Nathan Thompson's Fiscal Year 2011 Blog Update
By Nathan Thompson, Chairman and CEO, Spectra Logic
 
Recently we brought a group of our large users to Boulder to give us input on our technology and support strategies.  In speaking with these customers it became very clear that long-term relationships are important when it comes to storage, followed by the longevity of their storage platforms. The relationship aspect was not a surprise.  However, we didn’t fully appreciate that many of our largest customers ideally would like to keep their tape library storage devices in place for upwards of 20 years. During that time they expect that the modularity of their libraries will allow them to continue to increase capacity, density, reliability and utility as new “plug-in” technology becomes available through Spectra.  Since then I have been looking back—and we do have some customers who have been running 8mm AIT Spectra libraries for nearly two decades.  Upgrades have been applied to keep up with data growth, but they still are running the same robot with older drives (even thought 8mm tape is at the end of the road). 

Come to think of it, the very first T950 Spectra that shipped nearly seven years ago is deployed and in use at NASA Langley.  We have a relationship with the team that uses it, and over the years a number of upgrades and improvements (hardware, software and support processes) have been applied to upgrade it.

There is a relentless push for organizations to keep ever-increasing volumes of data for longer, and very often, indefinite periods of time. This plays to Spectra’s strength—strong customer relationships, and continuous incremental improvement of our products, processes and technology.  I think it's one of the overarching reasons Spectra Logic achieved record-breaking results in fiscal 2011 for our active archive, backup, compliance and disaster recovery storage solutions.

We increased our total revenue 30 percent and our enterprise tape libraries posted 49 percent revenue growth this past fiscal year. These are strong results, but not surprising when you consider current storage trends and the sheer volume of data that organizations store for extensive periods. Mortgage companies are storing data for the duration of a 30-year loan, at a minimum. Broadcast networks are archiving hundreds of thousands of hours of digital content for an indefinite amount of time. The Library of Congress is storing the very fabric of our republic, which dates back 300+ years. Earthquake scientists are storing seismic data for future analysis to better predict natural disasters. Governments are storing census data to analyze and predict demographic trends over multiple decades. The list goes on and on, highlighting the need for smart, reliable and cost-effective solutions for archiving data.  Enter tape. 

Simply stated, tape offers the best density, reliability, energy efficiency and scalability for the money. I'm thrilled that we were able to support our bold claims about tape's advantages last fiscal year by being honored with eight product and company awards, including one of the industry's most prestigious awards: theQuality Award in the midrange and enterprise tape library categories in the latest Storage magazine/ SearchStorage.com Quality Awards service and reliability survey. Spectra’s tape libraries swept all fourteen categories including sales-force competence, initial product quality, product features, product reliability and technical support.

Long-term relationships are important to our customers, and we strive to build relationships that stand the test of time. For us, that means establishing close relationships, being candid and transparent, and providing investment protection via products that are modular and flexible. We will celebrate our 32nd year in business next month, and our enduring success reflects our strong customer relationships and the high ROI our customers achieve by implementing our tape-based storage solutions. We invested 10 percent of our annual revenues in R&D and an additional 12 percent in customer support this year. We announced IBM TS1140 Technology tape drives, which are now offered with our enterprise class T-Finity tape library, and introduced Data Integrity Verification across our entire T-Series tape library family line - free of charge. This continued commitment to excellence enables us to deliver market-leading innovations designed to transform our customer's storage infrastructures.

To keep up with increased demand, Spectra further expanded by hiring additional local resources in Europe, Africa, South America, Canada, Australia and India. Currently, our products are installed in more than 40 countries worldwide. We grew our SpectraEDGE channel partner reseller base by 10 percent and now have more than 500 worldwide reseller members.

Spectra Logic continued to lead the industry's tape charge by initiating the first-ever Tape Summit in April 2011, a gathering of market leaders responsible for driving the future of tape-based software and hardware solutions designed to meet modern data storage demands. The inaugural Tape Summit conference was a success and is sure to become an annual tradition. Spectra also continued its leadership in growing the Active Archive Alliance, which we co-founded in April 2010.

While we enjoyed our FY2011 success, we are already looking forward to what's ahead in FY2012. At Spectra, we see a number of trends that will shape the storage industry, including:

• Data growth will continue to grow exponentially: Spectra predicts that data will double every 18 months, which is about a 48 percent growth rate.  What does this mean in real terms?  Every 1 TB of data today will be 7.1 TB of data in five years, and will continue to grow exponentially thereafter.
• Active Archives will gain momentum throughout 2012 as more organizations approach petabyte capacities and seek new ways to manage, index and access their vast data volumes. 
• The use of tape backup and archive within cloud infrastructures, which are also predicted to grow, will increase since tape provides the most economic and reliable storage for large data volumes and extended data retention periods.
• Hardware-based data integrity verification will become a requirement for "best practice" archive storage.
• Traditional backup practices will continue to shift.  Data centers will increasingly move to online, file-based archives for long term data retention instead of utilizing offline backups in proprietary formats.

It's always a pleasure for me to look back on what we’ve accomplished, and what we have to look forward to. As we continue to build strong, long-term relationships with our customers, all of us at Spectra will work hard to drive even more innovation into our data backup and archive solutions, offer customers the superior support they have come to expect and help lead the next round of transformation within the storage industry. We are honored to help our customers achieve success year after year.  And I consider it a measure of Spectra’s success that we have been and will continue to be here for the long-haul!

I recently read Henry Newman's blog announcing his top 10 storage predictions on Enterprise Storage Forum. He summarized 2010 in two words: stagnation and consolidation. While this may have been true for some companies, Spectra Logic experienced quite the opposite. We invested in innovation and accelerated deployment of the T-Finity tape library. We significantly grew our customer base, unit sales and revenues. We remained self-funded, debt-free and privately-held. Based on the tape innovations and technology advancements that we have brought to market, we knew that tape was poised to reign supreme.

Newman predicted that in 2011, "... declines in tape unit sales will significantly slow. The decline in the tape market is well known, but I believe the decline has stopped. The number of PB of tape shipped will actually increase in 2011 and tape unit sales could exceed 2010 levels."

We completely agree and there are a number of key trends that support this. Chris Preimesberger talked about data growth in his recent article "eWeek Identifies Key Storage Trends of 2010."  He noted, "The universe of data continues to grow at an estimated 40 to 60 percent clip per year, and it is not slowing down or even leveling off." Industries such as media and entertainment, Enterprise IT, high-performance computing and government, to name a few, are grappling with storing, managing and accessing massive amounts of data – as well as the growth of "big data" items like high definition video, computer rendering for films, video surveillance, geophysical exploration and gene sequencing.  As more data is generated and saved, organizations must expand their storage capacity, thus increasing their physical space requirements and consuming even more energy for power and cooling. And they must solve these challenges with often tight, highly scrutinized budgets. It is quickly becoming apparent to even the 'disk-only' die-hards that tape, an energy- and operationally-efficient and cost-effective storage solution, is a smart and essential part of today's optimized data center. Period. We refute recent claims made by EMC,in particular: "The system delivers new operational efficiencies while eliminating the costs and complexities associated with a tape-based data retention approach."

In his column titled "Storage 2010: What's Past is Prologue," Jon W. Toigo, chairman of The Data Management Institute remarked that "...it should be a no brainer that forthcoming improvements in tape capacity, combined with a more than 700 percent improvement in tape media and subsystem reliability over the past decade, will drive up the adoption of tape -- for backup as well as for archive -- in the coming year. Yet, these improvements are all meaningless if companies continue to abandon tape in favor of de-duplicating virtual tape (aka disk) subsystems with WAN-based replication: the offering du jour of most of the disk subsystem vendors in 2010."

Tape is superior to disk in large data environments in part because of its long-term reliability, energy efficiency and lower cost. This is backed up by a National Energy Research Scientific Computing Center (NERSC) paper in which Mark Peters stated, "NERSC has definite proof that its use of tape is viable not only in terms of economy and performance, but also in terms of reliability... At NERSC, there is over 13 PB of data on tape: 30-40% of its tape activity is read, it has a measured and proven reliability of 99.945%, and its $/GB cost is around 5% of that of its disk storage." Clearly, tape comes out ahead of disk with better reliability and lower cost.


We've always believed that the value and benefits of tape would lead to its re-emergence and renewed status within the storage market. It figures into the best archive solutions today – including online, active archives, for which demand is accelerating phenomenally.  Our customers manage huge amounts of data, from TV stations that store massive digital video and films, to highway toll booths that capture a dozen images of each of thousands of vehicles that pass through each day, to critical archived data such as historical weather statistics, nuclear collision information and our nation's national archives and documents. The Spectra T-Finity can scale up to 91 PB and tape has a shelf life of 30+ years. In industries with huge data archives, it would take potentially thousands of disk drives to meet this kind of capacity.  Spectra tape libraries provide users the best density, reliability, energy efficiency and scalability for the money.

And happily, our customers agree.  We were recently presented the industry's top honor: theQuality Award in the midrange and enterprise tape library categories in the latest Storage magazine/ SearchStorage.com Quality Awards service and reliability survey. The results are derived from a survey of qualified readers who assess products in five key areas, and Spectra's tape libraries swept all five categories including: sales-force competence, initial product quality, product features, product reliability and technical support. According to Rich Castagna, editorial director for Storage magazine and SearchStorage.com, "Spectra Logic led a very strong group of product lines to some of the best scores yet in the product features category." And 95 percent of our customers report that they would buy Spectra products again.

Tape will continue to be a critical aspect of storage solutions, from active archiving to internal and external clouds, to high-performance computing environments. With more and more organizations recognizing and embracing the value and benefits of tape, we know that its growth across the industry will continue to flourish. And given tape is a more than $3 billion annual market today, we predict Spectra Logic's modern tape libraries will continue to achieve significant growth in 2011 and beyond.

Spectra Logic was recently honored with an innovative product award for our T-Finity tape library. As I stood up to accept our award — the 4th product award this year for the T-Finity — it struck me just what a year it has been. Going into fiscal 2010, we knew we were very well positioned against our competitors. We were set to release the T-Finity,  we were leading in tape technology innovations due to steadfast R&D investments, and our archive and backup solutions were continuing to gain traction and market share. But fiscal 2010 turned out better than even I had imagined as the stars perfectly aligned for Spectra Logic.  

An economy that demands efficiency, customers that demand high returns on investment, longer sales cycles, tighter budgets and constrained headcounts may have paralyzed some companies, but Spectra Logic came out on top with the best people and the best technology. We ended our fiscal year 2010 on June 30 with record-setting revenues and 25 percent year-over-year growth for our Enterprise and mid-sized tape libraries and disk-based appliances. We boosted our bottom line growth and posted our fourth consecutive year of profitability. This strong showing validates the strength of the tape market for vendors with innovative products that customers increasingly depend on for large, highly reliable archive and backup data stores.

More than ever, enterprise customers are embracing our large-scale libraries – the Spectra T950 and T-Finity, which are fast becoming the preferred storage platform for large, data-intensive environments. Our T-Series tape libraries deliver the highest data reliability, scalability and density in the market.  Our goal was to develop and deliver tape solutions that offered 'no compromises' when compared to disk - and we succeeded. Customers across market sectors, including high-performance computing (HPC) and media and entertainment, rely on our enterprise tape libraries and disk appliances. Whether it's due to the economy, our amplified marketing and sales efforts, great referrals from delighted customers – or a combination of all three — we are now seeing demand from companies of every size and market sector.  Simply stated, customers want the most efficient data archive and backup solutions available — and we give it to them.

Spectra Logic not only leads the market with superior and innovative technology solutions, but we helped set the stage for industry-wide improvement by co-founding the Active Archive Alliance. We joined industry pioneers including Compellent Technologies, FileTek, and QStar Technologies to form the alliance in April 2010. The alliance is dedicated to promoting active archives for simplified, online access to all archived data on both disk and tape. More than a trend, active archiving is set to revolutionize how companies manage their ever-increasing stores of data, particularly through the new capability to extend the file system to tape and bring data on tape into the online archive.

Another area with accelerated growth in 2010 was our International operations, which included a 35 percent increase in revenue for Europe. We are continuing our global expansion, so you'll be hearing a lot more about it in the coming year, including growing our International sales team and participating in top industry trade shows abroad.

We enjoy great partnerships with our worldwide SpectraEDGE channel partners, who played an instrumental role in driving our growth and success. We added more than a dozen new programs and work with 475+ partners, and our SpectraEDGE channel program was recognized this year with the highest '5 Star Partner Rating' from CRN Everything Channel. We are committed to providing our partners with the support they need to profitably succeed.

Looking forward, we will continue to focus on growing the Active Archive Alliance by adding additional strategic partners and offering Active Archive as the most innovative solution for our data-hungry customers. And, we foresee a number of trends that will benefit Spectra and our customers, including:

• Data centers will implement tape-based Active Archives as a means of offloading primary disk storage;
• Tape will be the preferred medium for 80 percent of all data in electronic archives;
• Hardware-based data verification will be considered a requirement in all archive storage platforms;
• SAS disk will replace SATA for archive/backup storage by the end of FY11;
• SSD will be arriving in commoditized arrays, dropping cost per GB, and moving into a position as the preferred medium for performance disk; and
• Dedicated deduplication appliances will fall out of favor.  Deduplication will preferably occur in file systems and backup software applications.

I'm pleased to say that we not only weathered the storm last year, but overcame all that it threw at us. In 2011, Spectra will continue to do what we do best: deliver the most advanced, value-driven data backup and archive solutions in the market, and create breakthrough technology innovations that our competitors struggle to emulate and our customers and partners have come to rely on and expect.