There will clearly be a large SAN market for secure enterprise computing for years to come, but cloud computing in my view is likely to become the standard for an increasing number of businesses and applications.    In an excellent Techworld article about the effect of cloud computing on the future of storage Chris Mellor observes:

Google does not use a storage area network (SAN). It has no world-wide network-attached storage (NAS) infrastructure. Instead it uses thousands of Linux servers with cheap disks - direct-attached storage (DAS) - and organises their contents inside its own Google File System (GFS).

Cloud computing storage is the antithesis of traditional SAN and NAS storage. The good news is that relatively few organisations will have the size needed to build out cloud computing infrastructures. The bad news for SAN and NAS storage vendors is that they could be so incredibly massive as to trigger a significant migration of their customers to using storage-as-a-service on the massive clouds provided by Google, Amazon and others.

His last question is a key issue - will the growing number and size of cheap cloud storage options destroy the SAN market by absorbing customers who would otherwise be setting up their own storage networks?    I think the answer is no, but the cloud will put several constraints on the growth of the SAN market.    The key constraint will be the cost of SAN vs cloud storage.   Where SAN costs will run in the neighborhood of $20 per gigabyte, the (internal) cost of cloud storage by Google is reported to be about $1 per Gig.  At Amazon E3 the cost is about $1.80 per year per Gigabyte of storage.   Unless SAN makes some incredible price breakthroughs fast we’ll see a tendency in the direction of … cheap storage options.    The exception to this will be legacy users who will not want to abandon existing high performance architectures for the untested waters of large cloud storage usage and applications where security is a key concern such as banking and medical file storage and file sharing.   This is a huge and growing market and should keep SAN a profitable business for some time.

In the small and mid sized business markets we will see more of what is happening right now - a lot of storage moving into the cloud along with applications and services.    Even Microsoft - a key beneficiary of the small business server market -  has begun to push cloud computing while at the same time continuing to promote the “small business server” which I think is doomed to a slow death as small businesses seek to cut costs, minimize downtime, and avoid service calls and contracts.

More constraints on the growth of the global SAN market are the increasingly reliance on remote enterprise computing for globally distributed businesses, and mobile computing.   Businesses increasingly rely on the need for their workforce to be connected via low memory capacity mobile devices 24/7.  They need access to extensive amounts of data.   A cloud storage solution would for many companies be much cheaper and easier to manage than, for example, a VPN accessing an enterprise SAN setup.

Relevant Linkage:

Chris Mellor, Techworld:
http://www.techworld.com/storage/features/index.cfm?featureid=3893

Jon Stokes at Future of Storage:
http://thefutureofstorage.com/archives/45

Structure 08 Cloud Computing Conference:
http://events.gigaom.com/structure/08/