There has been an understanding held by those inside the storage industry for some time now that enterprise storage is a software business. To those on the outside, though, it has looked like a hardware business. People see the mass of HDDs, SSDs, controllers, enclosures, power supplies, etc, and think "I am buying hardware." But inside the industry, vendors have known for decades that what separates the winners and the losers has long been the software.
This week, Kaminario, a leader in all-flash storage and, according to their press release, a leader in cloud storage software, announced a transition to a software-centric business model. Kaminario is going to focus on software and let Tech Data handle the logistics and management of the hardware.
From a strategic standpoint, the move makes logical sense. When IT organizations buy a storage array, they have long been buying two products: data storage hardware and data management software. Developing these two products to any degree of success also typically requires different core competencies. Hardware requires volume to get component prices down, along with predictable, reliable, low-variance manufacturing and distribution. Software requires innovation, a deep understanding of the customer, and the ability to develop a differentiated technology that can best suit customers' needs. The hardware side tends to be a higher volume, lower margin business, while the software side tends to be lower volume and higher margin. If you are thinking, “But I pay a lot for my storage hard drive," that is because there is essentially a “software tax” included in that price. There isn’t a lot of synergy to doing both. So for Kaminario, this makes perfect sense to focus on what they do best, the software, and let someone else handle the rest. Also, I expect not much will change for the end customer (nor should it). Kaminario’s customers will still get the all-flash storage infrastructure they need.
For me, the interesting question is “Why now?” Software-defined storage has been around for a while, and Kaminario could have easily started down this path. I expect that the answer to that question is that even though storage is essentially two separate products (the hardware and the software), not very many organizations want to buy them separately. So, it made sense for Kaminario to start as an array vendor. The real question, then, is why they are making the change now. Golan, Kaminario’s CEO, addressed it a bit in his quote in the press release, but in a nutshell, it’s the same thing that is disrupting the rest of the storage industry, the cloud. In a world where infrastructure is changing rapidly, companies that can adjust more quickly to those changes have an advantage. By focusing solely on software, Kaminario has freed itself to accelerate development in an increasingly cloud-defined world. I also expect that there are other business and investment benefits to being perceived as a cloud software company in this day and age. Now that they have made the move, it will be interesting to see how well Kaminario takes advantage of its new streamlined business model.