-venture operation in China, as well as sales of Nimble Storage, which HPE acquired early this year.

Dell EMC Still Sort Of Number One In Sales, But Growth Still Sort Of Growing

Whether Dell EMC grew storage sales also depends on how sales were measured.

Dell EMC is only number two in terms of total enterprise storage systems sales at $2.2 billion, or about 18.8 percent of the market. Revenue was up about 1.6 percent over last year, IDC said.

However, in terms of external storage systems sales, Dell EMC is number one by far at $1.6 billion, which was down 4.0 percent over last year.

Why The Flip In The Number One Spot Between HPE And Dell EMC?

Dell EMC's commanding lead in storage sales reflects its 2016 acquisition of EMC, which prior to the acquisition did not sell servers and for years was the largest independent storage vendor.

Comparing its huge jump in sales when server-based storage is taken into consideration vs. external-only storage sales, HPE makes a leap to No. 1. This indicates that HPE has done a better job of attaching enterprise storage to its enterprise servers than Dell EMC has.

Winner In Growth: NetApp

NetApp, which since EMC was acquired by Dell has become the storage industry's largest independent vendor, continues to defy gravity with its growing storage sales. That growth, according to NetApp, stems from its higher-than-any-competitor growth in all-flash storage, among other things.

NetApp had $700.7 million in storage sales during the third quarter, which was up over last year by 19.4 percent, according to IDC. That was enough to make it the second-largest external enterprise storage systems vendor after Dell EMC. It was also enough to make it the third-largest total enterprise storage sales vendor despite not having servers with which it could sell server-attached storage.

IBM Showing Good Storage Sales Recovery

IBM was the fourth-largest storage vendor either way it was measured. IDC said Big Blue had $487.1 million in external storage system sales, up 5.1 percent over last year. IBM also enjoyed $508.7 million in total enterprise storage sales, which IDC said was 4.5 percent over its last-year sales.

While IBM sold its x86-based server business to Lenovo a couple years ago, the company still sells Power processor-based servers and mainframes which include storage.

Hitachi Storage Sales Slowly Fading

Hitachi Vantara, which as of September combines the Hitachi Data Systems storage and data center infrastructure business, the Hitachi Insight Group IoT business, and Hitachi's Pentaho big data business into a combined company, saw its storage sales contract. That contraction was enough, when combined with IBM's gains, to cede the number-four spot to IBM.

IDC said Hitachi's total third-quarter enterprise storage systems sales reached $475.9 million, down 5.9 percent, while its external enterprise storage sales fell 5.4 percent to $466.9 million.

As For The Rest…

The share of the storage market going to companies outside the top five branded vendors continues to grow, IDC said.

ODM direct vendors and others, including hyperscalers, combined during the third quarter of 2017 sold $5.5 billion worth of enterprise storage systems, accounting for about 47.7 percent of the market. This compares to sales of $4.2 billion, for a 40.5-percent market share, during the same period of 2016.

For external storage systems, the "others" sold $1.7 billion worth in the third quarter of 2017 for a 30.2-percent market share. Last year, they sold $1.5 billion, or about 28.5 percent of the market, IDC said.