Enterprise SSD Market Overview: What Customers Really Want

Introduction

As of today, the majority of enterprise customers who are using traditional hard disk drives to power their datacenters, but that is rapidly changing. IT managers are becoming increasingly aware of the benefits of switching to SSDs because they deliver blistering performance gains over legacy HDDs. This is a huge contrast to several years ago when it seemed ludicrous to even suggest that SSDs belong in an enterprise environment.

Of course, the argument has always been that SSDs are more expensive per gigabyte than HDDs, but SSDs have actually forced IT managers to re-think their cost metrics. Instead of focusing on pure cost, managers are now looking at IOPS, which is a measure of “Input/Output per second”. Basically, it’s the most common performance metric to benchmark storage devices. Managers are now looking at $ per IOPS, rather than $ per GB which has sparked a shift in the way IT departments think about their purchasing decisions.

So why SSDs?

Also known as NAND technology, solid-state drive technology has no moving parts and thus eliminates the rotational delay of a spinning platter drives. The result is that data is available almost instantaneously.

Switching from a legacy HDD to an SSD results can dramatically reduce IO bottlenecks and improve efficiency. Even though HDD cost per GB is still much lower than that of an SSD, solid-state drives offer a cost to performance ratio that cannot be beat. Since these drives are designed to deliver high performance throughput, the speed is much faster and more importantly, latency is also much lower.

These solutions are especially useful in the datacenter for cloud computing customers, who often process several hundred requests per second. Traditional spinning platter hard drives were not meant to handle the rigors of such a workload. Even in 2012, hard drives are often still the bottleneck and can bog down performance in a meaningful way. By putting NAND in the datacenter, it speeds up the data retrieval process and improves performance in a big way.

As more computing shifts to the cloud, web server bottlenecks are starting to occur more frequently and there is an increased demand for solutions that can push through these performance barriers. Clearly, more and more customers are beginning to recognize the benefits of this new technology.

The numbers don’t lie either. Morgan Stanley analyst Katy Huberty recently opined that the overall market for enterprise flash storage could rise from “$2 billion at the present to $20 billion over time”. Even though the market is relatively small for now, the upside and potential for SSD adoption in the datacenter is huge

Disrupting the Enterprise Storage World

Now that the benefits from switching to SSDs are becoming more wide spread, popular companies like Google, Facebook, Apple, and Salesforce.com are starting to implement this technology in their datacenters. Some of the main players in the Enterprise SSD Market are Fusion-IO ($FIO),  STEC Inc ($STEC), and EMC Corporation ($EMC).

Analysts are predicting that the enterprise SSD market could deliver double-digit growth through 2015. Enterprise storage powerhouse, EMC Corporation, recently decided to enter this market with the introduction of their VFcache product. Although this market is relatively new and fragmented for now, performance standards are beginning to emerge.

Enterprise SSDs are measured based on performance metrics like IOPS, Random Read/Write, and other various benchmarks. Even though these performance metrics provide reliable methods to quantify a drive’s performance, one could argue that the reliance on these metrics has gone overboard. Drives should be measured on other attributes besides speed, but it seems that some players in the SSD industry prioritize speed over everything.

In a quest to deliver the drive with the most IOPS, some companies have gone too far in focusing on pure IOPS and they neglected all the other features. It would be like if auto manufacturers focused entirely on producing cars with more horsepower in each new model instead of worrying about other features like safety.

Speed is an absolutely critical factor in any purchasing decision, but there are other characteristics that you must consider such as reliability. Unlike consumers, enterprise customers constantly are focused on 24/7/365 reliability and uptime for their entire IT infrastructure.  In addition, any sort of server failure obviously impacts customers/employees and could result in a loss of revenue.

Case Study: Salesforce.com

Some of the early-adopters of enterprise SSD solutions include technology companies like Facebook, Apple, and Salesforce.com. So what is the motivation behind these companies choosing to implement NAND solutions in their datacenters?

A good example to look at is Salesforce.com ($CRM), who operates a web-based software package that customers pay to use on a monthly basis. Their approach to software is almost the complete opposite of a Microsoft, who sells standalone applications to individual consumers/businesses. Basically, customers pay for access to a web portal that has a variety of different business applications hosted on it.

The innovative company has rapidly grown from a small-web startup into a $19.5 billion dollar enterprise. Since Salesforce.com’s product is accessed entirely through a web browser, reliability and responsiveness are absolutely must have features. So how does enterprise SSD technology map to their needs?

1) Reliability – For a customer who is selling access to a web-based application, reliability is one of the most important considerations. When customers pay for monthly access to a web portal, they expect rock-solid reliability and 100% uptime. For Salesforce.com, any sort of downtime or server outrage could result in a potential loss of revenue and could lead to disgruntled customers down the road.

Salesforce.com’s servers field thousands of requests per hour from their customers and it’s absolutely critical that their web infrastructure can handle this workload. By implementing high-performance SSDs, their technology infrastructure is equipped to handle more simultaneous requests and user logins. As the company scales up and adds more users to their platform, SSD technology ensures that their technology infrastructure won’t buckle under the increased utilization.

2) Responsiveness – Can you recall trying to load up your favorite website only to find out that the page is down? Or do you recall watching a video online and suffering through an endless cycle of “buffering”? You’re not the only one. Slow loading times and lack of responsiveness is a widespread problem that continues to plague many sites on the internet.

One of the main root causes behind this sluggishness is actually bottlenecks from using traditional HDDs, specifically latency. By implementing low-latency SSD technology in the datacenter, companies can reduce or eliminate these slow load times entirely.

Solid-state storage technologists refer to responsiveness as “application latency”, which is another way to quantify the quality-of-service. Although responsiveness is a difficult characteristic to quantify in simple terms, many sophisticated cloud-computing companies place responsiveness at the top of their list as far as “must have” features. Even web-based companies like Salesforce.com place a big focus in this area because it has a rather large effect on the end-user.

If a customer is using their platform to generate a financial report and it takes 5 seconds rather than 120 seconds, that makes a big difference from an end-user perspective. Back in 2009, Google ($GOOG) found that latency was a key issue that impacted both their customers and advertising revenue.  Google Search found that a 400 millisecond delay resulted in a -0.59% change in searches/user. By reducing latency as much as possible, Google was able to increase search volume and ultimately advertising revenue.

Endlessly waiting for websites to load is becoming a thing of the past and companies are willing to pay for solutions that cut through these traditional bottlenecks. As far as improving application latency and responsiveness, enterprise SSD technology is one of the top solutions out there.

Conclusion

Looking ahead to the future, the enterprise SSD market seems poised for continued growth and adoption in datacenters everywhere. In 2010, less than 1% of datacenters had SSDs or any SSD-caching products. As the widespread benefits of this technology become more well-known and costs decline, I see the opportunity for SSDs to be in every data center by 2018.

The market is small and relatively fragmented for now, but I see a lot of room for upside in the coming years. Many high end customers like Facebook and Apple are rapidly expanding their application of SSDs in the datacenter. Although some SSD companies tout their performance numbers as their main selling point, the typical tier 1 enterprise customers are often focused on other features.  For certain sophisticated enterprise customers, reliability and responsiveness actually take precedent over raw performance.

Since Enterprise SSDs are a relatively new technology, achieving reliability and quality standards remains one of the top challenges for SSD manufactuers. The industry is still extremely young, but the companies who make it in the sector will be the ones who can consistently deliver high-quality products with rock-solid reliability.

Disclosure: Long Position in $FIO and $GOOG


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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