2016 has seen a "considerable change" happening in the storage space as the big guns struggle, while smaller players and emerging technologies prosper, amidst the shrinking overall market revenues.

Figures from IDC showed that worldwide sales in the enterprise storage systems sector dropped 6.7% year-on-year, reaching $11.1 billion in the final quarter of 2016. Still, total capacity shipments were up 18.3% year over year to 52.4 exabytes during the quarter.

The market's chief revenue generators remain to be external storage systems and server-based storage, although these two areas saw annual sales declines of 7.8% to $6.4 billion and $3.4 billion, respectively. Meanwhile, original design manufacturers (ODMs) that sell directly to hyperscale data centres saw its sales grow 3.2% year-over-year to $1.2 billion.

Flash-based storage systems continue to thrive, generating almost $1.7 billion in revenue during the quarter, up 61.2% year over year. The Hybrid Flash Array (HFA) segment of the market continues to be a significant part of the overall market with $2.5 billion in revenue and 38.4% market share.

IDC storage vendors (cr) Figure 1: 4Q16 External Enterprise Storage Systems Results by Vendor Group (Source: IDC)

Dell Technologies was the largest external enterprise storage systems supplier during the quarter, accounting for 32.9% of worldwide revenues, according to IDC. HPE, IBM, and NetApp finished in a statistical tie for the second position with 10.2%, 10.1% and 10.0% of market share, respectively.

HPE's share and year-over-year growth rate includes revenues from the H3C joint venture in China that began in May of 2016, according to IDC. As a result, the reported HPE/New H3C Group combines storage revenue for both companies globally. Hitachi rounded out the top 5 with revenue share of 7.0%.

"2016 represented a year of considerable change for the enterprise storage systems market," said Liz Conner, research manager, Storage Systems. "While the broader enterprise storage systems market has been impacted by headwinds, companies continue to increase their investments in several key areas, such as software-defined storage, cloud-based storage, all flash storage systems and converged systems. As a result, traditional enterprise storage vendors have aligned their portfolios to meet the shifting demands."