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Bigger means fewer? No one told the tape storage business.

StorageExperts

AD.jpegBy Andrew Dodd, WW Marketing Communications Manager, HP Storage Media

 

In my previous blog on the state of the tape market, I explained how low and midrange tape usage, far from declining, had actually reached an all time high of 6,338 petabytes at the end of 2014.1 And year on year, tape capacity for the full year 2014 grew by 16%. Even the mighty Facebook data centre represents just 4.5% of a single quarter of the world’s demand for tape.2

 

To illustrate how our dependence on tape is growing, not shrinking, here's a chart showing the state of the tape universe just over a decade ago. All data comes from Santa Clara Consulting Group’s backup tracker reports on the storage media market, published quarterly since 2002.

 

Q3 2002J.jpg

Capacity of Global Tape Media Shipments, By Category, All Vendors, Q3 2002

 

Back then, the death of tape was just as imminent as it is today. And indeed, many of the technologies that were significant back then have faded into obscurity. But that's only because they were replaced by better, bigger and more successful tape solutions!

Q4 2014J.jpg 

Capacity of Global Tape Media Shipments, By Category, All Vendors, Q4 2014

 

Today, LTO-5 and LTO-6 dominate the landscape to the extent that these two product lines account for 82% of the total capacity shipped. Drawn to scale, it's incredible by just how much demand for tape storage has grown.

Then and Now v2J.jpg 

Bigger tapes, fewer cartridges? Not necessarily!

But wait a moment says the anti-tape movement. It's all well and good that the amount of tape capacity is increasing, but what about units and revenue? These tapes are much bigger in size than their predecessors so whilst there is more data being stored, the market is shrinking in absolute terms because bigger tapes means fewer are needed, and fewer tapes means the business is a lot less attractive for a CEO seeking to prioritise R&D dollars!

 

This may one day be true. One day, it may be possible to have a tape so big that you only need one of them. At which point, the last data cartridge will be like the 130-year old Galapagos tortoise that once shook paws with Darwin and is now a living fossil, the last of its kind. But in reality, this isn't going to happen any time soon.

 

First of all, bigger tapes are not leading to a reduction in the number of tapes at all. This is plainly because the total amount of storage required is growing too. Using LTO-5 as an example, you can see from the chart that aggressive growth peaked at the end of 2011, and since then units have held remarkably steady, even though HP LTO-6 has been introduced and enjoyed the same rapid ramp as its predecessor.

 

LTO-5 and LTO-6 Since 2010J.jpg

 

This is interesting for several reasons. In absolute unit terms, it's clear that the core tape business isn't going anywhere. Certainly, the older, smaller formats are being replaced and this is having an impact on tape media units in their totality. But the strategic part of the market, the one that generates the profitability, is extremely robust.

 

Year over year, LTO-5 units in Q4 2014 were 7% higher than the same period in 2013 and 3% higher than in Q4 2012. And it isn't just a case of me cherry-picking the best three months at the end of a year. For the full year 2014, LTO-5 media shipments surpassed both 2012 and 2013, with 7.7 million units compared to only 7.1 million and 6.5 million in the previous two years.

 

TableDominoJ.jpg 

   Source: Santa Clara Consulting Group

 

So how does that “bigger tapes means fewer tapes” argument go again?!

And even while LTO-5 data cartridges continue to sell in head-spinning volumes, LTO-6 uptake has been rapid. It isn't the case that customers have held back from investing in new technology because they prefer to stick with a familiar or cheaper legacy solution. Personally, I think this is because they've had little choice. Their archival storage requirements are growing so rapidly that they need the additional storage headroom LTO-6 offers. In the fourth quarter of 2014, LTO-6 media shipments increased by 51% year-on-year!

 

The steady fall in the TCO of tape benefits customers

In the interests of objectivity, I would acknowledge that revenues declined in 2014. Q4's tape media market value of $117 million was 13% adrift of the final quarter of 2013. But this is almost cherry picking in reverse. But revenues for 2014 as a whole were better than Q4 might indicate – only 7% lower than the previous full year. Although negative, this actually means the year-on-year revenue declines are slowing down.

 

One fact that is often misrepresented is that the bulk of the revenue decline in tape media is driven by price erosion. The aftermarket for tape supplies and accessories is extremely competitive and customers benefit as volume efficiencies are passed on in the form of steady price decreases. This means tape storage in general is cheaper than it has ever been. When LTO-1 was launched in 2001, it offered a compressed cost per GB of about $0.60. Today, HP LTO-6 offers a native cost per GB of less than $0.01. To purchase 2.5 TB of HP tape media capacity in 2000 would have cost $3,125. Today it costs about $50.

Then and Now 2J.jpg 

This is a remarkable trend, wholly positive for the customer and tape industry as a whole. The worldwide tape media business for 2014 was valued at half a billion dollars and that is a considerable amount by any measure. That's why HP and others have invested significantly in tape R&D for the imminent launch of LTO-7. It's why the LTO roadmap was extended in September 2014 to reach out to ten generations. And it's also why prototypes of advanced tape media with over 100 TB of storage are a fact, not a fiction. It may not be constantly in the headlines but neither is this an industry resting on its laurels.

 

If tapes were dominoes….

And so to my conclusion and that bold promise to show you tape-as-you've-never-seen-it-before. One of the problems we often face in the storage industry is quantifying some of the dizzying statistics we use to explain the growth of digital data. A gazillion iPads stacked higher than a dozen Empire State Buildings, resting on the back of a giant elephant three times the size of Jupiter? That was last year.

 

But when I am presenting for HP Storage Media, I am often asked how many cartridges we ship in a typical month. That's a typical question but one HP decided to answer in a rather untypical manner.

 

If tapes were dominoes, how many would you need to set up and topple in order to represent just four weeks of the HP tape business?!

 

This video represents about one month's worth of shipments for HP's European region (where the company has a leading 40% market share). As such, our tape dominoes are about 45% of HP's worldwide output and 15% of the global market as a whole. (We were going to try and perform the stunt for real until it became clear that we would need several million dollars worth of product in a warehouse with a giant sandpit, snow machine and dangerous rockets, at which point, clever CGI and a server farm the size of Luxembourg to render the graphics became a better alternative!)

 

Although you're going to see many tapes fall in the next few minutes, I'm confident that the industry as a whole is standing firm and tall. While LTO-5 and LTO-6 units continue to outperform previous years, we are only months away from the release of LTO-7, which will undoubtedly bring fresh opportunities for growth.

 

How many LTO tapes? Take a guess and get back to me.

If anyone would like to hazard a guess as to the exact number of LTO tapes in the video, there is a small prize of a souvenir set of photographs from our recent Cape 2 Cape project awaiting the nearest correct answer.

 

Please send your estimate to dominoes@hpstoragemedia.com by Friday 6th March to enter the competition.

 

Tape is back. But as I hope you can now see, it has never been away.

 

 

1 Santa Clara Consulting Group, Quarterly Backup Tracker, Q4 2014

2 https://code.facebook.com/posts/229861827208629/scaling-the-facebook-data-warehouse-to-300-pb/

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