A computer storage exec explains why that once-hot market is melting down

Earlier this week, storage giant Hitachi Data Systems made a big move in the flash storage market by introducing new system that uses 100% flash technology.

This is another nail in the coffin for the young companies that pioneered the use of flash in the enterprise, like Violin Memory, Nimble Storage, and Pure Storage.

A few years ago, they were one of the darlings of the enterprise tech world, raising huge amounts of money, or being acquired for hefty sums.

Flash is the same storage tech used by smartphones, thumb drives, and tablets. And because it's faster than older storage technologies, it has taken the enterprise data center market by storm.

That should have been good news for the pioneers. But as the popularity of their technology has skyrocketed, big players like HP, EMC, Hitachi and most recently, NetApp have swooped in.

Today many flash storage vendors are hurting, as are the big players:

• Violin Memory's stock is nearly worthless, trading below 80 cents, as its investors try to sell itself
• Nimble Storage's stock has crashed from well above $40 a year ago, to about $6.50 cents.
• Pure Storage, who's IPO flopped in October is still trading below its initial $17 IPO price, at under $14.
• Storage giant NetApp, which finally entered the all-flash storage market in December by acquiring a startup called SolidFire for $870 million cash, has seen its stock price tank 46% in the last year, to under $22.
• And the big storage kahuna, EMC, is on its way out completely, trying to sell itself to Dell.

We talked to Miki Sandorfi, vice president of the unit responsible for Hitachi's storage division, about what's going on with the market.

The market is "contracting"

Sandorfi told us that with new technologies like flash storage, the market will go through "explosions and contractions," and "we're in that contracting phase now."

It's not just that the giants have swooped in to compete, although that's part of it. (Undercutting prices is something that Hewlett Packard Enterprise, with its 3Par Systems is doing particularly well, multiple people have told us.)

But Sandorfi says enterprises have drastically changed how they buy storage.

Instead of buying big, expensive systems from dedicated storage vendors, they are using a combination of cloud services (like Amazon's S3) and new "converged" systems. Those are systems that blend together computers, storage, networking and certain types of management software.

Vendors that can do it all is the big reason why Dell (who makes servers) is buying EMC, Sandorfi says.

It's also why server maker Cisco likely needs its own flash storage tech (and is likely working on getting it, sources tell us).

Life after storage

Sandorfi believes that even this "converged" trend will be somewhat short-lived because companies are turning more heavily to cloud services, and buying less equipment for their own data centers. As we previously reported, there's even a movement where big companies unplug all their data centers and just use cloud services like Amazon.

The view of the world we have is that life moves on. We started with storage, then with systems, and now we're moving into software.

The next really big market for storage vendors is big-data analysis software, he says.

Not just the software that stores vast amounts of data, but that can analyze it to offer business insights in real time and from all kinds of devices, not just computers.

"The view of the world we have is that life moves on," explains Sandorfi. "We started with storage, then with systems, and now we're moving into software."

That's why Hitachi bought big data analytics startup Pentaho about a year ago, he says.

Hitachi wants to offer software that can do big data analytics on top of data stored anywhere, and "I don't care" if it's in the Amazon or Google's cloud, or on Hitachi's own storage systems, or systems from others, he says.