In the run-up to EMC World next week, EMC has released information about something they are calling “Project Liberty”, which appears to be a virtual appliance based on VNX. Is this a serious attempt to deliver products for the ethereal Software Defined Data Centre and what risk does this pose to EMC’s traditional storage business?
Late To The Party
Virtual Storage Appliances (VSAs) are nothing new and many companies have been selling products in this space for some time. You can take your pick from supported products like NexentaStor, HP StoreVirtual VSA, HP StoreOnce VSA, NetApp Data ONTAP Edge, Open-E, Nasuni Storage Controller, VMware VSA and free products such as OpenFiler and FreeNAS. EMC itself has already released unsupported versions of Celerra and VNX as a VSA and there are product offerings from other companies that provide functionality similar to virtual storage arrays, including open source products like Ceph and GlusterFS.
So what’s new about this move by EMC? Firstly, let’s note this is a “project” and not yet specifically a product, so we have no guarantee EMC will actually turn this into a fully fledged product offering. However if this becomes a product EMC choose to license and support, it does signal the acceptance from EMC that their hardware business isn’t sustainable in the long term. In fact that’s something we already can start to see appearing in EMC’s financials.
1Q2014 figures showed the Information Services division revenues declined by 3% and when “high-end” storage was excluded (e.g. VMAX) there was actually a 6% growth, meaning VMAX figures were worse than the overall number. Of course one swallow does not a summer make, but we can see a trend of reduced growth in the high end business over recent reporting periods.
Tough At The Top
So why is this decline happening? In recent years we’ve seen a move away from highly centralised SAN-based storage to silos of technology. Converged and hyper-converged infrastructure has taken some of that business, plus we’ve seen a range of flash startups taking market share as well as impressive growth figures from the likes of HP with 3PAR.
Over time we can expect to see more business move to private and public cloud and while this change might take some time, it means EMC and others can’t grow their high end business as aggressively as they used to. Software-only versions of EMC’s existing products offer a way to monetise the value of the IP built into those products. There’s no longer any value in the hardware as these platforms are pretty much commodity, so selling the software IP is an attractive alternative.
Other vendors have seen this approach as having value in moving into the cloud. NetApp already has Private Storage for AWS (see their partnership with Zadara Storage) which allows customers to get their data into a cloud provider using NetApp’s replication technology. HP are well on the way to providing virtual appliances of their major storage products (StoreVirtual VSA and StoreOnce VSA), including packaging them as part of converged solutions.
Benefits and Disadvantages
Packaging systems as VSAs has some good and bad points (depending on your point of view). For the customer, there’s the option to use a VSA to keep a consistent infrastructure, perhaps at a branch location or smaller data centre. This means features, functionality and management tools can all be kept the same, while reducing the overall cost of deployment. However deploying a VSA can be more work for the customer. It means choosing the right hardware (depending on whether deployed as a VSA or on bare metal) and performance can be more difficult to quantify.
Things appear tougher for the vendor, as hardware typically attracts a good revenue margin, especially where commodity consumer-grade drives can be sold in enterprise arrays. Customers won’t want to pay the same markup costs for software, however with VSAs there’s no hardware product to manufacture and ship (or support), so priced correctly, VSAs could actually be more profitable than shipping tin. This isn’t news to EMC – a huge part of their business is built on software licences from VMware.
One place EMC will see a problem is in their current operating model. Typically hardware is purchased with maintenance over a three year period. At the end of that time, the customer is offered an attractive refresh option or an expensive maintenance bill. That model will be very hard to justify with a software only VSA and so many customers may be happy to extend VSAs for 4 or more years. It may be necessary to use a different licensing model with VSAs, perhaps one that is based on a capacity or monthly charge.
The Architect’s View
Selling hardware has been a great for EMC but the world is moving on. There’s lots of valuable IP locked in software and the hard work writing the software has already been done. It’s a tough step for any hardware focused company to break the links to what was a profitable business, however without change, EMC will see that business erode and before they know it, there could be little business left there at all. Project Liberty could be the true start of EMC’s journey to the Software Defined Data Centre.
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