Back to the Drawing Board

Storage as a service was a major beneficiary of the dot-com revolution, and a major loser in the dot-com crash: When the Internet startups died, so did the concept of storage as an online utility, experts say.

One supplier of colocation facilities to storage service providers was Exodus Communications, which filed for Chapter 11 bankruptcy protection Sept. 26. Other storage providers saw the writing on the wall and have attempted to shift their businesses toward something more viable than storage as a network utility.

"That model has gone away. Its dead," says Steve Nilmore, a Storability spokesman. Storability was founded to supply a storage management service aimed at companies existing storage infrastructure, rather than an online utility.

"Its not an easy market to be in. Exodus was the most prominent casualty so far, but I assume there will be others," says David Hill, an Aberdeen Group analyst.

The notion of storage as a utility got its start when Internet colocation facilities added banks of disk drives to their cages, implemented some management software and announced they were in the online storage business, says Alan Jones, senior vice president of technology services of EMC, the supplier of Symmetrix, a Redundant Array of Independent Disks system. "They planned to move up the food chain. The flaw was that they didnt start out with the expertise and architecture that could be scaled up rapidly," and large customers couldnt count on their service providers to meet demand when it spiked, he says.

Nevertheless, vendors in the field say there is a future for storage management services — either on the customers site or through remote management — and that they are price-competitive with IT shops managing their own storage.

Adam Couture, a Gartner Dataquest analyst, agrees. He projects that a market that was valued at about $176 million in 2000 will grow to $5.3 billion by 2004. Last year, 63 percent of the market was backup and recovery services. Those services will grow in terms of dollars generated, but decline somewhat as a percentage of the total, he predicts.

Top of Mind

Analysts and vendors agree that backup and recovery took on new importance after the Sept. 11 terrorist attacks. Was the backed-up version in a safe location, or at least a different location? Beyond the question of whether a backup copy exists, customers have started to ask about "recovery in an appropriate amount of time," says Tom Major, vice president of marketing of ManagedStorage International, a supplier of storage management on top of enterprises existing facilities.

ManagedStorage also will evaluate a firms existing storage, which may be scattered throughout the corporation, and put a layer of virtualization software over storage devices so they can be managed from a central command post.

Companies that started as online utilities have migrated their firms toward selling management services; implementing management packages inside the enterprise firewall to better manage their existing devices; or simply selling storage management tools and software, Aberdeens Hill says.

The managed service approach has its appeal, EMCs Jones says, because "its hard for companies to find and retain storage management talent."

ManagedStorages Major says such offerings are price-competitive because they can serve many customers, as opposed to each company training its own Exchange storage manager.

In addition, Major says, ManagedStorages evaluation of customers existing facilities "typically finds they are using only 30 [percent] or 40 percent of their storage assets. We can take that up to 75 [percent] or 80 percent." And, a firm may defer any further storage purchases for a year, driving savings to the bottom line, he says.

Earlier this year, Segaza Group — formerly Zona Research — found that most firms were not interested in purchasing storage as an off-site service because they wished to retain control of their data.

Firms such as Sanrise Group, Scale Eight, StorageNetworks and StorageWay have had to go back to the drawing board to come up with arguments that convince customers that they will save with their storage management systems and tools.

Still Up for Debate

For some, the debate is inconclusive, "Six of one and half a dozen of the other," Aberdeens Hill says, because it depends on what existing skills a company has versus how much it wants to build out its own storage infrastructure. "New companies starting out dont care as much about owning their data. If they dont have the expertise in-house, they can outsource it cheaper," he says.

Dataquests Couture says a backup and recovery service might charge $9 to $15 per gigabyte of data backed up, while an IT shop could reduce that cost significantly if the backup occurred during off-peak hours on existing equipment.

But the off-site service might perform that backup five times per week instead of once. Putting a price on the value of the more frequently updated data is difficult, Couture says, until you find that you need it — as companies did Sept. 11.