SAN market healthy, getting healthier

Worldwide sales of storage area network switches rose 15 per cent last year, largely driven by an industry transition toward a newer version of Fibre Channel technology, according to a new study.

Storage area network, or SAN, switches generated $954m in revenue last year, up by double digits over the previous year, said research firm Dell'Oro Group in a study released on Monday. The firm predicts growth will continue this year.

"We're forecasting sales to grow 12 per cent in 2003 to about $1.1bn," said Paul Baranello, a Dell'Oro senior analyst. "It's slightly less growth than 2002 and shows growth is slowing. But compared to other segments in networking, it's positive growth... and any growth is good growth."

The storage industry has almost completely moved to the newer 2Gbps version of the Fibre Channel networking technology used to link storage systems and servers. Switches supporting 2Gbps speeds, as opposed to the earlier 1Gbps models, accounted for more than 95 per cent of sales in the fourth quarter, compared with less than 20 per cent a year ago, the report said.

"There were a lot of new products that came on the market for 2Gbps, and that helped the market in 2002," Baranello said. "Almost all the vendors did a complete product transition from 1Gbps at the start of the year to 2Gbps at the end."

But while the storage industry predominately embraces the Fibre Channel networking standard, a newer standard, which incorporates ordinary IP (Internet Protocol), is making some headway.

SAN switch makers have not been immune to the tough information technology spending environment. Industry leader Brocade Communications Systems, for example, reported a first quarter revenue that was flat compared to year-ago figures and down from the previous quarter.

Brocade, however, managed to maintain its industry lead last year with a 58 per cent market share. The company also increased revenue by 19 per cent to $551m, compared with the previous year, according to Dell'Oro.

McData, meanwhile, generated a 1 per cent increase in revenue to $279m last year but was ranked second, with 29 per cent of the market. Inrange Technologies captured third place with its 6 per cent market share. The company saw a 35 per cent increase in revenue to $57m last year.

"I think Inrange had stronger year-over-year growth because they were coming off a smaller base," Baranello said. "They focused on the higher-end 2Gbps products, and that's where most of the growth was in 2002."

Dawn Kawamoto writes for CNET News.com.