Compaq Computer Corp. will surpass 2000 storage market leader EMC Corp. and reclaim top spot in the worldwide overall storage market in 2001, according to Framingham-Mass.-based International Data Corp.

IDC will be preparing its final report on the market in three weeks, but preliminary data released by the firm predicts Houston-based Compaq will retake the top spot it held in 1999 with 18.2 per cent market share in 2001.

The shift at the top of the overall storage-market leader board is more the result of an EMC drop than a Compaq surge. According to IDC, Compaq’s market share will increase by less than half a percentage point while Hopkiton, Mass.-based EMC will lose 3.2 percentage points of overall market share. That’s the exact amount of overall market share IDC predicts IBM Corp. will gain in 2001. The big gainer this year, Armonk, N.Y.-based IBM will have a 14.2 per cent market share in 2001, compared with an 11 per cent share in 2000.

While no Canada-specific data was available, Alan Freedman, IDC Canada servers and storage research manager, said EMC Canada’s strong install base and customer relationships will likely mean less of a local market share loss.

“It probably won’t be as drastic a change in Canada,” Freedman said. “People here tend to be a little more conservative.”

Freedman and IDC storage systems research director Charlotte Rancourt offered several reasons for the IBM surge, including aggressive pricing, the company’s breadth of business, improvements IBM has made to its Shark enterprise storage server and customer loyalty.

“I think IBM customers who fundamentally like IBM are now willing to look at IBM,” for storage, Rancourt said.

Of the top three vendors in the overall storage market, only IBM will see an increase in revenues in 2001 while Compaq and EMC will see revenues fall from 2000, according to the preliminary IDC report.

The overall market data includes revenue from both external and internal storage systems. IDC considers servers with more than three drives a storage system. IBM and Compaq sell such servers while EMC concentrates solely on the external market. Rancourt said it was a major accomplishment for EMC to have led the overall market in 2000.

EMC will retain the number one position in the external storage systems market, though its lead over second-place Compaq will narrow from nearly 11 to less than six percentage points, according to the report. The IDC data claims EMC’s external market share will drop from 25.6 per cent in 2000 to 21.2 per cent in 2001. IBM’s share of the external market will rise from 7.8 per cent in 2000 to 12.2 per cent in 2001.

“EMC has hit that juncture where there are other alternatives that people are willing to consider,” Rancourt said, noting that both IBM and Hitachi Ltd. have improved their storage offerings.

Rancourt and Freedman said IBM has over the past 12-18 months greatly improved the Shark system, which can be configured for both the mid-range and high end markets.

“In the past EMC would list off a whole bunch of functionalities that IBM didn’t have,” Freedman said. “The list is shorter now.”

Freedman and Rancourt also noted IBM’s aggressive pricing strategy, due in part Rancourt said, to its ability to bundle together a wide range of offerings.

“IBM does have the ability when it closes a large deal of services and storage to discount the deal overall,” she said, noting that EMC considers this giving away the storage.

Chris Saul, IBM’s worldwide product manager for the Shark system, added that customers buying all their equipment from IBM don’t have to deal with multiple vendors if something is not working.

“If there’s a concern, there’s no finger pointing,” he said.

Freedman and Rancourt offered differing projections on the impact EMC’s recently announced alliance with Dell Computer Corp. will have on the former’s market share.

Freedman said that unlike Dell’s other offerings, servers are yet a commodity product, and he doubted Dell’s distribution power will have a major impact on the bottom line.

But Rancourt said the agreement will help EMC cut its costs and open an outlet for EMC’s mid-market Clariion product.

“Dell’s customers are the primary market for Clariion,” she said.

Robert Stroud, divisional partner manager for EMC Canada said he expects EMC to realize market share gains in this country through both its recent alliance with Dell and the uncertainty surrounding the direction of some of its competitors, namely Compaq and Hewlett-Packard Co.

“What people find about EMC is that all we do is storage,” Stroud said. “Our message is clear from a product and market perspective.”

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