The Business Case for Storage Networks [Electronic resources] نسخه متنی

Commoditization of Hardware

So, what were the long-term effects of the "New Economy?" This is the subject of heated debate; however, economists J. Bradford DeLong and Lawrence Summers provide us with an insight into one aspect of the "New Economy:" competition. In an address at Kansas City's Federal Reserve Bank Symposium in August, 2001, DeLong and Summers argued that the long-term effects of the technological advances of the "New Economy" would not be the creation of "scale-related cost advantages," but the creation instead of a more level playing field, making competition itself "more effective."^[12]

Obviously DeLong and Summers refer primarily to the supply side of the economic equation. Accordingly, they state, "Competitive edges based on past reputations, or brand loyalty, or advertising footprints will fade away. As they do so, profit margins will fall: Competition will become swifter, stronger, more pervasive, and more nearly perfect. Consumers will gain and shareholders will lose."^[13]

The commoditization of disk and server hardware is therefore a visible symptom of stronger and more perfect competition, and certainly the consumer in most circumstances benefits from increased purchasing power. The question, however, remains: Do the consumers gain a true advantage? Not if the commoditized assets are poorly utilized, which, when dealing with storage, is more often than not, the unfortunate case.

The Disk as Commodity

Table 1-2) were primarily due to three factors:

Spending on Y2K-related infrastructure

Continued demand for web and electronic commerce applications

Increases in the number of complex enterprise resource planning and supply-chain management installations

As a major manufacturer of disk storage systems and a provider of disk-related software and services, the annual revenues for the Hopkinton, Massachusetts-based firm, EMC Corporation, provide an excellent snapshot of disk spending for the two years on either side of Y2K (shown in Figure 1-3).

What is more germane to the premise of this discussion, however, is the breakdown of revenue by line of business at EMC Corporation from 2000 to 2003 (see Figure 1-4). These figures show at a glance the growing shift in focus from disk sales to revenue generation through software and services. This shift indicates further commoditization of disk storage.

[16]

Worldwide Fibre Channel Switches and HBAs Factory Revenue ($M), 2000-2003

Three consecutive years of growth in the Fibre Channel switch market point to a shift from DAS to SAN infrastructure and, as intelligence moves onto the storage network, the commoditization of disk storage continues.

The Server as Commodity

Server sales decreased dramatically between 2000 and 2002. The number of server units sold during this same time frame indicates the increased commoditization of the host.

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Worldwide Server Factory Revenue ($M) and Units Shipped

Chapter 5, "Maximizing Storage Investments."

It is reasonable to assume that the adoption of the Linux operating system has also contributed to the commoditization of the server.

An application infrastructure based on the Linux operating system has a significantly lower TCO than one based on a proprietary operating system. The increased customer adoption rate of Linux will continue to apply pressure on companies whose revenues are derived from sales of proprietary operating systems and enterprise-class servers.