Storage Spending to Increase in 2010

ESG’s 2010 IT Spending Intentions Survey reveals good news for the storage industry in 2010.  First, 52% of midmarket (i.e., 100 to 999 employees) and enterprise (i.e., 1,000 or more employees) organizations will increase general IT spending in 2010 as opposed to only 43% in 2009.[1] More importantly, specific spending on storage equipment also looks promising, as 54% of the organizations surveyed said they will increase their spending on storage hardware this year, up from just 38% in 2009 (see Figure 1).  Conversely—and just as significant to storage vendors—only 15% of organizations will decrease spending on storage hardware in 2010, compared to 25% of respondents in 2009.

IT Initiatives Driving 2010 Storage Spending

What specific IT initiatives are driving this planned increase in storage hardware spending?  For one, organizations with major 2010 initiatives involving new data center construction appear set to take that opportunity to refresh their storage infrastructure: 66% of these organizations will increase storage hardware spending in 2010 compared to 54% of ESG’s total respondent base (see Figure 2).  Other IT priorities driving above-average new storage hardware spending  in 2010 include desktop virtualization (66%), new business intelligence initiatives (65%), business continuity/disaster recovery programs (63%) and enterprise content management (ECM) projects (62%), to name but a few.

Storage Spending Outlook by Industry and Organizational Behavior

For storage vendors, solutions and marketing messages tied to the IT priorities above should find a receptive audience among 2010 IT buyers.  Storage vendors will also want to know more specifically where they should best focus their efforts and resources in 2010 from a vertical industry perspective.  As shown in Figure 3, health care, business services, financial services, and communications and media organizations are the most likely to have plans to increase storage hardware spending in 2010.  On the other hand, fewer than 50% of the organizations surveyed in other industries— which includes both federal and state/local government, education, and transportation and logistics—expect to see budget increases for storage hardware this year.  It is worth noting, however, that organizations in the federal government and transportation and logistics industries are very much maintaining storage spending and were least likely to actually foresee spending cuts in 2010.

Changes in an organization’s overall 2010 IT spending profile compared to 2009 can also serve as a key indicator of  storage hardware purchasing plans. As shown in Table 1, those organizations that are still focused primarily on cutting IT costs are unlikely to increase storage hardware spending while those in “growth mode” will be far more active buyers.

ESG also analyzed storage hardware purchasing plans by company psychographic profiles and found a number of interesting trends.  Most significantly, the manner in which an organization typically purchases IT products and services is a strong predictor of increased storage hardware spending.  Respondents that classify their organizations as “leading-edge” consumers of IT products and services are far more likely to have plans for increased storage hardware spending in 2010 than are those with more conservative IT purchasing habits (see Table 2).

Which Storage Products Will Sell in 2010?

2010 storage spending corresponds to organizations’ ongoing need to manage explosive data growth, which was identified by ESG’s survey respondents as a top-five IT priority over the next 12-18 months. Indications of new raw storage system purchases—whether SAN (31%) or NAS (22%)—might well indicate that equipment purchases postponed in 2009 return to the top of the priority list as solutions in organizations struggling with that data growth and its associated management challenges (see Figure 4).  Other top storage solutions for 2010 include data replication, storage virtualization, more power-efficient hardware, and data reduction technologies.

2010 storage investments by company size: When analyzed by company size, ESG’s data reveals that enterprise organizations are more likely than their midmarket counterparts to have 2010 plans for initiatives such as tiered storage, new SAN system purchase, data replication, and storage encryption (see Figure 5).  For their part, midmarket organizations are slightly more likely than larger organizations to have plans for NAS-based systems, tape replacement, and storage management tools.

2010 storage investments by industry: The top five specific storage-related 2010 priorities by industry are displayed in Table 3.  Among the key findings:

• Major verticals such as health care and federal government are in lockstep with respect to four out of five of their top storage priorities: data replication, new SAN purchases, new NAS purchases, and storage encryption.
• Financial and business services both cite data reduction as their top storage solution priority for 2010.
• Communications and media firms also look to data reduction—and new NAS systems—to help control and manage ever-increasing stores of file-based content.

2010 storage investments by top business initiatives: Shifting away from industry-specific storage trends, ESG has also examined planned 2010 storage investments as they pertain to respondents’ specific business initiatives.  The most noticeable ‘take-away’ from this analysis is that “green” has re-emerged as a key driver for storage spending; perhaps this is a response to a rebounding economy; potentially, it is also a renewed semantic acceptability for a term that has been subsumed during the downturn into the more ‘austerity-acceptable’ terminology of ‘efficiency.’ Whatever the motivation, the adoption of certain storage technologies—including SRM software, flash-based SSDs, and Fibre Channel over Ethernet (FCoE)—can be significantly identified as key areas of 2010 investment by organizations that cite “green initiatives” as having a significant impact on their IT spending decisions over the next 12-18 months (see Table 4).

The Bigger Truth

The preceding data can help storage vendors by identifying high-probability target buyers—whether by company size, industry, IT priorities, and/or business initiatives that are underway.  The psychographic data presented can also be used to separate strong from weak prospects.  Smart companies will sort through their leads and use ESG’s data as the basis for a set of qualifying questions.  For example, telemarketing staff could call prospects and ask them:

1. “Is your organization in IT cost containment or growth mode?”  Growth mode prospects should be highlighted as they are probably increasing their storage hardware spending.
2. “Would you consider your organization to be a ‘leading edge’ IT consumer?”  If yes, this prospect probably has significant storage purchasing plans for 2010.
3. “Does your organization have 2010 IT initiatives in the areas of virtualization (server and desktop), data center construction/consolidation, improved business intelligence, business continuity/disaster recovery, or enterprise content management?”  All prospects answering yes to any of these are likely to have significant storage hardware spending plans.
4. “Does your organization have significant green businesses initiatives underway?” Such organizations are more likely to be interested in power efficiency, better storage management, solid state and converged networking.

Beyond such qualification exercises, ESG’s data can also underpin the blueprints for vendors’ vertical industry sales and marketing strategies; this is because the data not only indicates which industries are buying storage systems, software, and networking, but also the specific technologies that they plan to purchase. Table 5 takes the insights from ESG’s Spending Intentions research and provides a general, actionable guide—by industry—that can help storage providers fine tune the optimum application of their marketing budgets. It does this by providing guidance for marketing messages and plans in industry-appropriate directions, which can in turn help to steer accurately focused investments in marketing programs and sales tactics.

Security Spending Poised to Increase in 2010

ESG’s 2010 IT Spending Intentions Survey finds two items of good news for the information security industry in 2010.  First, 52% of midmarket (i.e., 100 to 999 employees) and enterprise (i.e., 1,000 or more employees) organizations will increase overall IT spending in 2010 as opposed to only 43% of organizations in 2009.[1] Second, spending on information security products and services specifically looks even more promising, as 55% of organizations surveyed say they will increase their security spending in 2010, up from just 36% in 2009 (see Figure 1).

When these aggregate numbers are broken down further, it becomes clear that enterprises will be more likely than their midmarket counterparts to increase information security spending in 2010. As shown in Figure 2, 61% of enterprises will increase security spending in 2010, compared to 48% of midmarket organizations.

Security Spending by Industry

2010 spending on information security products and services looks promising overall, but ESG’s data indicates that vendors would be best served by focusing sales and marketing resources on the enterprise rather than on the midmarket segment.  ESG also found vast differences in security spending trends by industry.  As Table 1 indicates, financial services firms, health care organizations, and federal government agencies are most likely to bolster information security spending in 2010 while state & local government, education, and manufacturing spending will be far less robust (see Table 1).

Security Spending by Organizational Behavior Considerations

ESG introduced several questions about organizational behavior, attitudes, strategy, and management philosophy into its 2010 IT Spending Intentions Survey.  There are some clear and interesting relationships between this data and information security spending plans.  For example, ESG found that organizations that consider upper management as “risk takers” are more likely to increase information security spending than those whose management teams are more risk averse (see Figure 3).

IT purchasing behavior is also a good predictor of information security spending plans.  Organizations that describe themselves as “leading edge” IT consumers are more likely to increase information security spending in 2010 than those classifying their organization as an “average” or “laggard” consumer of IT products and services (see Figure 4).

Top Areas for Security Spending in 2010

ESG also asked respondents a more specific question regarding which areas of information security they planned to invest in this year.  The top three categories are network security (i.e., firewalls, IDS/IPS, VPN, etc.), desktop/endpoint security (i.e., antivirus, Internet security suites, full-disk encryption, etc.), and web/messaging security (i.e., URL filtering, virus scanning, web threat management, anti-SPAM, etc.) (see Figure 5).

Some interesting distinctions on security spending surface when the data is analyzed by organization size (see Figure 6).  For example, smaller organizations are more likely to have plans for network security, desktop security, and web/messaging security initiatives than larger organizations.  On the other hand, enterprises are slightly more likely to have plans to spend on physical security, application/database security, and identity and access management than are smaller organizations; they are also much more apt to spend on information assurance and security management products and services than their smaller counterparts.

Finally, ESG analyzed the data on specific 2010 security investment areas by vertical industry and found a number of fascinating correlations.  For example, federal government, state & local government ,and health care will be the biggest purchasers of network security equipment (i.e. firewalls, IDS/IPS, VPNs, etc.); education and state & local government dominate desktop/endpoint security spending; and financial services and health care are the industries most likely to invest in identity and access management systems in 2010 (see Table 2).

Research Implications

Security vendors are generally enthusiastic about their outlook for 2010, but ESG’s data indicates that sales prospects vary greatly by vertical industry, organizational behavior, and organizational size.  Because of this, it is imperative that vendors fine-tune sales and marketing strategies appropriately.

ESG believes that the first step in effective, targeted sales and marketing efforts is to look beyond security alone. Companies and industries looking to invest in IT to propel their businesses will likely take risks and purchase cutting-edge tools of many kinds.  These firms will also need to better manage any security issues associated with these business and technology initiatives and will thus increase investments in security technologies.  Industries likely to invest most in new IT-driven business processes include financial services, health care, and federal government agencies—the very industries with the highest percentage of organizations increasing security spending.

Ultimately, ESG’s data provides a blueprint for vertical industry sales and marketing strategies (see Table 3).  This should help vendors adjust budgets, prioritize programs, and create the right tools for direct and indirect sales efforts.

Information security vendors must also segment and adjust their midmarket and enterprise marketing strategies.  In general, enterprise marketing budgets should increase while midmarket budgets should remain flat or decrease slightly (depending, of course, on the target market for a given vendor, product, or service).  Furthermore, enterprise marketing dollars should be skewed toward identity and access management, information assurance, and security management and operations technologies and services.  Alternatively, midmarket efforts should concentrate on network security, desktop security, and web and messaging security.  Since midmarket companies are also most likely to purchase managed services, it may be worthwhile to double down on programs focused on SaaS (software-as-a-service) or cloud offerings in these areas.

Data Overview

Data presented in this brief was collected via a survey of 480 IT decision makers at North American and Western European midmarket (i.e., 100 to 999 employees) and enterprise-class (i.e., 1,000 or more employees) organizations.[1] In this survey, respondents were asked to provide ESG with detailed information on their current usage of PCs and other client access devices that provide general-purpose PC functionality.  Figure 1 shows the average percentage of client devices by type among ESG’s total respondent base.  Figure 2 and Table 1 show relative client access device types by number of employees, while Figure 3 shows the average percentage of client access device types currently in use across different industries.  Finally, Figure 4 shows current client access device types by the percentage of the respondent organization’s total employees that currently use a desktop PC, laptop PC, or other client access device providing general-purpose PC functionality for work on a daily basis.