The Storage System Market Showed Signs OF Recovery In 2024

While on-premise storage is not immune to the threat of a recession in 2023, the impact is less pronounced than in the cloud space. The state of the economy last year did push back project timelines, hindering the renewal of storage infrastructure investments. By the end of 2023, storage shipments began to pick up, signaling renewed confidence and stability in the traditional storage market.

In 2023, OBM storage-as-a-service (StaaS) or subscription-based models emerge as a means for traditional vendors to counter the cloud's "pay-as-you-go" business model. Branded storage vendors say there is a strong upward trend in on-premises StaaS protocols. While the subscription-based approach to procurement promises long-term benefits for customers and suppliers, its rapid adoption appears to have led to a decline in supplier revenue. Historically, since the introduction of software RAID protection, storage services have been driven by software. The reliance on software coupled with high storage costs has contributed to the rapid adoption of these subscription-based models. Unlike traditional capital-based storage system sales, subscription revenue is recognized over time, which impacts the revenue report for branded storage through 2023.

External storage vendor results for Q4 of '23 by company

According to Omdia's tracking, in the fourth quarter of '23, OBM revenue was down 4% year-over-year, and ODM vendors were down about 29% year-over-year. As shown in the chart below, other highlights for individual vendors include

Dell EMC, after showing momentum in 2022, fell 18% year-over-year in the fourth quarter of '23.
Huawei continued to widen the gap with its competitors, increasing its share by 1.5 percentage points in the fourth quarter of 23.
NetApp's share grew in the fourth quarter after refocusing on on-premises storage, but it was still down for the full year.
Lenovo's growth was driven by huge shipments of ODM+, while traditional product lines declined year-on-year.
IEIT Systems (Inspur) rebounded in the fourth quarter, driven by service providers in China.

There are indications that 2024 will be a year of storage shipment growth
Omdia expects the outlook for storage shipments to improve in 2024 because storage systems are the cornerstone of data management and reinvestment in more storage capacity can only last for a while in this data-dependent economy. In the coming year, factors such as digital transformation, expansion of the Internet of Things, various data analytics, and growing demand for artificial intelligence will drive storage device purchases.
While the market has matured and cloud growth has slowed, Omdia predicts that the expansion of overall cloud services will grow strongly at a compound annual growth rate of 10% over the next five years. As we transition to a true hybrid cloud era where workloads move in both directions, planners are placing and redistributing workloads between on-premises and cloud DCS based on operational and data requirements. The need to re-optimize location data and applications has led to this shift, resulting in a more balanced demand for on-premises and cloud DC markets.
In addition, despite past slowdowns, storage innovation and the data management ecosystem will remain strong. Omdia expects storage revenue to still grow at a compound annual growth rate of 12% through 2028. Overall storage growth is expected to reach 11% for the full year 2024, especially as cloud storage is expected to return to growth by mid-year. This points to a promising future for the storage market, as vendors will delve into new approaches such as unstructured data management solutions, enhanced network security features, and high-performance scalable file systems to rekindle interest and offset the market decline seen in 2023. This continued innovation demonstrates the resilience of the storage industry and its ability to adapt to changing needs and obstacles, bolstering confidence in future growth and development.