San Jose, California-headquartered data storage solutions firm Western Digital expects growth in India’s storage market to accelerate as the country embarks on a digitisation and data localisation drive.
The $20 billion firm sees itself playing a larger role in this market in the context of the anticipated growth. Lately, it has been making acquisitions to transform itself into an end-to-end storage player and compete better with Seagate Technology, its primary rival and the second largest player in the market. Five years ago, it acquired Hitachi's data centre hard drive business. In 2016, it acquired Sandisk to get a bigger foothold in the flash market and take on competition from players such as Samsung and Toshiba.
In an interview with TechCircle, Vivek Tyagi, senior director for enterprise sales at Western Digital for India and South Asia, spoke about the evolution of the data centre market and as the opportunities for growth in India.
How has the cloud transformed your business?
If you are an original equipment manufacturer (OEM) of servers or storage, you are Western Digital customer. You will buy a drive from us, put it into your server or storage device, wrap-around with software and sell it in the enterprise storage market. If you are a cloud service provider building massive data centres, those players are no longer buying the tier 1 OEM storage products now. To cut costs, these massive hyperscale companies are designing and building their own servers and storage. But they still need these drives that players like us produce. These firms have become our largest customers, who buy a large amount of data centre grade hard drives and flash drives from us.
Will the cloud era end the fragmentation of enterprise storage? Does that help you?
Assume that there are 10,000 MSMEs and they all need servers and IT infrastructure. That means I have to meet each one of them or have multiple partner layers to do it. If the trend moves to the cloud and there are only 10 large players, we need to talk to just 10 people to cover 70-80% of our clientele.
But do you offer value addition when these large customers come to you directly?
At the next level, anyone who buys these drives has to put that in some sort of enclosure and put software on top for storage. So, we started a new business called the platform business, where we ourselves design and manufacture our own enclosures and put drives in them with different capacities and sell these as storage platforms. In storage platforms, we have dumb storage without any CPU or we are making storage servers also. So it is a server with Intel CPU with intelligence with storage.
How have your recent acquisitions helped you become an end-to-end player?
A few years back, we acquired a company called Tegile, which makes SAN and NAS storage apart from NVME storage like the traditional OEMs. Now as a company, we have devices platforms and completely built storage systems. Historically, Sandisk had consumer storage like pen drives and external hard disks. So, now we have everything from consumer storage to the data centre, anywhere you need storage, we are present.
How will your role change when customers need capacity to run AI (artificial intelligence) or analytics workloads?
For analytics and AI to work, the performance of storage is key. It has to work in tandem with your computing platform. If storage is slow and compute is waiting, it is wasting precious storage. So when we size it for a customer, we decide on the ratio depending on workload. If it is an ecommerce or internet transaction business, we provide all-flash storage or mostly read-only. We provide a hybrid of flash and hard drive storage. If it is archival, it is a hard drive capacity.
Why have company’s revenues declined over the last few quarters despite the explosion in the data center business?
That happened because the flash semiconductor industry is cyclical in nature. Flash was in short supply two years ago and hence prices went really high and now in the last six months because flash is in surplus supply, the average selling price has crashed by 40%. If you look at the storage or the units we shipped, it has really grown. Now is the trough but demand is catching up and this quarter we see better signals.
Do you see the shift in consumer storage from devices to the cloud impacting the Sandisk portfolio?
Storage is the basic building block of our business. In flash, we are making the NAND flash memory chip. That can be for a pen drive or a memory card or combine many of these to build a solid-state drive (SSD) for a laptop or even enterprise-level storage for a server or data centre. As long as storage grows, we grow. Sandisk’s market share has grown in pen drives. But, yes, the cloud is growing faster and that is where our growth is happening faster. On the laptop side, the average storage capacity is growing, hence the number of laptops sold does not affect us badly. Also, laptop hard drives are being replaced by solid-state flash drives. Our combined company is well-positioned to take advantage of all that.
How is your India enterprise market growing?
If you look at third party numbers, it is approximately $400 million and growing in high single digits. It includes the external storage that enterprises buy and does not include cloud storage, which is above and beyond this. We sell both. We are in the right market at the right time as we started selling two-three years ago.
You see several Indian businesses joining the data centre bandwagon. Will that accelerate the growth of India's cloud capacity and your business?
These guys (the Adani Group, Reliance Jio, etc.) are seeing it from an infrastructure perspective. They have the capacity to build power and acquire land. The infrastructure might be rented out to other cloud players to offer storage as a service. So, it is clear that infrastructure companies see data centre as an emerging and fast-growing business and they are investing ahead of time. We are yet to talk to these players and see what is in store for us.
Do you see India becoming a top-five market for data centre storage sales for you?
We will have to see. It is already a big market for us and we see that growing fast. Ultimately people create and consume data. We are a country of 1.3 billion people and it should be a top market. But it depends on how government regulations come into play. Data localisation as being planned by the government might change the growth dynamics. Everything seems to be moving in the right direction in India.