SanDisk To Benefit From VMware Certification As Software-Defined Storage Gains Traction

SanDisk Corporation (NASDAQ:SNDK), widely recognized for its removable flash storage products, has switched its focus towards developing enterprise-class flash storage products. This comes as a result of increasing demand for solid-state flash-based storage solutions. According to our estimates, the company’s solid-state drive (SSD) division constitutes about 30% of the company’s valuation, primarily due to the high profitability of SSDs and the anticipated growth in the division.

With software-defined storage beginning to gain traction, storage companies are developing their products so that they can be integrated on virtualization platforms. Major storage providers such as EMC (NYSE:EMC) and NetApp (NASDAQ:NTAP) have introduced software layers on their flash arrays that not only enable the storage devices to be accessed via cloud, but also enable users to virtualize other storage systems. Despite high inputs/outputs per second (IOPS) storage solutions offered by storage providers in the market, users often face bottlenecks in the storage architecture that effectively reduce the read/write capabilities of high-end storage products or increase latency. In the last quarter, SanDisk rolled out an upgraded version of SanDisk Flashsoft, its software layer that intends to eliminate these storage bottlenecks and maximize utilization of software-defined storage.

We have a $75 price estimate for SanDisk’s stock, which is in line with the current market price.

See our full analysis for SanDisk’s Stock

Virtualization Of Flash And Software-Defined Storage

On traditional virtualization platforms, a single physical server hosts various virtual machines (VMs) that share all hardware resources, including storage drives. The main disadvantage of using this approach becomes apparent when certain applications use up more resources than anticipated within the space of a common physical server. This hinders the performance of applications on other VMs connected to the same server. Although IT departments across companies try to ensure a fair distribution of resources according to applications, there can be unanticipated outliers or workload spikes that can disrupt high IOPS usage or increase latency. The bottlenecks caused by such disruptions can be countered with a flash hypervisor, or a software layer, that sits on top of the virtualization platform and redistributes flash resources to the VMs.

Currently, the only way to obtain higher IOPS on traditional Storage-Attached Network (SAN) platforms is to add more hard drives to the existing storage racks to achieve the throughput levels. This makes virtualized flash especially beneficial for traditional data centers because it optimizes memory allocation and eliminates the need of investing on additional hardware. Although scaling up has becoming cheaper and easier with the introduction of all-flash arrays, investing in hardware is certainly more expensive than adding a software layer.

SanDisk Flashsoft

SanDisk Flashsoft, the software for enterprise storage solutions, uses host-based caching for VMware’s vSphere environments. This means that Flashsoft software enables a standard SSD to be used as a high-speed caching memory for enterprise-level storage devices. The memory drive acting as cache increases its IOPS, which improves performance and reduces latency. With such flexibility, SanDisk aims to capture the attention of IT departments that are contemplating the switch to flash-arrays. Although flash-arrays are gaining traction in the industry, switching to arrays is still costly.

If customers were to decide to switch from traditional storage platforms to a flash arrays, they would first back up all existing data  and applications. They would then restore the data and reconfigure applications on the new platform. Additionally, it is unlikely that shifting to a newer platform would be a 100% shift at once. Therefore, during data migration there is effort involved in prioritizing the shift of applications/data to the faster platform and retaining less frequented data on the original platform. Customers can avoid all that effort if they use the Flashsoft software layer instead, where only a minimal initial configuration is required to get started. The company’s latest Flashsoft 3.2 is available for both Windows and Linux platforms.

On the virtualization front, Flashsoft supports all VMware (NYSE:VMW) vSphere features, including vMotion, VMware High Availability (HA) and vSphere Distributed Resource Scheduler (DRS). On the back end of storage, Flashsoft is compatible across all available data storage infrastructures irrespective of make (EMC, NetApp, Hitachi) or connectivity (SATA, SAS or PCIe). ^[1] Additionally, it supports all guest operating systems in the virtual machines, giving the software full flexibility. At the end of last year, SanDisk announced that VMware has certified its enterprise-class solid-state drives, which are available in Dell’s (NASDAQ:DELL) Poweredge servers, as a supported flash layer that can be used with VMware Virtual SAN. ^[2] According to Forrester Research, Flashsoft software would cost slightly over $130,000 (including software maintenance) over a three-year period, whereas IT costs can be reduced by up to $400,000 by deploying the software solution. ^[3]

Although the solution offered by SanDisk provides an ease of usage and a cheaper alternative to flash arrays, it has certain disadvantages that may hamper its long term growth prospects. Firstly, the performance boosts offered by the Flashsoft software are only effective in reading data. The writing of data is predominantly associated with the back end (storage drive side of data centers), which is unlikely to be affected by a performance boost or optimization of memory allocation. ^[4] Secondly, using a simple SSD as cache memory reduces the read-time or latency of frequently accessed data, which gets moved to the cache memory for faster access. Therefore, there may not be a similar improvement in performance when dealing with infrequently accessed data. We believe it is likely that the adoption of Flashsoft software layer provides only a near-term benefit for SanDisk.

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1. Flashsoft Software For VMware vSphere, SanDisk Products, February 2014 [↩]
2. SanDisk SSD Certified For Use With VMware Virtual SAN, SanDisk Press Release, December 2013 [↩]
3. Total Economic Impact Of SanDisk’s Flashsoft Software, SanDisk Documents, January 2014 [↩]
4. Enterprise Flash Virtualization: Flash In The Pan Or Here To Stay, Tweak Town, February 2014 [↩]