Commoditization of Enterprise Storage

Let's start with a question.
When was the last time that Enterprise Storage [NAS, DAS and SAN] Industry saw a new entrant challenging the incumbents and become successful?
Answer: 2001-2004 when NetApp successfully challenged dominance of EMC and picked up significant market shares in NAS space [NetApp today commands around 24% of NAS market while EMC has around 41%].
What happened at that time? Well, NetApp brought a new NAS appliance, in the industry, that was cheaper and lot more easier to manage for the IT folks. There is another side of the story. EMC, as we know today was not exactly the same in 2003. Between 2003 and 2005, EMC went through a transformation under the leadership of Mr. Tucci from being an engineering-driven organization to marketing-driven organization. They bought few companies which later on changed the way people look at EMC. Some of the dazzlers that they bought at that time are Documentam and VMware, much smaller but very interesting entities at that time. But these are all past data. Why are we bringing them now?  The next question will lead to the answer.
Question 2: Networking hardware segment [Routers, Switches] has already seen a mass-scale commoditization. HDD segment is also heavily commoditized. Surprisingly Enterprise Storage segment has resisted it till now. The question therefore is how are they doing it?
Well, the easy and quick answer is that the storage technology space is not as transparent as IETF-driven  networking technologies and more importantly Storage gears deal with storing and managing the organization data which is critical to organization's survival unlike Networking gears which only see the data in transit. High sensitivity to data  has made the organizations extremely risk-averse and a prisoner of sort to a particular set of vendors [who they bought the equipment from earlier].
Will my new system smoothly talk to old systems? How do I trust that my data will not mutate (get corrupted or changed irretrievably ) or storage infrastructure will not become unavailable and shaky when I bring a relatively unknown vendor in the same setup when the vendors themselves did not certify the configuration? I want my vendor to guarantee that the setup will be stable and I can demand that if the setup is relatively homogeneous.
Life of Data is another important aspect of the puzzle. Since regulatory compliance require firms to keep their internal data for a long period [some critical data must be stored for 25 years or more], IT managers tend to buy equipment from those vendors who are likely to survive for that long, and that leaves the buying decision heavily skewed towards the established players, making it a little difficult for new-entrants to find foot-hold.
All the leading Storage System vendors capitalize on this fear in customers' mind which kind of explains why they have been successful in resisting commoditization of storage systems and how they have been successful in pushing their servers and disk arrays to customers year after year. If you have invested in NetApp gears, you will continue to buy NetApp boxes and software and likewise for HP, EMC unless the cost dynamics pushes you to change.
  A curious thing to note that all the leading storage OEMs today use processors, HDDs and Flash drives from the same set of vendors and have their manufacturing outsourced to same part of the world but somehow they have maintained the product differentiation in customer's mind. Multiple Design patents and proprietary software are the secret sauce behind their dominance, they would argue. It is also curious to observe that relative positions in terms of market share between the top 5 did not see significant changes over the past 5-6 years with EMC leading the pack and IBM, NetApp, HP following EMC from a distance. Quite miraculously the incumbents have not really seen a challenger like NetApp in last half of a decade.
But is it really a miracle?
It is only when we look closely, the veil of miracle drops and we realize it is rather a vigilant and clever market maneuvering, by the incumbents, that did not allow the challenger to find success and sustain the way NetApp did. Each time, we saw a new entrant creating a niche for itself, we also knew that it is going to be bought over in a matter of months. When clustered Storage became hot domain for startup, we saw spinnaker got acquired by NetApp, and Isilon got bought over by EMC. If EMC bought XtremeIO, HP bought 3PAR. When Deduplication brought the spotlight on efficient storage, IBM bought Storwize. Datadomain was bought over by EMC just when people thought they would be the change-agent in disk-based back-up. As many observed, the incumbents somehow always managed to gobble up new entrants before they became challenger.
How long can they sustain? Well, they will sustain as long as the game is played in the same way by the new entrant and buyers continue to look at storage in the same way they have been looking.
But what happens if the game itself changes? Is it realistic to expect that the game will change when incumbents have low incentives to change the game? What incentives customers have to take up the risk of changing their way of looking at their IT puzzle?
We will explore that in next post.