Fears of decreased storage budgets proved real in the first quarter of 2009, as EMC and IBM suffered large dropoffs from their 2008 revenue. Yet smaller and more focused vendors Data Domain and Riverbed reported their revenues increased more than 20% from the same period last year.
So why didn’t the budget freezes and uncertainties that stopped customers from buying EMC and IBM storage blow a hole in the business of Data Domain and Riverbed?
One reason may be that Data Domain (data deduplication for backup) and Riverbed (WAN optimization) are considered market leaders in the one market they’re in. But EMC and IBM are leaders in more markets and bigger markets than Data Domain and Riverbed, and their revenues declined in those segments.
More likely, the success of the smaller vendors has more to do with what they sell.
Perhaps Riverbed CEO Jerry Kennelly put it best on Riverbed’s earnings conference call: “You’re either selling capacity, or you’re selling efficiency. People don’t need capacity now, they’ve got it. But everybody needs efficiency.”
In other words, Riverbed and Data Domain help people get more value from the storage they already own. Storage admins and analysts have been saying that’s where money would be spent during these poor economic times. Now we know that’s the case. The bigger question is how long that will continue to be the case after the economy improves.