Compaq flexes its storage muscle

He has to. The new Compaq Computer senior vice president in charge of storage is expected to build the group's credibility to compete effectively with market leader EMC.

Now in his third week on the job, Lewis has another challenge: His division doesn't get the same attention the press and Wall Street lavish on other divisions of the PC company. Yet storage contributes where it counts: Compaq's bottom line. In fact, storage accounted for more than 35 cents of every dollar of income in 2000, according to Compaq.

CNET News.com's Joe Wilcox spoke with Lewis, who was headed to Massachusetts for a meeting with Compaq's East Coast storage staff, this week in Washington, D.C.

CNET News.com: How important is storage for Compaq right now?
If there's one thing we could communicate, it's that we have a fast, credible, growing storage business within Compaq. Folks shouldn't take us for granted. Our growth has been excellent in the enterprise space, 50 percent year over year in the fourth quarter. That's just as fast as EMC is growing today. There is analyst data that shows we're either No. 1 or No. 2 in the markets we're in. We're fairly comfortable with our position in the market, but what we're hoping to do is create a little more awareness, a little more credibility in the market.

Good storage management software has driven EMC's success as much as hardware. What are you doing in the storage software space?
We started our software business almost two years ago, and we've grown that from a standing start to over a $200 million run rate. We are the world's fastest growing software company today.

Storage prices are falling so fast. How can a company continue to make money in that market?
The hardware cost, the cost per megabyte that everybody quotes, is headed essentially to zero. It's going to be a small amount. If you look at your cell phone, you're paying for the service. You have certain needs--good network coverage, so much talk time, voice mail, and so on--and that's where we think storage is going. There will be less worrying about what the storage is and more concern about the service. Storage will become a service.

What is Compaq's storage services strategy then?
We have a very clear vision with the software, the hardware and the solutions we provide. We want to be able to see storage delivered as a utility service. We're very flexible about who delivers those storage services. We obviously do a lot of consulting and a lot of services, but we also partner with major storage service providers. But also if you look at the data, the majority of the large Fortune 500 companies--even though they like the idea of networked storage, storage as utilities--will probably run them themselves. They won't outsource right away.

Do you see non-technology companies reselling their storage as a utility to suppliers or their employees?
If you look at the efficiency curve and equate this to a power utility, it's pretty inefficient for everybody to put a Honda generator in the back of the house. There's a point where you have to be large enough to have the efficiency. So you might have a General Motors outsource storage to their suppliers. The companies that are smaller we think will be more likely to look for the service.

What impact do you think the slowing economy will have on storage sales?
With the economy the way it is, we get a lot of questions about this. Our suppositions are a few things. One, our investment model for storage area networks is actually a cost-savings model to companies. So a lot of companies will keep investing in storage area networks (SANs) or network attached storage (NAS) to potentially save money because the payback is so rapid. Second, we think information is kind of like food. We think information is closer to that hierarchy of needs, there with food, clothing and shelter.

Given the economic situation, who do you see as the biggest consumers of storage?
The financial sector stands out as one particularly growing area. With transactional data keeping, people want to track the relationship with their customers. We see this in retailing and the idea of integrating the entire experience for the customer. We also believe the media and entertainment space to be the up-and-coming market for storage.

The NFL has something like 6 million miles of film. They have the rights to rebroadcast anything they filmed. They said they're going to digitize it and put it online. There are some studies that show within the next three years up to half the storage is going to be in this multimedia market.

How much of a storage opportunity does the spread of wireless devices create?
All of those devices are there to get at information. The more innovative ways there are to get and see information, the more demands you put on delivering that information in different formats. You're not only going to be able to have one Web site now. You're going to have four Web sites, but with one piece of information. You'll have one Web site that delivers content to personal digital assistants and another Web site that delivers content to a pager or cell phone. You're going to have to keep all that up and store all that information. The more there is to access creates all these multipliers on the back-end.

What's the storage attach rate to your own servers?
We're incredibly strong. I can't give you the exact number, but I can tell you it's over 90 percent. We do not lose on our own market. Our attach rate in North America last year doubled off our own platforms. That's obviously a critical growth market for us.

How do you feel about the NAS vs. SAN debate?
You asked my favorite question. What I think is finally getting across is that SAN and NAS are complementary technologies. One is not disruptive to the other. SANs are disruptive to monolithic storage, those big boxes for channel-attached storage. NAS is really only disruptive to a general-purpose file server. We think almost every company will have both SAN and NAS requirements. NAS, we characterize as a significant benchmark of 15 to 20 percent. It's been that way. It's going to continue to be that way. One is not going to disrupt the other.

What's the biggest challenge Compaq storage faces in 2001?
The biggest thing I would like to see this year is to make sure we have enough awareness of Compaq as an enterprise player, Compaq as a storage player out there. That helps our sales force greatly if they don't have to come cold to accounts. The more we can drive what we call a pull model, the easier it will be.

What are your product plans for 2001?
I can tell you that we will literally change out our entire product line this year. Literally everything we have shipping today we'll have another generation of it shipping by the end of the year. It's going to be a big year for us. As I tell the engineers, the execution is going to be huge.