Zerowait Corporation

Are your storage purchases in 2009 increasing or decreasing?

By Paul Travis, March 6, 2009, 1:40 PM

For the first time in more than five years, worldwide factory revenues for external disk storage systems posted a decline in the fourth quarter of 2008, according to IDC’s Worldwide Disk Storage Systems Quarterly Tracker. Revenues totaled $5.3 billion, down 0.5 percent, IDC said. The numbers show that storage, one of the stronger tech sectors, isn’t immune to the global economic slowdown and cutbacks in IT spending by businesses and other enterprises.

EWeek

Eighty-nine percent of storage survey respondents report that they will either maintain or increase their storage purchasing in 2009. There is reason for most of the storage business to remain confident looking ahead to next year — despite the free falls in other sectors of the economy.

My viewpoint – Even in a slow economy some customers are requiring more storage, and some customers are requiring less. Companies laying off thousands of employees will probably see their storage needs flat line or decrease. Fewer employees are going to store less than a full staff would.

All the companies we speak with and visit are looking for a better deal on their storage purchases and support. Hardware vendors are extremely negotiable now on price and terms. If you have money and are looking at new equipment it is definitely a good time to get competitive quotes. If you are looking for ways to stretch your storage maintenance budget there are many options available. Our travel budget has increased, as we are seeing more people who are interested in our services all over the country.

Saving money in hard times is not easy, but efficiencies can be found that were over looked when times were good.

Today I was on the phone with a series of customers in the South and Southwest, because I am going to visit with them in the next few weeks. The Economic situation is on everyone’s mind. One customer told me that “capital is on strike” and then he told me to look up the IBD editorial. I did and it is sobering. I have pasted a few portions from the article below.

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In the three months since the election, the broadest measure of the stock market’s value, the Wilshire 5000 Index, has plunged more than 30%, slicing over $3 trillion from Americans’ wealth. Investors have walked away from investing, while businesses shut down factories and offices and slash jobs.

This is both highly significant and dangerous. Capital, bluntly put, has gone on strike. Those who own wealth are pushing it to the sidelines, as a young and inexperienced president tries to jam through the most sweeping economic changes in over 70 years.

The prospect of these changes becoming law has already radically altered our nation’s economy. Entrepreneurs and CEOs who once created new products, new services, jobs and trillions in wealth for America’s workers and retirees now find themselves vilified and punished for their success.

*SNIP**

This isn’t the only warning sign. A new study asserts that some 100,000 highly educated, well-trained Indians now living in the U.S. will return home in the next few years. Ditto China.

Immigrant entrepreneurs are highly sensitive bellwethers of economic and social conditions. They know where the opportunities are — and where they aren’t. They’re voting with their feet.

***SNIP**

An estimated $1.4 trillion in new taxes planned by the new administration over the next decade explicitly target the people President Teddy Roosevelt once derided as the “malefactors of great wealth” — those in the top 5% of the income spectrum. Yet, they’re the ones who’ve made our economy the envy of the world.

By the way, under Obama’s plan the rich won’t pick up the whole tab. New energy taxes of $646 billion will hit the middle-class hard. Meanwhile, in just eight years, our national debt will double to $20 trillion, as nondefense federal spending jumps from the long-term average of 16.5% of GDP to above 23%.

You — or your children — face higher taxes for decades to come.

As our stock markets melt under a barrage of new taxes on incomes, estates, capital gains, dividends and energy, it’s good to recall that more than 100 million people own stocks or mutual funds. And that the stock market is the main wealth- and growth-creating mechanism in our capitalist society.

But when taxes go up, regulations proliferate and the rule of law and private property protections are weakened, the economy will invariably suffer. This is a universal lesson of economic history, one we ignore at our peril. And yes, this is what’s happening now.

No, we don’t blame all our current ills on President Obama. He came in at a tough time, when many bad decisions had already been made. But he is responsible for what he’s done since.

His stimulus package is little more than a down payment on a socialist economy. It raises taxes on the successful, brings back the welfare state, hands out favors and cash to friends of one political party, while imposing government control over the entire free market in ways that just a year ago would have seemed unimaginable.

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This is my twentieth year in business and as an entrepreneur, I can assure you that I am always listening to what our customers are doing and how they may need our help. Our customers are hunkering down, they don’t see a short term fix. They are looking to us to provide them a lifeline to get through these tough times, they don’t know how long they will last. I hear from our European customers and they say the economy of the world is in flux. Markets are looking for long term answers not short term patches. We are providing answers to our customers that solve their problems in our tiny niche, but they are worried about Macro trends. Our customers come in all sizes – they are spread all over. There is a lack of confidence in our leaders. There is a lack of confidence in everyone’s leaders.

As an entrepreneur, I am an optimist and I take risks with my capital to grow the business. I can assure you that I will bitch, complain, argue and laugh with my friends, customers and maybe even a competitor about the economic situation. I remain optimistic that over the long term we will continue to bring the innovations to our niche market that our customers want. We will figure out a way to solve problems creatively. But we need a steady hand at the controls, which we don’t seem to have today.

Imagine the Press release – High availability data center moves Zombie storage into the clouds.

(EOL) End Of Life announcements often frighten storage users into upgrading equipment when they don’t have to. Storage administrators know that files and document storage is getting harder to maintain as our digital data trail grows. Actually, everyone knows it – we all have saved stuff somewhere and can’t remember where it is on our hard drives.

Most folks agree with this NetApp study

“Compared to the full amount of allocated storage on the file servers, this represents only 10 percent of data,” Leung said. ‘[This] means that 90 percent of the data is untouched during this three-month period.’

After (3) months most data becomes Zombie storage – storage that is spinning and burning electricity, but very rarely accessed. As it ages it gets accessed less and less. How many documents have I stored over the last ten years which are still on my hard drives, but I will never look at again? I will bet there are thousands. I am guilty of creating Zombie storage.

The delete key is the green key that is never used enough.

Storage should have a cost per user, but as storage media gets cheaper, we save more useless information – How many of us have heard the phrase ” there is no cost to saving data”. Junk accumulates quickly yet needs to be accessible – According to users. Spinning media with dead data still takes power, directly and in cooling costs. There is a cost.

This is where your legacy storage platform can come to play. Using the Hierarchical Storage Management models of olde , you can move secondary and tertiary storage to olde platforms that the OEM does not maintain any more. Zombie storage can be put on low performance media. After all, data migrations are expensive. Data that is rarely accessed can be shuffled between older assets quite easily. Mirroring and copying data based on access rules makes a lot of sense.

Some folks are using Cloud Storage providers for this, but I have concerns about security for sensitive data being put in a cloud storage provider’s aggregated storage.

In the next few months I expect to see a provider emerge from the fog that will be able to provide a very high speed, private, secure, cloud storage solution that will charge only for storage as you need it. If this all emerges as I expect it to, we may have an answer to controlling costs on your Zombie storage requirements.

….Thanks for the link Simon

Recently, there has been an increase in interest in our services within the financial sector, and that can have multiple reasons. But the root cause is that folks in this storage intensive business need to cut operational costs quickly and we can help them do that. Coincidentally, there is a clause in the new Stimulus bill which should help our business because it is going to make it harder for financial companies receiving TARP funds to hire folks with H1B visas. These companies may have to outsource these jobs to companies like Zerowait that can provide storage support services. With American jobs on the line I think it may be harder to reverse this clause than some folks think. I imagine that a lot of service companies and employees will be writing their Senators and Congressman to keep the clause without any changes.

No matter how you feel about the Stimulus package, it will have direct effects on the storage business overall because the cost of money is going to go up. As a significant portion of storage sales are financed, there will be a a increased cost for buying new equipment.

Here is an article that explains the potential problem pretty well.

With the US deficit soaring, Treasuries aren’t a great safe-haven investment
Based on the cost of fiscal stimulus and the recently announced bank bail-out, the US federal government’s debt to GDP ratio is heading much higher.

By Martin Hutchinson, breakingviews.com
Last Updated: 12:57PM GMT 19 Feb 2009

By 2011, it may even equal Hungary’s current ratio, which skyrocketed due to profligate spending and remnants of centrally planned waste.

This suggests the credit quality of currently top-rated US Treasury debt may trend down more toward the quality of Hungary’s government debt, which is nearer the bottom of the investment-grade pecking order. That’s not a complete disaster. But it means treasury bonds won’t really be a safe-haven investment either.

Assuming deficit projections by the Congressional Budget Office (CBO) for the 2009 and 2010 fiscal years are right, and adding in the costs of the stimulus package, the bank rescue plan and borrowing costs, US public debt would rise from 41pc of GDP in September 2008 to about 70pc of GDP in September 2011 – roughly in line with Hungary’s December 2008 ratio.

… here is the issue stated at the end of the article

Finally, the projection assumes US interest rates remain low. With treasury-bond maturities now averaging only 48 months, higher interest rates would rapidly feed into higher borrowing costs and budget deficits.

Theoretically, this should cause more folks to want our support services. – Time will tell – : )

Saving money in the Data Center on energy costs, seems to be something just about all of our clients want to do. Yesterday’s Wall Street Journal had an article that pointed out how radically different an energy producing country’s administration feels about alternative power generation and resource usage, as compared to our Administration’s point of view.

Currently, we think of power outages as incidents, not long term events. But what if energy is curtailed for the long term?

The article …
“Saudi Arabia Oil Minister Ali Naimi lobbed a verbal salvo in the crude vs. renewables scuffle. In a speech to oil executives in Houston, he warned that promoting the growth of renewable fuels too quickly could create a “nightmare scenario” – too little investment in oil, while renewables aren’t yet ready to pick up the slack.

His remarks seemed aimed at officials in Washington D.C. and particularly members of President Barack Obama’s administration. His speech comes at a time when the new Obama administration embarks on an ambitious path to steer the country’s energy policy away from fossil fuels. President Obama was to instate a national renewable electricity mandate and a carbon cap-and-trade system this year.

“We must be mindful that efforts to rapidly promote alternatives could have a ‘chilling effect’ on investment in the oil sector,” he said at the Cambridge Energy Research Associates oil conference, according to his prepared remarks. “A nightmare scenario would be created if alternative energy supplies fail to meet overly optimistic expectations, while traditional energy suppliers scale back investment.”

That echoes an argument made last summer by a Dutch think tank–basically, that oil-producing nations are just as concerned about “security of demand” as consumer countries are about “security of supply.”

Mr. Naimi’s warning against ramping up investments and expectations in renewable energy comes at a time when OPEC members are feeling the financial pain of low crude oil prices.
Mr. Naimi, the longtime oil minister for Saudi Arabia, is one of the most influential voices in the oil world. But he speaks as the Organization of Petroleum Exporting Countries has slashed output in an effort to cut supplies and keep prices from falling.

Still, Mr. Naimi acknowledged that the world was likely headed towards a transition away from fossil fuels. But he said it wasn’t clear which fuels or technologies would be able to gain the scale and economics needed to replace crude oil.

The cost of replacing the current “highly efficient and economical” energy infrastructure with alternatives would be “prohibitive” in the short term. “A prudent approach demands we recognize that the massive scale of the global energy system makes rapid change costly and impractical,” he said.”

The article led me to ask some questions:

1) What happens to data center costs and up time guarantees if we run into a power crisis?
2) How do we decide which systems are critical in a completely integrated network?
3) Do we have a Disaster Prevention plan that includes provisions for which systems are critical if we only are allocated 80% of the power consumption we used last year?
4) Which servers and appliances can be turned off and are not critical?
5) How often are you going to do a backup and will we have the power to complete it?
6) How long can our UPS and generators realistically provide the extra power we need?
7) What will this do to our bottom line costs of operations?

** linked to by Simon Sharwood – Thank you.

The recession is causing a lot of companies to focus on their bottom line, some companies are laying off people which is always hard and others are trying to cut expenses in various ways. Cutting expenses is also hard when a lot of things are purchased as long term service contracts. Whether you agree with the efforts the government is taking or not there is no doubt that there will be unforeseen effects to the long term economy caused by the actions they are taking. According to the head of the Congressional Budget Office – Douglas Elmendorf:
“CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net.”

For perspective on the time frame – 2019 may seem like a long time away, but it is only 10 years, and Zerowait is now in our 20th year in business.

Making strategic business plans in such an environment is very difficult and I think it is one of the main reasons that we are seeing our business prosper. Keeping things going for the short term is a viable alternative. There are no clear signs of how to judge interest rates and business activity over the next year, and according to the Congressional Budget office the current bill could actually hurt long term growth

“In contrast to its positive near-term macroeconomic effects, the Senate legislation would reduce output slightly in the long run, CBO estimates, as would other similar proposals. The principal channel for this effect is that the legislation would result in an increase in government debt. To the extent that people hold their wealth in the form of government bonds rather than in a form that can be used to finance private investment, the increased government debt would tend to “crowd out” private investment—thus reducing the stock of private capital and the long-term potential output of the economy.”

Forecasting the future is not possible in these turbulent times – there seems to be no consensus. By the way, the CBO’s 10 year time frame is often considered to be two hardware upgrade cycles by our customers. Since the effects of the government’s actions are not quantifiable by economists and business analysts it is not a surprise that folks are holding on to equipment longer and stretching life cycles.

I think we are seeing the effects of uncertainty as a business driver.

Last week I went to visit customers and friends in DC, Atlanta and Charlotte. Our list of government customers is growing as time goes by for a number of reasons. Just like everyone else the government needs to stretch their budgets and recognizes that storage subsystems that were built for high availability a few years ago, remain reliable even after they are superseded by the manufacturer’s newest models. Maximizing the capacity of the heads that are in place makes a lot of sense with your and my budget dollars. Thanks uncle Sam .

In the strange twisted intersection of Government and the financial sector that has been brought about by the recent infusions of Government money into the banking system, there has been a uptick in interest in our services at banks that are NetApp users also. These banks are also looking to stretch their storage infrastructure’s lifespan beyond the OEM’s End Of Life statements.

Thoughts of economizing on network and storage equipment seems to be going on in both the Government sector and the financial sector, and from the meetings it seems that there is a general understanding that maintaining equipment that performs well is a logical and cost effective way to stretch everyone’s budget dollars.

Tough economic times have often inspired creative solutions to problems, and more and more companies are recognizing that our company provides a reliable way to manage and maintain their storage assets for the long term, and they are asking us to provide them more services also.

Also, today I want to say thank you for search storage for citing my blog in a recent article.
http://searchstorage.techtarget.com.au/articles/29046–Sectors-GDrive-details-revealed

It still surprises me to see who reads my blog on a regular basis.

For many years we have been working with companies on slightly unusual network applications. In the 1990’s we worked with a lot of companies as they got onto the web and started to do credit card transactions. One of the first companies that we worked with on a major load balancing and security project was Cybercash. I thought they had a great business, but ultimately they failed for a variety of reasons. The unintended consequences of fast growth and losing their focus on their objectives were certainly general causes.

Knitting together the software and patches that keep routers, switches, servers, applications and security working does not have to end in failure. By addressing the unintended consequences of each component and their effects on each of the other components, high availability networks can be built and maintained. It just takes planning. Unfortunately, many admins and IT execs don’t have time to plan to this extent–which is why many networks are continually added to and why many customers with network attached storage seem to operate in a seemingly catch-up mode as they work to maximize their storage infrastructures. It is often more expedient to add to the current network and patch a piece than rethink the whole thing.

This all leads up to what will happen to storage and network growth when budgets get cut and regular purchasing is stopped or severely diminished. I suspect that storage and network administrators will begin to acquire storage on an as-needed basis and purchase it over time. This will differ from past behavior where they sought to purchase in bulk for future growth. The pricing models and terms are still being worked out by numerous vendors, and ownership of capacity and components has to be determined. The economics of enterprise storage is changing with the economic conditions. It will be interesting to see which vendors will be able to adapt to the changes and which unintended consequences are brought about by the current recession and our reactions to it.

Over the past week I have spoken to some storage administrator friends who manage great islands of storage. And while they still have excess capacity on their heads and can redeploy storage in different ways, they have been told to curtail their new raw storage equipment purchases. Putting storage purchases off can work for a little while because most of the time customers buy more storage than they actually need at time of procurement. But eventually, more media will have to be purchased. Maximizing the capacity and utility of the heads works well for many of our customers because the majority of storage is only accessed occasionally, so by redeploying storage to older heads, probably will not noticeably change data access speeds for end users.

History has shown that storage media prices go down over time, so buying storage as you need it really makes a lot of sense for many customers, and this section of our business has been growing lately. Folks are recognizing that maximizing heads with storage is a great idea when budgets are tight. But perhaps the harder economic climate is also teaching people to think creatively about their storage purchases and usage.

A study last year raises some interesting questions, and may explain why many of our FAS980 customers are currently maximizing the capacity of these older systems.

During the three-month period that the network was under scrutiny, more than 90 percent of the material on the servers was never accessed. The researchers captured packets encoded using the Common Internet File System protocol, which Microsoft Windows applications use to save data via a network. About 1.5T of data was transferred.

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Statistically speaking, most data on enterprise networks rarely gets accessed after it is written to network storage, according to researchers from NetApp Inc. and the University of California. Evidently, we are too busy writing new data to go back over old data.

Andrew Leung, a computer science researcher at the University of California, presented the findings at the USENIX conference in Boston last week. Given those results, organizations might want to consider moving much of their data to slower but less expensive storage units since it rarely gets accessed, he said.”

I was in DC the past few days visiting with some of our federal customers. One of our customers told me that there were some sweeteners in the Stimulus Bill regarding storage purchases. I thought that this was interesting, so I went on line this morning to see if I could find the aspects that may have a direct impact on our business.

I could not find anything that directly referenced what we do, but it looks like there is some more data going to be stored.

Here is the link:

http://readthestimulus.org/

S.336 (S.1) Senate Democrats Bill Text 1/27, Page 305:
(6) human-computer interaction and information management technologies; and (7) the social and economic implications of information technology. Subtitle C—Incentives for the Use of Health Information Technology PART I—GRANTS AND LOANS FUNDING SEC. 13301. GRANT, LOAN, AND DEMONSTRATION PROGRAMS. Title XXX of the Public Health Service Act, as added by section 13101, is amended by adding at the end ..

S.336 (S.1) Senate Democrats Bill Text 1/27, Page 36:
… $8,650,000,000 shall be expended pursuant to section 201 of this Act, of which: not less than $200,000,000 shall be available for competitive grants for expanding public computer center capacity, including at community colleges and public libraries; not less than $250,000,000 shall be available for competitive grants for innovative programs to encourage sustainable adoption of broadband service; …

House Democrats 1/23/09 Bill Text, Page 438:
… 1991 (15 U.S.C. 5511) shall coordinate Federal research and development programs related to the development and deployment of health information technology, including activities related to— (1) computer infrastructure; (2) data security; (3) development of large-scale, distributed, reliable computing systems; (4) wired, wireless, and hybrid high-speed networking; (5) development of software and …

House Democrats 1/15/09 Committee Report, Page 71:
… structures, signals and communications, power equipment and substations, passenger stations and terminals, security equipment and systems, maintenance facilities and equipment, operational support equipment including computer hardware and software, system extensions, and preventive maintenance. Funds will be distributed through the existing fixed guideway formula. It is estimated that the state-of …

axman 1/16/09 Tax Provisions, Page 181:
… TECHNOLOGY RESEARCH AND DEVELOPMENT PROGRAM.—The National High-Performance Computing Program established by section 101 of the High-Performance Computing Act of 1991 (15 U.S.C. 5511) shall coordinate Federal research and development programs related to the development and deployment of health information technology, including activities related to— (1) computer infrastructure; (2) data security;

House Democrats 1/15/09 Committee Report, Page 64:
The Social Security Administration (SSA) National Computer Center (NCC) is nearly 30 years old and it will soon be unable to support the critical systems necessary to SSA’s mission. The construction … to meet the growing needs of SSA for the processing of retirement and disability claims, and storage of wage and medical records. An estimated 400 jobs will be created during the construction process. …