Techaisle Analyst Insights

Every major server OEM is projecting strong midmarket hardware revenue through 2027. The analyst consensus calls it a refresh cycle - aging infrastructure hitting end-of-life, customers replacing what they have with the next generation. Standard industry mechanics.

Techaisle's primary research on midmarket data center adoption tells a very different story. What is happening right now is not a refresh. It is a wholesale architectural rearchitecture driven by three forces colliding simultaneously, and the vendors who run their standard replacement sales motion will lose to competitors who understand what the buyer is actually solving for.

Three Forces, One Procurement Event

Three in four upper midmarket firms will execute a major infrastructure overhaul within 12 months. That number alone could be mistaken for a routine hardware cycle. But look at why they are buying, and the picture changes entirely.

For the first time in Techaisle's tracking history, new workload requirements have eclipsed end-of-life as the primary trigger for server procurement in the midmarket. Hardware is not failing - it is being replaced while still functional because it cannot support the workloads the business now demands. That is a fundamentally different procurement event. The buyer is not asking "give me the same thing but faster." The buyer is asking "give me something architecturally different."

What changed? Three forces converged in the same budget cycle.

There is a persistent narrative in the infrastructure market that small businesses are lagging in data center modernization. Walk into any vendor's SMB strategy session, and the slide deck invariably frames the 1–99 employee segment as an adoption gap to be closed. The assumption is that these firms are simply behind the midmarket on the same linear modernization path, and the vendor's job is to accelerate them.

Techaisle's latest primary research on SMB and midmarket data center solutions adoption trends tells a fundamentally different story. Small businesses are not behind. They are executing a deliberate architectural skip - and the vendors who fail to recognize this will waste their GTM resources solving a problem that does not exist.

The Modernization Paradox

Here is the paradox buried in our survey data: by every traditional maturity metric, small businesses appear to be the least modern segment. More than half default to public cloud as their primary operating model. The vast majority have no HCI deployment. Their storage strategy is overwhelmingly passive - cloud backup treated as an insurance policy, not a strategic data platform. On paper, this looks like a segment frozen in 2015.

But look at the same data through an AI-readiness lens and the picture inverts completely. Small businesses carry almost zero legacy technical debt. They have no VMware licensing exposure - the hypervisor shock that is consuming the midmarket's attention and budget right now simply does not apply to them. They are not trapped in "Accidental Hybrid" sprawl, the architectural chaos that afflicts nearly three in ten core midmarket firms. They have nothing to rationalize, nothing to untangle.

This is what I call the Modernization Paradox: by skipping the software-defined data center and HCI generation entirely, small businesses have inadvertently positioned themselves to adopt the next generation of technology - embedded, SaaS-native AI - with zero capital friction and zero architectural rework. They look like laggards on a 2020 maturity model. On a 2026 maturity model, they may be better positioned than the midmarket firms currently buried in migration projects.

The rise in virtualization has been driving an accompanying demand for converged infrastructure or hyperconvergence: products that combine processing, storage and networking into a robust and scalable unit that can support and respond to the options inherent in virtualization. While the migration from separate server, storage and networking products to converged infrastructure is still in its early stages, the Techaisle SMB virtualization & converged infrastructure survey shows that it is beginning to gain traction, especially within more sophisticated SMB accounts.

Scale computing, launched in 2008, based out of Indianapolis with development in San Francisco bay area and offices in London, Paris, Toronto and Dubai made its SMB focused hyperconvergence launch at VMworld in 2012. Since then Scale Computing has implemented over 6,000 systems in a little over 1,600 customers.

As per Techaisle’s SMB virtualization and converged infrastructure survey, the key barriers to adopting hyperconvergence within SMBs are high cost of implementation, infrastructure disruption during roll-out, greater-than-anticipated time and resource investment, and the complexity of integrating new infrastructure units with existing infrastructure. For example, a pet peeve of SMBs when using VMware on HP Proliant DL380 G8 is their inability to use cloud migration to upgrade or add G8 or G9. These are the issues that Scale Computing is trying to address. In defense of VMware, although the initial code base of ESX was never built to be self-aware, VMware is working on it.

Dropbox, Carbonite and many others have accelerated the use of Cloud storage in the consumer market for backup of music, photo, file sharing and more recently with various social networking needs and media sites. Similarly, Box.net has established its strong presence within the business segment. Techaisle’s SMB and mid-market business MarketView forecast shows that cloud storage will be a US$1.1 Billion market by 2016 growing at a 37 percent CAGR.

It would not be out of place to say that businesses are always very concerned about regulations and business policies requiring them to retain data for longer periods. Add to this the intricacies involving data protection via backups and replication, data scalability requirements and data availability needs across multiple geographies - the complexities and cost with storing massive amounts of data that is generated across the enterprise becomes huge.

Though it has limitations, an object based Cloud storage solution addresses many of the business challenges above – a scalable, easily replicable, pay-as-you go solution that is geographically accessible through public internet solution, thereby meeting businesses’ most demanding requirements with respect to their data storage policies.

Given the cost competitiveness, scalability and security attributes, backed by enterprise grade SLAs, Object Storage in the Cloud is an extremely viable option for the small and medium businesses (SMBs) looking to migrate their datacenters into the Cloud. RAID arrays are mostly used by mid-sized businesses but that is no protection against a disaster or any malware attacks.

What is Object Storage and why it is significant for mid-market businesses?

An object Storage solution breaks storage data into distinct segments, or ‘Objects’, each containing a unique identifier (or metadata) that allows data retrieval.

Valet parking is often cited as an analogy for Object Storage. When parking at a garage, the attendant gives a claim ticket that identifies the car that allows the driver to pick up the car later. The driver is not concerned where the car is parked as long as it is identifiable when it is time for pick up. Object Storage, likewise, stores data (objects) and retrieves when required based on its unique identifier.

Object Storage differs from traditional Storage Area Network (SAN) or Network Attached Storage (NAS) in that the former is ‘Object Based’ and has the following characteristics:

• Each object has its own ID, metadata, data protection policy and is unlike any file system where files often inherit attributes from their parent containers/files/directories.

• There is no limit on volume restriction of size of file systems – unlimited scalability, not limited on infrastructure capacity maximums.

• Data is accessible anywhere over HTTPs - availability of the service can be anywhere on the internet. Hence this is latency sensitive.

• Data is typically retrieved via a RESTful or SOAP based API Web service. Storage vendors have their own proprietary API platforms – e.g. Amazon S3, Nirvanix APIs, OpenStack or EMC Atmos platforms. Any programming language that supports web service-based API calls to remote systems can be used to build applications around the storage solutions.

• Price, which is normally based on usage, is much lower than traditional Block and File storage solutions. Businesses typically pay a per-gigabyte rate for upload and download and a per-gigabyte fee for monthly storage. In addition, some providers charge for each data access request based on reads, writes, etc.

Use Cases

• Data Archiving and backup: Retain data that needs to be easily accessible and always available but is not constantly used in real-time.

• Data Compliance Requirements: Must keep data safely and reliably for audits, reporting, regulatory compliance, discovery, backup and restore, or disaster recovery.

• Data accessibility: Have a library of content and/or media files that employees in many locations must access to download items. Also need employees in many locations to be able to upload or download files.

• Web 2.0 and Social Media: Manage exploding data growth or have fluctuating data storage requirements - Object storage systems have massive scale and provide moderate performance at low cost.

Medical Imaging and medical records applications also have massive use for Object Storage due to sheer volume of data storage requirements. Healthcare Vertical, particularly, have shown high adoption rates for Object based storage.

Competitive Landscape

The market is yet very fragmented though Amazon AWS Simple Storage Service (S3) is considered the leader in this space. Though it has challenges, AWS is a highly innovative service and has created AWS Storage Gateway that enables hybrid storage architectures that span both on and off premise storage options.  Nirvanix, a pure play Cloud Storage provider that offers public, hybrid or on-premise Nirvanix-powered storage services which are priced for various support levels. There are other big names such as Google, Windows Azure Blob, Rackspace CloudFiles, AT&T’s Synaptic Cloud Storage and recently Savvis has also entered the Cloud Object Storage space.

Vendors seek to differentiate themselves on price, quality of services (QoS), SLAs and hybrid architectures. At the same time they tend to gravitate towards some established storage and compute platforms to enable standardization, achieve economies of scale and allow for ecosystem build-up. This allows their business customers to combine their storage solutions with any third party solution that uses a similar platform. For example, AT&T Synaptic and Savvis are aligned with EMC Atmos Storage Platform, whereas providers like HP, Rackspace CloudFiles and SoftLayer are aligned wtih OpenStack platform. This enables any third party solution that is based on the above platforms to be combined with storage solutions offering any custom configurations. AmazonS3 is an exception that is based on its own AWS Storage Gateway.

Techaisle Take

Justifiably, there is a great deal of hype today around Object Storage, especially relating to its Cloud, Social Media and Big Data applications. However, it is important to understand the specific use cases and workloads Object Storage can be useful for, given its limitations such as Latency sensitivity, lack of standardization among object storage interfaces and in some specific uses where the stored data is modified frequently and hence not suitable for an Object Storage solution.

Upcoming report: Techaisle's Cloud Object Storage Competitive Landscape report.
Send email to This email address is being protected from spambots. You need JavaScript enabled to view it. to be notified when it is published
If you want your company to be included in the report and want to arrange a briefing, please send an email to This email address is being protected from spambots. You need JavaScript enabled to view it.