It's been described as one of the fastest growing sectors in the IT channel, but just what is the current state of the storage market and where is it headed? Ben Furfie takes a look?

Digital Memories

It’s what memories are made of – at least in the digital sense. Storage is a huge market and with its many facets, it can be a difficult market to get your head around, especially with the ever expanding list of new formats and products.

Hard disks are still very much the flagship format of the storage sector, and perhaps the biggest development in the market this past year has been the introduction of 1TB hard drives for consumers.

However, now that watershed has been passed, the channel is less sure what importance subsequent milestones will have upon demand: "Psychologically, consumers who have high storage needs wanted to see an affordable 1TB solution, but now they have that, it is unclear what impact 1.5TB and 2TB drives will have," suggests M2M’s marketing manager Hitesh Kothary.

VIP’s storage product manager Darren Jackson echoes his thoughts: "Hard drive capacities have not changed significantly in the last 12 months, but the average selling price has dropped substantially," adding that it was this decrease that brought 1TB drives into the price range of most customers, albeit at the high end.

Indeed, despite the relative cost of these devices, they are still seen as a major growth area. "In the current credit crunch, the only area of increased growth is in data, the majority of which is now termed digital landfill," suggests Westcoast’s storage sales specialist Huw Wilkins.

"This is having a largely positive effect on the market: "We expect the data storage market to continue its growth well into the years to come, with larger devices – currently only used by corporate companies and businesses – to eventually filter down into the SMB marketplace."

Another major area of growth has been solid-state disks, based on NAND flash memory, especially as capacities continue to increase and average unit prices decrease. "NAND-based flash memory is increasingly becoming the storage medium of choice," states the managing director of Simms International, Alex Tatham.

"While back-ups are still being done on hard disk drives, the advent of solid-state disks is beginning to have an impact on OEMs, and while the technology is yet to make any significant impact on the general consumer, we should see more and more being bought as they become more aware of the product."

However, it’s not all over for the HDD with VIP’s Darren Jackson adding that there is still a lot of change taking place across the market: "Manufacturers are currently moving to 320GB a platter, and will soon be moving to 500GB a platter next year."

The biggest change in the market has had very little to do with a new storage technology; rather it has to do with the monumental shift in computer usage and in particular the move from desktop PCs to laptops and netbooks.

"The massive growth in notebook sales is driving a boom in portable hard drives," states vice president of EZY Infotech EMEA, Nigel Edwards. "It’s all down to the hard drives that are supplied in today’s laptops not being great.

"It’s mainly because the capacity is tiny in comparison to desktops and, of course, it helps that you can get portable hard drives that are three or four times the size of the one included in their new laptop, and that can easily fit into their back pocket," he adds.

It’s a point echoed by Kothary: "Internal hard drives have not hit the dizzy heights of desktop hard drives and this has given a massive boost to sales of external hard drives. The growth in consumers carrying their libraries of music, pictures and film content is very visible."

However, laptops aren’t the only devices having an impact on the storage market; netbooks are also having a profound effect: "The majority of netbooks have a solid state disk installed as standard, and this is helping to drive down the cost of this type of storage down," states Tatham. However, because of their relatively small size, they too are driving demand for portable storage: "The predominance of portable computing means that portable storage is also required."

However, less portable storage is also on the rise: "Home storage servers that store/back-up home PCs wirelessly are increasingly popular now that home users are moving increasingly to laptops and other portable devices," he continues.

It isn’t just external storage that is on the increase, either. There has been a marked rise in demand for internal storage of various types, as VIP’s storage product manager Darren Jackson explains: "Demand for both internal storage for upgraders and external 2.5-inch drives has increased throughout the year."

CCI Distribution product manager Simon Atkinson agrees: "We have seen a big increase in demand for 2.5-inch hard drive sales and we expect this to continue throughout 2009."

However, Kothary warns that internal storage in laptops poses a different set of issues to that of desktops. "The skill set of upgrading laptop hard drives is a lot more complex and intimidating for users, and there may also be warranty issues from the manufacturers."

When it comes to this Christmas, and what the hot product will be, almost everyone was in agreement: larger capacity in a smaller form factor. "Small 2.5-inch external hard drives to go alongside the small netbooks and laptops should do well this Christmas," reckons Atkinson.

Jackon similarly says: "320GB 2.5- inch external drives, along with 500GB and 1TB 2.5-inch internal drives are going to be the big products this Christmas. 3.5-inch hard drives, such as 500GB models, will also do extremely well."

It’s not just hard disks that will do well this festive season, according to Kothary. "While high capacity and very consumer friendly external hard drives, such as those that allow customers to back-up, archive and share content at the touch of a button, will do very well, SSDs will also start to make a big impact."

Indeed, there is serious potential to make a nice margin from these products. "Any sales of laptops should see accessory sales as natural," argues Atkinson. "Somewhere between 15 per cent and 20 per cent of the laptop’s value should be sold in accessories, and of that, storage for backup should be the most obvious angle to take."

However, hard drives aren’t the only thing to consider. With increasing numbers of laptops, such as Apple’s MacBook Air and the Samsung X360, being sold without an optical drive, there is a rapidly growing market to supply customers with external disc drives.

"As optical drives are increasingly absent in some notebooks and all netbooks, slimline optical drives should also sell, as the demand for reading and writing discs remains popular," says Atkinson.

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