Hard drive shortage ripples through channel

Flooding in Thailand has caused hard drive manufacturing to halt, and solution providers are getting pinched on hard drive prices and systems delivery. Some suggest that storage management strategy changes could help.

Damage from mid-October flooding in Thailand has had a ripple effect through the tech industry, as hard drive manufacturers Western Digital Corp. and Seagate Technology LLC experience supply chain shortages, problems with logistics and damage to manufacturing equipment. 

The area affected is responsible for meeting nearly 70% of the world’s demand for hard drives, and analysts predict that it will be largely out of commission for two months. The hard drive shortage is expected to last into Q1 of 2012, and channel sales are being affected.

Sid Herron, sales director at Moose Logic in Bothell, Wash., said that two Dell server shipments have been delayed because of the hard drive shortage. The orders are two weeks out and counting.

“We’ve got projects in process that need to be wrapped up by the end of the year,” said Herron. “At this point in time, we’re lucky, we’ve only got two systems being held up for this.” But Herron said at least customers understand the situation.

Making changes in storage management strategies
A lot of questions are floating around and systems admins are getting anxious over the shortage, which is happening at a time when hard drive sales have been brisk because of higher volumes of data being stored. Trace3 CTO David Hekimian suggested that this might be a good time for channel partners and companies to examine storage practices and look at other options that might work better in the long run anyway.

“Companies in general are going to look a lot closer at what they’re storing at a high level and ask ‘Why are we adding disk space? Do we still need this data?’” said Hekimian. He suggested that now is a good time for VARs to discuss a storage management strategy and look at implementing some tools to help with this problem, such as file virtualization and database virtualization solutions.

Storage analyst Henry Balthasar at the 451 Group suggested another means to deal with the problem in the short term. He thinks that the price difference between Flash and standard hard drives will diminish, opening up the possibility of using Flash for storage performance rather than using short stroking. This option, said Balthasar, would free up those 300 GB disks that are in short supply to be used for storage.

Because the large-capacity 3 TB and 4 TB drives seem to be unaffected by the shortage, Balthasar thinks performance will be affected. Ultimately, Flash drives could help partners and their customers meet December purchasing deadlines and customers would save in the long-term on energy costs by using Flash as well.

Another option is cloud storage utilization, but questions exist in that arena too.

“What’s going to happen to Azure and Amazon’s S3?” asked Hekimian. “Those guys are giving away disks at those prices.”  

Price increases may cut into VAR margins
In addition to product delivery delays, VARs are also going to see some price increases and may have to decide how much margin to take from hard drive sales. While some prices from larger enterprise systems are unlikely to be affected, smaller players that don’t have solid pricing agreements in place with hard drive manufacturers are already feeling the pinch.

Drew Meyer, senior director of product marketing at Netgear reports that the company has seen pricing for drives increase by as much as 70% since the floods. The company responded by passing on the price increases, but not increasing margins in their ReadyNAS product line.

The place that hard drive prices are really going to go up, says Hekimian, is retailers such as NewEgg.com who don’t have negotiated price agreements with manufacturers. With end-of-year buying cycles rolling up, some channel partners may have to work close with storage manufacturers on pricing to complete the sale.

Let us know what you think about the story; email Leah Rosin at lrosin@techtarget.com, or follow us on Twitter.

 

 

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