Every major business magazine has a cover story this week on the economic turmoil that’s gripping the credit markets, Wall Street, and the rest of us. Every one, that is, except Forbes, which chose to put John Chambers, CEO of Cisco on its cover this week. No doubt, some editors over there are wishing they’d made a different choice at this moment–but leaving that aside, in some ways this story says more about the economy than any of the others.

Cisco, the article demonstrates, has jumped in with both feet into the area with the greatest promise: data centers. This unglamorous chunk of reality that underlies all the fun and fancy Web 2.0 that, for now, is keeping Silicon Valley from tanking along with the rest of the economy. (Unless you believe the NYT, of course.)

To quote the Forbes article: “This is what the online computing revolution has become, a giant electricity hog of Internet searches, phone calls, blog posts, wireless downloads, bank transactions and office documents. And video, lots and lots of video. ” The article also includes a chart comparing new server spending v. power and cooling costs.

All of which leads us to the inexorable conclusion–which TechTarget’s Dave Raffo refers to in a recent post–that one of the few places that is sheltered from the current storm is anything that reduces the cost of storage. So yes, storage optimization is the place to be in today’s tough economic climate. But the main point is that it could help keep lots of companies afloat that might otherwise crumple under the weight of their storage costs.

This week Matt O’Hern called out my company Ocarina Networks on the Marketing Shift blog as an example of what’s being done to manage the upwardly spiraling load of online data. Google’s latest data storage scheme–placing data centers on barges and creating an offshore “waterworld” of data–may seem bizarre to some, but this move on their part perfectly illustrates the desperate situation many such companies are in, as the tide of data reaches ever more oceanic levels. This is particularly true for those which, like Google, offer free, unlimited storage to their users for photos, emails, videos, and other files. As O’Hern rightly points out, companies are turning to Ocarina to help them optimize that data, reducing their data footprint. Glad to be mentioned in this timely and important story.

My company Ocarina Networks is one of Network World’s “10 Storage Companies to Watch.” We’ve been given this honor before, by Byte and Switch in 2007. This is not just to toot our horn, but to mention that more and more, we’re confirming our hunch that primary storage is where there is an immense need for new and innovative optimization solutions.

As I mentioned in an earlier post, the kind of data that’s driving much of today’s storage growth–files–demands a file-aware solution for shrinking them down. It’s clear to me that there is an emerging set of opportunities in this space, and we are only beginning to see where this will lead.

No one can miss the fact that data storage is spiraling upward at a terrifying rate. Joerg Hallbauer puts it on Dell’s Future of Storage blog hit the nail on the head with his post: “We are running out of places to put things.”

Citing data collected by IDC, Hallbauer concludes that in a mere three years, we there will be 1400 exabytes sitting on disk. Currently, according to the study, there are 281 exabytes of data being stored, and the CAGR rate is 70 percent. Much of this data is on laptops, home computers or servers under your desk today, but as Joerg correctly notes, there’s no question its migrating quickly to the cloud. Huge data centers will end up holding most of this data, and disk drives are not growing fast enough to deal with it anymore.

So, where do we go from here? Well, if the traditional answer was, wait for bigger drives so I can put more stuff on a disk, the other logical thing to do is to say, how can I put a lot more stuff on disks that I already have?  The answer is advanced storage optimization. The first simple storage optimization solutions are out there today – single instancing, deduplication, and compression. But the area of storage optimization is really just taking off, and much more sophisticated approaches are emerging that will allow a disk – whatever its physical size – to store 10, 20, or 100 times more data than it does today.  

What’s more, the move to large data centers providing huge cloud storage services will make this more efficient, because storage optimization is all about finding redundant information and figuring out how to store it more efficiently. So the larger the data set, the more likely you will see big wins from next generation storage optimization.

This also naturally leads to more tiering. Where today you have fast disks (Fibre Channel or SAS) and slow disks (SATA) making up the tiers, it’s much more likely in the future that the fast tiers will be solid state storage of some sort (SSD and Flash, as Joerg points out) and the massive tiers that hold the bulk of all these Exabytes will be the largest possible disks integrated in to systems that have very efficient storage optimization built in.

Image credit: Orange Photography blog archives

I was interviewed on video by John Foley for InformationWeek’s Startup City a month or so ago, and have just discovered that the video is now up on the site. If you haven’t already, I encourage you to explore this blog. Foley does a great job of covering the vast and growing landscape of IT startups. Enjoy.

Byte & Switch has once again released its “Top 10 Storage Startups to Watch” for 2008, and it’s definitely worth a read. My company Ocarina Networks was on that same list last year, and so I can say with confidence that they got it right at least once before. 

As reflected in this year’s list, data reduction technologies continue to be hot. Makes sense in a down economy that anything that increases capacity will continue to get budget dollars. As we’re finding, dollars for stuff like Ocarina is already there in every data center’s budget – it’s just listed as disk expense. We’re not only ahead of our revenue goals for our storage optimization product launched in April, but we’re having to triple the size of our sales force to keep up with demand. 

If you have planned to buy 100 TB of disk, and can spend half as much for an optimization solution that shrinks your files that means you don’t have to buy any disk at all. A win all the way around. While Ocarina started out with wins in large web sites – where the fastest year-to-year storage growth is taking place – we’re now seeing installs in life sciences, energy, movie studios, and finance.  

The chief takeaway from what I’ve seen: some nice-to-have new technologies may be facing a tough summer with an economic downturn, but data reduction scores high on both saving money and green IT, and is likely to stay strong, or maybe even move up in priority, during a down cycle in storage spending.