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During the past week, Neuralytix has had the honor of speaking to several emerging vendors in the storage market. All of them can be generally classified as “independent storage vendors” – vendors whose products are storage systems, or software defined storage solutions delivered as either software only, or as appliances.

The conversations with all the vendors were very similar. Each espoused their relative superiority in performance, architecture, and cost, and compared themselves to large incumbents in the storage industry – namely EMC and NetApp. But the similarities between their presentations did not stop there.

In our opinion, each vendor failed in their ability to articulate the business value of their solution, spending too much time on the technical difference; they failed to discuss the significance of “data” and how applications and data would interact in an optimal fashion; and (in our opinion, worse of all), many of them glossed over or completely omitted any reference to how they work with server vendors, and how they would address the velocity at which enterprise customers are racing towards hyperconverged infrastructures (HCI).

Let’s be clear – a fast diminishing number of enterprise customers are just buying storage. Every enterprise customer is rethinking the datacenter of the future – and, all of them are thinking about how HCI will play a part in that architecture. Neuralytix projects that HCI will increase at a CAGR of over 300% through 2021, by which time, two-thirds of all datacenter refreshes or net new datacenters will be leveraging HCI technologies.

When we think about HCI, storage is no longer a separate consideration, but an integral one.

Using EMC and NetApp as examples – we clearly see a winner and a loser. EMC is the winner, it aligned itself with server vendors in an intimate fashion – first, with a joint venture with Cisco to form VCE; then it sold itself to Dell. On the other hand, NetApp has vehemently stood its ground as an independent storage vendor – having a relatively loose marketing (and/or a meet at the channel) relationship with Cisco to create the FlexPod reference architecture. But Cisco is not committed to NetApp. Cisco has not only gone on to create its own HCI solution, completely cutting out NetApp, but it has also formed similar relationships with IBM, Pure Storage, and many others, regulating NetApp to being no better off than any partner of Cisco.

The result is very clear to see: Dell EMC now has a leadership position in HCI, and is able to offer a full complement of traditional and next generation datacenter offerings; while NetApp is, well, just a storage vendor.

While not every storage vendor is EMC (or wants to be EMC!), every vendor needs to build a very strong story around how they work with server vendors in a next generation converged (or hyperconverged) infrastructure. Remember that while enterprise customers may be considering a best-of-breed configuration, they are also looking to simplify deployment. Simplicity of deployment and management leads to a driving down of the overall cost of operating and maintaining a datacenter, which is in the best interest of the customer.

For those storage vendors who do not themselves offer a scale-out, software-defined storage solution, it is imperative to also demonstrate some element of scale-out, and not just scale-up. While it is true that storage area networks (SANs) allow the simultaneous scale-out of servers with the scale-up of storage, that type of architecture, we believe, will diminish at a rapid rate over the next 18-36 months.

Consistent with our predictions during our Priorities 2017 webinar, during 2017, there will be significant consolidation in the datacenter infrastructure market. By having a strong alliance or joint venture with a server vendor will likely result in positive opportunities for exit, either through IPO (in the case of Nutanix), or through acquisition. But vendors that are adamant and resistant to alliances will see themselves in a predicament – unattractive for a merger or acquisition, but also unable to exit in a fashion compatible with the desires of the initial investors.

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