In our opnion the most recent Gartner Magic Quadrant for SSD raised more questions than it answered. If you look at the current SSD players Nimble, Pure and Violin are the three high profile specialist Flash vendors that have not been acquired and have all IPO’d.
Each of these companies shares one other interesting similarity. None has ever made a profit.
If you look at the last five quarters’ financials for each of these companies, the cash burn rate is significant.
Whilst Pure and Nimble show impressive revenue results, they continue to lose large amounts of money quarter on quarter. Violin look to be in worse shape with quarterly losses at double their revenue; to the casual observer it is difficult to see where Violin end up other than acquired on the cheap.
At the time these companies launched the markets were very excited about the “flash story”. The technology was (and arguably still is) “hot”, but it is starting to look like the story is not as strong as the reality for the Flash only vendors.
The first problem they face was somewhat predictable. The large storage players have been able to add flash offerings into their own portfolio. This gives them a more flexible message of – The right storage for the right use case - as opposed to the flash specialist who argue flash for everything. In the past we interviewed Pure APJ CTO Michael Cornwell who strongly advocates this approach believing Flash could even be used for archive in the future. The problem that Pure has, is even if Michael is right, many people will have a starting point of “Well the flash only vendors would say that wouldn't they”; they only have flash to sell.
We have seen numerous flash vendors ride the investment wave to get their products launched, never achieve a sustained revenue model and sell early to the larger players (e.g. Extreme IO sold to EMC). This adds weight to the point that whether through generic development or acquisition the traditional players have been able to enter the flash market very quickly. It also raises the question, why did so many emerging flash players sell up so quickly? If they believed the hype shouldn't they have looked to grow through increased sales and IPO? Perhaps their experience in the market led them to believe that getting bought early was the best option.
The less predictable issue for the flash vendors has been just how quickly technology is moving. Hyperconverged appliances became really hot right after flash, and in doing so blurred the lines of the enterprise storage market. Hyperconverged players like SimpliVity and Pivot 3 are often seen competing in what are clearly storage led deals. In our opinion it is no accident that SimpliVity as an example appointed Scott Morris as their VP for APJ. Scott comes from NetApp - he is a storage guy.
Also Software Defined Storage (SDS) in all its guises is starting to have a tangible impact on the storage market as a whole. SDS is commoditising the space and freeing companies from being locked to a single storage vendor. It can support open tiering of storage and through software can help improve performance even using commodity hardware. SDS really does help companies use the right storage for the right application and that means less expensive commodity storage rather than expensive flash arrays can be used more easily in the enterprise. This is hurting the storage market as a whole and adds another pressure to the flash players; which may have been difficult to predict a few short years ago.
It’s hard to see where the light at the end of the tunnel is for the flash vendors. Perhaps Nimble with their hybrid approach and lower cost of entry have the most adaptable go to market strategy. However, the challenge we see is whether these specialist companies can truly trade their way to profitability, given the increasing challenges they will find in a market where the goal posts have moved significantly since their launch plans were conceived.
For IT directors, we don’t see much to worry about here. The technology and the products are not going to disappear. An investment in products from these specialist vendors is not a made decision. As long as you are getting the functionality and cost performance you want then go for it. However, just be ready for the possibility that the badge on the front of your glossy new array may change in the future to one of the bigger more established storage companies. In our view the market has to considered further, ultimately we are not convinced that a flash vendor market exists at all – just the same old storage market with the same old vendors offering flash as one of the many options in their portfolio.