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Hitachi Data Systems: A storage giant lost in translation

I just don't know what I'm supposed to be

For Sale sign detail

Hitachi Data Systems (HDS) is the only world-class Japanese storage company, with its USP-V high-end enterprise arrays and AMS mid-range systems.

Its fellow Japanese corporations, Fujitsu and NEC, are under-performers in comparison.

In fact, the USP-V arrays are so good that HP OEMs them and Sun did resell them. Acer OEMs a custom low-end AMS array; Sepaton OEMs the standard AMS arrays. Forty four of the top 50 Fortune Global 500 companies are HDS customers and HDS has a lead over EMC and IBM in enterprise storage. For 13 years Hitachi has been number one in Japan for enterprise and mid-range systems storage.

How has this come about? How can we comprehend the enigma that is Hitachi Data Systems?

Hitachi is a corporate behemoth with some 360,000 employees, 932 subsidiaries, a hundred-year history, and products that range from power stations, trains, hospital systems, and supercomputers through to servers, storage and hard disk drives. In the era when mainframes ruled the glasshouse data centres and Japanese companies were full of self-confidence and ready to take on the world, Hitachi began making IBM plug-compatible mainframes, classic me-too products. HDS came about because of that.

HDS history

Hitachi established Hitachi Data Systems in 1989 in conjunction with EDS, when it bought National Advanced Systems from National Semiconductor, to sell its mainframe and allied storage products outside Japan. The products required detailed and intricate selling of features to US and European customers. It made sense to recruit local sales, marketing and support people and employ them in a US-based company that was a part-subsidiary of Hitachi. Doing this with EDS gave Hitachi access to a ready-trained mainframe-aware sales force.

The location of HDS in the Hitachi corporate structure goes like this: Hitachi has an Information Systems and Telecommunications Systems Group (HISTS), which incidentally generated the most revenue in the overall Hitachi group with about 17 per cent of total fiscal 2009 revenues.

There are two divisions concerned with storage in the HISTS group. Firstly there is Hitachi Global Storage Technologies (HGST) which makes hard disk drives, and, secondly there is the Hitachi Storage Solutions Group (Hitachi SSG) which carries out research and development, and builds and sells hardware, software and services in Japan. HDS is a subsidiary part of it and sells, markets and supports the storage products in the entire world outside Japan.

Hitachi GST is the result of combing the 2002 acquisition of IBM's disk manufacturing business with Hitachi's own disk manufacturing operation.

Shinjiro Iwata, a Hitachi VP and exec officer in the Information and Telecommunications Systems Company, says: "When the ECL [Emitter-Coupled Logic] technology changed to CMOS [Complementary MetalOxide Semiconductor] IBM could do more than us in the late 90s. We couldn't carry on doing the mainframe business. We tried open system servers in late 90s [but didn't succeed]. What was left was storage. We became a storage-only company in 2000. There was no other place to go … for HDS and the storage division."

"Storage is different from servers. A server has semiconductors from Intel and operating system software from Microsoft, meaning the parts that we control are getting smaller. It's different in storage." There was more scope in storage for HDS to own more of the product and so make more revenue from it.

HDS became a wholly-owned Hitachi subsidiary in December 1998 with the EDS part being bought out by Hitachi.

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