Welcome back to the Protocol Power Index, a ranking of the most powerful companies by tech industry subsector, as well as the companies best positioned to challenge them. This time: hybrid storage.
While the Big Three of AWS, Microsoft Azure and Google Cloud dominate cloud storage, many companies still aren't sure if the public cloud is the right place to put all of their data. Out of that concern has grown the thriving sector that is hybrid storage.
The desire to shun the public cloud can be born out of issues relating to compliance, governance, latency, reliability or simply an aversion to change. But the solution for companies with such concerns — whether they're highly regulated finance firms or performance-focused AI startups — often looks the same: a blend of on-premises and cloud storage.
Despite the dominance the biggest vendors have over cloud storage, companies and governments still spent nearly $90 billion on on-premises hardware and software in 2020, and 80% of companies have a hybrid cloud strategy. To make matters more complicated, 92% of companies plan on leveraging multiple clouds, which makes finding, analyzing, managing and updating data difficult. So it's no surprise that dozens of players — legacy companies and startups alike — have popped up to solve these challenges in a hybrid and multicloud world, with no single final winner in sight. And, for now at least, the Big Three haven't taken full control of the market.
Amazon, Microsoft, Alibaba and Google do, of course, have leading hybrid and multicloud storage offerings. But, per our Power Index methodology, we've omitted them from this analysis due to their sheer size and inconsistencies in segment-specific data in order to focus on other established and up-and-coming players in the space. We have, however, written about how these vendors will continue to shape the space in the "What happens next" section after the leaderboard.
So which companies have the lead in this space right now? And which ones are challenging that dominance? We've ranked the market for you.
|Power Score: 79.56||Momentum Score: 35.0 (3)||HQ: Sunnyvale, CA||CEO: George Kurian||Founded: 1992|
In 2016, NetApp looked like it could disappear into irrelevance. Facing declining revenue from its physical storage systems in light of increased competition from cloud providers, the company laid off 12% of its employees as part of a $400 million cost-cutting initiative. But over the last five years, the company has reinvented itself as a services business by partnering with AWS, Azure and Google and offering its storage software ONTAP on cloud infrastructure. (It probably doesn't hurt that NetApp CEO George Kurian's twin brother Thomas Kurian runs Google's cloud division). In fact, in the last four quarters, NetApp doubled its market cap. At the end of FY 2020, Kurian noted that the storage market was in the "early innings" of a technological curve. But NetApp's on-premises and cloud growth in the past year have set the company up to take on the hybrid market however the next innings do unfold.
|Power Score: 77.65||Momentum Score: 26.0 (T-6)||HQ: Round Rock, TX||CEO: Michael Dell||Founded: 1984|
In recent years, Dell's strategy has been … unclear, to put it charitably: going private in 2013, buying EMC for $60 billion in 2016, coming back to the public market in 2018 and now spinning off its $64 billion stake in VMware this month. But now, Dell has less debt on its balance sheet and a streamlined business strategy focused on laptops, data center hardware and hybrid cloud solutions. Dell's $4 billion per quarter storage division is still massive, but revenue is stalling. So the company is finally, albeit reluctantly, acknowledging that the public cloud isn't going away anytime soon, and despite its obvious preference for on-premises hardware, is well positioned to take on the hybrid market with its Apex offering.
|Power Score: 74.21||Momentum Score: 26.0 (T-6)||HQ: Spring, TX||CEO: Antonio Neri||Founded: 2015|
In the years since CEO Antonio Neri took over, HPE has reinvented itself through a commitment to turning the whole company into an "as-a-service" business. With a more focused remit, the company has grown its GreenLake hybrid cloud service significantly on the back of what it sees as a moment for "repatriation" of data. While the services business underpins the long-term "edge-to-cloud" growth strategy that focuses on "control over data assets," HPE's storage business is providing the free cashflow to capture the more cloud-native pieces of its business. But as the company positions itself as a "true alternative to a public cloud" by selling up the stack, it faces one of the paradoxical challenges of the hybrid cloud market: It has to argue against the costly service bundling done by public cloud vendors in the name of repatriation while still offering enough packaged services and storage flexibility to avoid functionality dropoff if and when a client does make a hybrid transition.
|Power Score: 69.00||Momentum Score: 22.0 (T-8)||HQ: Armonk, NY||CEO: Arvind Krishna||Founded: 1911|
|Power Score: 66.51||Momentum Score: 36.0 (2)||HQ: Mountain View, CA||CEO: Charles H. Giancarlo||Founded: 2009|
When Pure Storage was starting its business as a flash storage hardware and software provider in the early 2010s, flash was expensive and had limited adoption across the enterprise. Still, Pure had found a niche, and as the price of flash has dropped — falling 10x in less than 10 years — its revenue grew 50% per quarter leading up to its 2015 IPO. Now though, as flash storage has become commoditized, Pure has focused on growing its hybrid cloud subscription services that offer its management capabilities across both cloud and on-premises for heavy-duty workloads like chip design, analytics and AI. As CTO Rob Lee noted, the hybrid focus — and the software layers built on top — have been designed for "extending our reach, helping customers work with their data a couple of more steps down the road beyond just serving the bits and bytes of storage." That expansion has paid off: Pure reported in August that its subscription services were now more than 34% of its revenue.
|Power Score: 66.0||Momentum Score: 29.0 (5)||HQ: Palo Alto, CA||CEO: Raghu Raghuram||Founded: 1998|
Dell's early November spinoff of VMware changes little about the company's leading multicloud virtualization software, but it does give the company more financial freedom and a stronger case to serve as the "Switzerland of multi-cloud," as CEO Raghu Raghuram has put it. VMware already has tightly integrated offerings with all of the major cloud providers — drawing even closer to AWS recently via an expanded partnership — as well as extensive go-to-market campaigns with each of them. Though the company is best known for its eponymous multicloud virtual machine offering, software-defined storage has become a larger part of its overall strategy: Its vSphere suite offers a host of storage capabilities that complement the host provider's, and the company continues to push into Virtual Volumes (vVol). VMware is coming off of a busy year of personnel issues: The company needed to replace its CEO and lost another C-suite executive in the succession process. But in Raghuram's brief tenure so far, hedge funds have bought in, with VMware showing up in 3% more portfolios compared to the previous quarter despite the stock price's up-and-down past few months.
|Power Score: 53.93||Momentum Score: 22.0 (T-8)||HQ: San Jose, CA||CEO: Rajiv Ramaswami||Founded: 2009|
Nutanix specializes in hyperconverged infrastructure, a foundational element of the hybrid cloud that virtualizes every element of an IT stack, from the storage and compute down to the networking. While the company started by selling a combination of hardware and software to provide that service, it has since pivoted toward a software subscription model of the type that has come to dominate the industry, leaving the hardware to be provided by the likes of Dell, Amazon, Microsoft and Google. In a September earnings call, CEO Rajiv Ramaswami went so far as to call the software transition "complete," given that 91% of the company's business now comes via subscription. Nutanix competes most directly with VMware, and a lawsuit against Ramaswami, a former VMware employee, alleging that he had meetings at Nutanix while still at VMware still hangs over the company.The company recently snapped up another VMware (and Pure Storage) executive, naming Dominick Delfino chief revenue officer in November. The company reported an 83% jump in recurring revenue in FY 2021 as compared to the previous year, driven in some part by the hybrid commitment the company made at the close of 2020.
|Power Score: 44.58||Momentum Score: 40.0 (1)||HQ: Seattle, WA||CEO: Bill Richter||Founded: 2012|
Like many other smaller players in this field, Qumulo recently exited the storage hardware business to focus on its hybrid-cloud file storage system. The company is particularly focused on taming unstructured data and has integrated closely with Azure, though it does have partnerships with AWS and GCP as well. In June 2021 the company said it had a 150% year-over-year increase in customers in the health care market, seen as a major growth area in unstructured data, managing more than an exabyte of data at the time. The company has also raised some serious cash: Its July 2020 $125 million series E round valued the company at $1.2 billion, giving it quite a bit of runway to expand its software offering and build on the "nearly 100% year over year growth" that was touted as the company closed that latest funding round. Qumulo's growth (and cap table) vaulted it to the top of the momentum rankings as a player poised to make a bigger name for itself in the coming year. Back in 2019, CEO Bill Richter hinted at IPO ambitions, though he played his cards closer to his chest in a more recent interview.
|Power Score: 42.95||Momentum Score: 34.12 (4)||HQ: San Jose, CA||CEO: Mohit Aron||Founded: 2013|
Cohesity sets itself apart from other hybrid cloud companies by focusing on secondary storage, which is primarily used for backup, recovery and analytics. With the increase in ransomware that has hit companies around the world, Cohesity is well positioned to offer enterprises protection of business-critical assets. The company commissioned a report in 2020 that defined the hybrid storage market as "teaching an old dog new software-defined tricks," and Cohesity's approach has followed that path. The company has taken storage challenges, like data restoration in the event of a cyber attack, and applied a software approach. That vision seems to be working: The company had its best quarter ever in the three months ending in July, posting a nearly $300 million annual revenue run rate. The success is, to some extent, tied to the continued perpetration of ransomware or other cyber attacks, but that market has shown no signs of slowing. The company does also face increased market competition though, especially as it's broadened its own offerings.
|Power Score: 36.25||Momentum Score: 17.6 (10)||HQ: Windcrest, TX||CEO: Kevin M. Jones||Founded: 1998|
Rackspace was an early player in the cloud computing space, renting out servers and storage in its data centers in the late 2000s and early 2010s. The company has largely turned its eye to hybrid and multicloud services, and the long-tailed transition forced the company to slim down in July 2021, laying off 10% of its workforce. On broader hybrid cloud offerings, the company has partnered closely with Dell in addition to the public cloud vendors. The company's storage backbone is still apparent through the presence of data centers, but the new mission appears to be gradually moving customers into cloud-first environments. Though the company isn't turning a profit, it's collected seven straight quarters of revenue growth thanks to the services push.
Explore the Data
The Protocol Power Index is designed to view power through a holistic lens that reflects how modern tech companies amass and exercise their strength. To do so, the Power Index takes into account 30 metrics across five categories — Economics, Leadership, Innovation, People and Politics & Policy — and synthesizes them into a single Power Score. Read our full methodology statement here.
What happens next?
Three forces stand to shape the companies operating in the observability software space in the coming years: big cloud bundling, security vulnerabilities and enterprise cost-cutting.
|2||Pure Storage ↑||36.0|
Compliance and governance play a huge role in determining the size of the hybrid storage market, and public cloud vendors' industry-specific offerings pose a real threat to growth.
- The financial services and health care industries are often considered slower adopters of the cloud, a result of the volume of data produced, the sensitivity of that data and the latency requirements dictated by the nature of the data.
- In finance, that combination of factors has made hybrid cloud the most popular approach in the industry, according to research Google published in August. Or as Northwestern Mutual CIO Neal Sample noted last year, sometimes on-premises storage is simply "the right tool for the right job" when ultra-reliability is required.
- Also, 78% of the organizations Google surveyed said "regulatory uncertainty over the use of public cloud prevents their organizations from adopting cloud technologies that would otherwise provide benefit to them."
- While the industries with the most sensitive data are a bastion for hybrid cloud adoption for now, public cloud vendors are using industry-specific offerings to take control of some of the ground they've so far been unable to claim. In May, AWS launched FinSpace, which it hopes will be the public cloud answer for some of the financial services requirements. It's one of 16 industry-specific offerings the company now has on tap. Google Cloud also unveiled Datashare in May, while the Microsoft Cloud for Financial Services became available in October.
- The promise of industry-specific offerings from the Big Three is the power of the public clouds tailored to the compliance needs of different industries to generate trust, without the need for full lift-and-shift — moving servers from on-premises to the cloud with no modifications — buy-in. Sound familiar? It's a very similar pitch to the companies specializing in hybrid management. And if organizations decide en masse that industry clouds can offer the same security and governance as on-premises solutions, the landscape could shift dramatically.
How hybrid will the hybrid cloud actually be? Data repatriation and so-called cloud-bursting technologies will affect how far companies go in using their own hardware.
- It's been half a year since Andreessen Horowitz set off alarm bells at AWS, Azure and GCP with a think piece on the prospect of repatriation of workloads like storage and compute. Using Dropbox as an example — it saved around $75 million over two years by building its own infrastructure — the primary argument was that the choice to use public clouds, while valuable in the early stages of an organization's data strategy, ultimately puts significant pressure on a company's margins as it scales.
- It wasn't a new argument. In the past, HPE CEO Antonio Neri had compared vendor lock-in to leaving the Hotel California, and IDC had gone so far as to call repatriation (at least of specific workloads) an integral part of cloud migration.
- Coming from a16z though, the piece prompted a new review of the data, and, as expected, the legacy tech companies, now competing in the hybrid market, acted quickly to seize on the idea that repatriation is the future.
- Still, few companies seem to actually be repatriating. Dropbox is a nice example, but a survey done by the Uptime Institute in 2020 showed that 70% of respondents hadn't repatriated any workloads in the previous year. And the voices against repatriation have argued that the idea presented in the a16z piece was simplistic, in that setting up the internal infrastructure and staffing necessary to support on-premises maintenance was a difficult and costly challenge in and of itself.
- If repatriation (however much it does happen) is a win for on-premises storage that would trickle down into hybrid storage success, the broader adoption of cloud bursting — where private servers or clouds are used for the most part, with public clouds acting as a backup for workload surges and overflows — would be a direct win for the hybrid industry.
- The rise of remote work has been a boon for the employment of infrastructure that supports cloud bursting — Zoom being an obvious example of the practice — so it's no surprise bursting has remained a buzzword among hybrid players, even if its actual implementation proves difficult.
- Still, the two trends together will determine how large the hybrid market actually is. If the rise of industry-specific offerings is a win for the public cloud providers, the balance of the hybrid market depends on whether on-premises advantages (real or perceived) can keep pace with the developments of the cloud.
And then there are new storage technologies. Eventually, data might completely outgrow traditional storage technologies, which could end up defining the R&D priorities of storage companies down the line.
- Forecasts still show massive data growth coming in the next several years, from IDC and Seagate's projection that volume could hit 163 zettabytes by 2025 up from around 59 zettabytes now and the projections built off of that IDC model that show continued exponential growth to the tune of a tenfold increase of today's data volume by 2030.
- The explosive expansion of data production — however much it ends up growing — has led some to look toward the possibility of a brewing data crisis, not dissimilar to the chip shortage that's been unfolding globally over the past two years.
- As a result, there's been an increased focus on alternative mediums for storage that would alleviate an impending crisis while also saving organizations the sometimes-costly prospect of continued hardware upgrades as new technology rolls out.
- To that end, Microsoft has been a leader in looking at DNA as a viable alternative to traditional storage hardware, while other experts say crystals may end up aligning business strategies as much as they do chakras. Glass has been offered as another alternative.
- Take some of this with a grain of salt, though: There is the possibility that more efficient use of storage space, the development of better hardware or the further growth of the compression market could alleviate any kind of crisis.
- But researchers are looking at alternative ways to store data nonetheless, and a breakthrough in that research could completely upend the storage market (and the hybrid market with it) if it ever were to become a reality.
To rank the competitors, we've developed a formula that encapsulates 30 criteria. Those criteria span five groupings that factor into power: Economics, Leadership, People, Innovation & Politics and Policy. We then developed two systems for weighting the criteria — one for measuring power and the other for measuring momentum — such that companies can be scored on a 0–100 scale. Read our full methodology here.