While the capacity increase was a sharp contrast to the falling revenue, total storage capacity had been rising 40% to 60% a year, according to IDC's storage systems research manager, Natalya Yezhova.

"This quarter there was a big hit from internal storage (storage within servers), which is tied directly to server sales," Yezhova said. "External disk storage system capacity was up 40% -- still low compared to usual quarters. High-end storage suffered from being more impacted by a freeze in end-user spending and longer purchasing cycles."

Low-end and mid-range storage systems were less affected by the economic downturn, Yezhova said. And some even saw growth, as users are beginning to look at a variety of new mid-range storage systems that can meet growing storage needs while keeping costs in check.

"As many IT budgets are adversely affected by the current economic conditions, end users are looking for more economical ways to meet their growing storage needs," said Liz Connor, an analyst with IDC's Disk Storage System Tracker. "While delivering enterprise class functionality, [Fibre Channel] SAN systems fulfill many storage needs, but usually at a higher average price. Enter the world of iSCSI and NAS storage solutions."

IDC said worldwide revenues from external disk storage systems posted a decline of 0.5% compared to 2007 -- with revenues totaling US$5.3 billion in the fourth quarter of 2008. For the quarter, total disk storage systems revenues hit $7.3 billion, a decline of 5.9% from the fourth quarter of 2007. IDC pointed to weakness in server systems sales.