Thoughts on Disk Drives

I think a lot about disk technology, but disk drives are so commoditized that I don't worry much about specific disk drive companies. My only thought on Seagate acquiring Maxtor is that it could reduce competition in the industry and make it harder for us to negotiate prices.

Strategically, what I do care about is that most disk companies have two different business models that they use for different disks:

1. Commodity: Low-margin, inexpensive drives for PCs and laptops.
2. Value-Add: Higher-margin, more expensive drives for servers and storage systems.

This two-tier structure has lasted for years. Fifteen or twenty years ago, SCSI was the commodity drive, and DASD and IPI were the value-add drives for mainframes and UNIX servers, respectively. Today ATA and SATA are commodity, and Fibre Channel is value-add.

ATA drives have about twice the capacity at half the price of Fibre Channel drives, but if you look at the raw components, the cost isn't that different. What is different is that disk companies have very different business models for value-add drives versus commodity drives. The Fibre Channel drives have higher margins, and they are more profitable. There's nothing wrong with this. These drives have better performance and they tend to be more reliable. Another way to put it is that server drives have more value, and PC drives are more commoditized. Prices and margins are always lower for commoditized products.

Since value-add drives are so profitable, drive vendors hate it when storage system vendors figure out how to use commodity drives in high-end storage systems. EMC was successful in the early 1990s because they used RAID and mirroring to make commodity SCSI drives good enough for enterprise storage. IBM stuck with expensive DASD drives, and EMC wiped them out in the market.

Several years ago, when NetApp first started designing high-capacity, low-cost storage based on ATA, one of our disk vendors fooled us into converting the project to a custom SCSI drive they would make for us. SCSI is much closer to Fibre Channel, and they told us they could build a commodity-priced SCSI drive with the same price and capacity as an ATA drive. But when it came time to purchase the drives, they told us that they had changed their mind, and instead the drives would be value-add priced.

That detour probably delayed our first ATA-based system by a year. The lesson? A "customized commodity" is a contradiction in terms. If a disk drive company builds a special drive for you, or builds a special drive for a small niche market, then they will sell it at "value add" prices. In the long run, the only way to get commodity prices is to use the same drives that volume PC vendors use in large quantities.

As a result, I've never been interested in exciting new disk technology for our ATA-based systems. Some people got excited about Serial ATA (or SATA) and thought it would be an advantage to be early to market. SATA does have advantages over ATA, but if we were early in putting SATA in storage systems, I feared the disk vendors would switch to value-add pricing. Instead we designed shelves flexible enough to let us switch from ATA to SATA based on volumes in the PC market.

2006 is going to be the year of "ATA in the Data Center".