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Is the SSD Market Recession-Proof?

by Zsolt Kerekes editor - July 2008

What effect will a recession (if there is one) have on the bubbling solid state disk market?

This is a serious subject - and before giving any answers I'm going to requalify the question.
What kind of recession?

How bad?

If it's as bad as the recession in the 1930s - that's very bad for a broad spectrum of industries (although the military industries seemed to do quite well).

On the other hand if it's no worse than the 2000-2003 IT recession which came after the dotcom bust, Enron collapse and 9/11 - that had storage winners as well as losers.

I'm going to assume for the purposes of this discussion that if there is a recession in 2008/9 it will be more like the recent example above - in which overall IT spending declined - 10, 20 or 30 per cent - depending what you compared it to - but did not stop altogether.

Surprisingly we haven't seen that kind of downturn yet in the rotating disk storage market yet. An IDC report published in September 2008 - said that the external disk storage market grew 17% year-over-year in the 2nd quarter of 2008.

But that doesn't mean the storage market is imune.

With banks failing or merging on a daily basis - there will soon be a flood of as good as new enterprise storage systems flooding the broker / recycling market - just as when the dotcom bubble bust. The impact may not hit new storage sales immediately - but users don't need to buy new storage fresh from the factory if they can pick up the same products at maybe a quarter of the price in an auction.
Which part of the SSD market? Is there more than 1 part?

If you're new to SSDs You may think of "SSDs" as a single segment. But there are a lot more. More than 2. More than 3. In the 5 years since I started publishing various editions of my SSD market penetration model - which identified 4 main segments things have gotten a lot more complicated.

Let's just say that we're now well into double digits - and every weeek this year has suggested a new way of looking at an SSD market which in the long term will be bigger (in revenue) than the HDD market is today. (Although the HDD market will keep growing too.)

With that kind of perspective - lumping the fate of all SSDs together makes about as much sense as thinking about a single "storage market". Instead (like investments) some parts of the market will go up while others go down.
A recession can kill, slow down or accelerate the successful market adoption of new technologies. Which of these happens depends on how technically delevoped the new technology is when the recession starts to take effect.

My explanation of why some technologies actually do better and grow faster in a recession is that customers have less money to spend and have more time to research and think about new upgrades and purchases - before they commit to a particular solution.

When enterprise customers have growing IT budgets (as in 2005 to 2007) the easiest thing to do is buy more stuff from their existing suppliers and ignore the distraction of qualifying alternative solutions. But when IT budgets are crunched (as in a possible 2008/9 recession) user enterprises face the dilemma of having to increase application performance (to stay competitive in their own markets) while having less available funds to buy technology assets. Buyers in a recession spend more time shopping around and researching best value for money options. That's an opportunity for new technologies to do well.

One example of switching away from safe (but pricey) solutions in the last IT recession was the effective replacement of the SPARC Solaris server market by Linux running on commodity Intel architecture servers.

Although many other factors were involved too - the key effect of the recession was to speed up the move to the new alternative. Linux had a much tougher time getting past the datacenter door keepers during the preceding dotcom boom when the future success of new web startups seemed to be measured by how nay Sun servers they had ordered.

Going back to the subject of this article - here are my predictions for how the SSD market will fare if there is a recession in 2008/9 - and the thinking behind the conclusions.
  • hybrid flash disk market - will be a loser. This would have happened even without a recession - because these product confer little or no benefit to most PCs - while increasing the cost.
  • flash SSDs aimed at the notebook market. This segment will have winners and losers.

    Losers. - Products which have mediocre performance (same or not much better than a notebook hard drive) will fail to be successful - despite the fact that notebook SSD prices will drop as many of the 25 or so manufacturers making such products try to gain market share or recoup investments before exiting the market.

    Winners. - Products which are significantly faster than hard drives will be successful - because there is always a market for faster products - even in a recession. Although SSD oems who make such products wull see significant growth in units shipped - it is unlikely that the high (double digit) penetration rates predicted by IDC, Web-Feet Research etc will be achieved in the next few years - because the recession will put a dampener on new notebook sales.
  • flash SSDs aimed at the server acceleration market.

    Flash SSDs which offer significant application speedups are appearing in 2.5", 3.5", PCIe and rackmount form factors. In many applications they will be more cost effective than a traditional solution (more servers). And in some applications they will offer performance which is years in advance of what current processors can perform. But, an important limitation of many of these flash SSD enterprise products is that most of them are optimized for a DAS rather than a SAN architecture. That means their take-up is likely to be more in smaller to medium sized companies or departmental rather than enterprise-wide applications in bigger organizations.

    Another market which has emerged in recent years is the use of SSDs in appliances such as network switches. That too will accelerate in a recession - because it's cheaper and more convenient for oems of such products to offer a faster model as an upgrade (by installing an SSD to replace a hard drive) rather than design or sell a completely new appliance.
  • RAM SSDs aimed at the server acceleration market

    With RAM SSDs costing about 25x as much as flash SSDs (for the same capacity) and the performance gap closing - you may think RAM SSDs are an endangered species - and that after a recession this category will no longer exist. I confess that I too once thought this might be the case. But recent detailed discussions with many readers on this subject accompanied by much thought and analysis about the various directions the SSD market could take - have led me to the opposite conclusion. I'm now convinced that the RAM SSD market will be very much alive and well after a recession and will actually benefit if there is one.

    Most current RAM SSDs are designed to suit a SAN architecture. As the pressures to deliver increased application performance increase - but IT budget cuts preclude the traditional (buy another 100 or 1,000 servers) solution - more users will have the time to consider SSDs as a "distress" upgrade. Deep pocket organizations with big databases - such as banks and government have been doing this for years as recounted in many case studies. But these lessons have largely ignored by most user organizations - because when the economy is good - it's much easier to ignore solutions that require more thought - even if they cost less. RAMD SSD costs have declined considerably since the last recession - which was probably the last time that many buyers in big enterprises looked at this type of solution. (And then happily forgot about them again afterwards.)

    Another factor which will accelerate the need for more "ultimately fast" RAM SSDs - particularly towards the end of the recession and for some time after - will be the growing population of installed DAS flash SSDs. A flash SSD accelerated server just looks architecturally like a faster server.

    When there are islands of fast flash SSD accelerated servers - the only way to scale these applications up to an enterprise level will be to bind the fastest common files into a RAM SSD solution. That's what I call my "SSDs everywhere" model. More DAS flash SSDs create more bottlenecks which can only be handled by more SAN RAM SSDs. It's a kind of virtuous performance uplifting circle in which neither technology replaces the other - but the growth of one increases the demand for the other.
Overall a recession will be good for vendors of faster server oriented SSDs (both flash and RAM based) - but a recession will be bad for vendors of notebook SSDs. The notebook market was going to become a bloodbath anyway - because there are too many oems chasing similar design slots with products which deliver little or no advantage to the average user. The recession will speed up the fast-forward (or erasure) of some of these market segments.
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the Top 10 SSD Companies
RAM Cache Ratios in flash SSDs
Storage Market Outlook 2010 to 2015
3 Easy Ways to Enter the SSD Market
the Problem with Write IOPS - in flash SSDs
SSD Myths and Legends - "write endurance"
RAM SSDs versus Flash SSDs - which is Best?
Selling revolutionary SSDs to conservative technology laggards
SSD ad - click for more info
...Later:- April 24, 2009

...As we now know, there really was a recesion. But rereading this article I wouldn't change a word of the analysis - which still holds true today.

My conclusion (cut and paste from the bottom of this article) hasn't changed either. Here it is.

"Overall a recession will be good for vendors of faster server oriented SSDs (both flash and RAM based) - but a recession will be bad for vendors of notebook SSDs."

For 2009 SSD market predictions - see Looking Ahead to the 2009 SSD Market
After SSDs? - Predicting the Storage Market's Next Obsession

Editor:- March 12, 2009 has published a new article - After SSDs... What Next?

It looks beyond the next 3 years of hoopla in the SSD market and predicts what will be the next "big thing" in storage after that. the article, SSD market research & analysts
SSD ad - click for more info
that RAM SSD "Eureka Moment"
Commenting for this article Tomas Havrda, President Solid Access Technologies (one of the word's fastest growing storage companies) said this...

"The recession is a good technology disinfector which tests the products as well as business models.

" Flash SSD publicity helped make customers aware there are other storage subsystems besides spindle-based devices. They then discover that there are RAM SSDs.

" Customers are saying 'We can't keep doing what we are doing now'. It is not easy to get into the door, but when customers actually try the ultra fast SSD there is a "eureka moment" where they don't return our demo and instead buy it outright."
Z's Laws - Predicting Future Flash SSD Performance
A few months ago a reader asked a very good question.

"Is there an industry roadmap for future flash SSD performance?"

That prompted other questions like...
  • How fast are flash SSDs going to be in 2009?, 2010? or 2012?
  • What are the technology factors which relate to flash SSD throughput and IOPS?
  • How close will flash SSDs get to RAM SSD performance?
There wasn't a simple answer I could give at the time. Clues lay scattered all across this web site and in my many one on one discussions with readers about the market... But I agreed there should be a single place on the web where these answers could be found.

Forget Moore's Law. That gives you the wrong answer, and this article explains why. the article
Where's the Money for SSDs Going to Come From?
There's no such thing as "new money" in an IT spending slowdown.

Here's an editorial first published on our home page back in January 2008 - which basically says - more spending on SSDs will mean less spending on something else.

2008 SSD Budgets - Robbing Peter to Pay Paul?

I've got a question for you. How big is your solid state storage budget in 2008?

I hazard to guess that most of you haven't put anything notionally marked as "SSD spending" in 2008's budget - even if you already have a good idea about what you're going to spend on traditional storage products and services.

I also predict that when the crunch comes - and you find yourself spending surprisingly large amounts of money on SSDs for the first time - these costs will be initially allocated to other cost centers - such as servers or PCs - rather than storage.

It was always thus.

In 1983 for example - over 90% of corporates didn't have a budget for buying IBM PCs. These disruptive tools intitially crept in under the IT department radar - as users found they could do useful jobs like word processing and business analysis quicker, cheaper and more conveniently than using the clunky alternatives then on offer by their IT departments. Similarly RAID systems did not appear in most 1990 corporate IT budgets - but are now everywhere.

In 2007 the SSD industry surprised many by introducing many exciting new technologies and products.

I predict that in 2008 - innovative users will surprise the SSD market by discovering for themselves a new generation of killer applications- enabled by SSDs - which would have been technically impossible - or even nuts to try and achieve using conventional hard disk based technologies. Those SSD sparks will feed back to fan the flames of the market.

Examples might include what I call - enterprise spreadsheet analysis - in which business managers are enabled to model "what if?" scenarios on duplicate sets of their entire customer database - to find gaps in their marketing or test ideas for new products.

Other applications enabled by SSD accleration might include AI enabled real-time upselling offers on ecommerce web sites. These are already feasible for innovative small to medium size companies but are not scalable with today's magnetic disk arrays. Large enterprises can't be nimble with their data because their servers would grind to a halt if you tried these types of tricks.

I'm not going to give you a long list of predicted disruptive SSD technology enabled applications - because they would be wrong - and you're going to see them coming thick and fast from real users on these pages soon enough.

2008 will be the year that users - rewrite the rules on how they mix and match new storage technologies in ways that the original manufacturers of those products - never dreamed about.
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