Storage service providers rise from the ashes

Posted on August 23, 2006

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By Stephanie Balaouras


In the late 1990s, the storage service provider (SSP) market emerged with tremendous fanfare. Numerous SSP startups (with significant venture capital backing) appeared almost overnight, and traditional outsourcers were just as quick to add storage services to the menu. The prevailing wisdom of the time suggested that enterprises would enthusiastically embrace outsourcing as a way to control the spiraling costs of increasing storage demand. The logic seemed to work—storage is a commodity and responds well to economies of scale—but the businesses didn't; in fewer than four years, the SSP market had almost vanished. By 2002, most pure-play SSPs had closed their doors, been acquired, or taken their intellectual capital and transformed themselves into software vendors. For example, Storability Software went from a pure-play SSP to an independent software vendor (ISV) and then got acquired by StorageTek, which Sun Microsystems then gobbled up.

Several factors contributed to the rapid demise of the SSP market in its first incarnation:

In reality, the majority of enterprises were firmly opposed to outsourcing storage. In 2001, Forrester interviewed IT directors with overall responsibility for storage planning at 50 Global 3500 companies; 48% of the interviewees said nothing could convince them to hire a service provider to handle their storage needs.

Complexity and a lack of expertise made the shared storage infrastructure model untenable. To provision storage capacity and adequately protect a critical application requires specialized expertise and in-depth knowledge of the interrelationships and dependencies of the selected storage array, fabric devices, server hardware, and databases.

Significant costs made the model unprofitable. To offer outsourced storage services, SSPs had to make enormous capital investments in data center infrastructure and shoulder huge monthly telecommunication services bills to link clients to the data center.

The few SSPs that did survive did so by focusing on disaster recovery rather than online primary storage.

SSPs re-emerge
Encouraged by a number of favorable market drivers and trends, SSPs began to regain traction in early 2005. The SSP model has a much better chance of succeeding today than it did in 2001 for the following reasons:

Focus. The majority of SSPs are concentrating on secondary storage requirements to support business continuity (disaster recovery and backup) and data retention (archiving content to satisfy regulatory requirements, legal discovery requirements, and corporate policies). Focusing on secondary storage requirements means that SSPs will require less end-to-end knowledge and expertise in business applications, databases, and storage arrays. These SSPs also can invest in less expensive disk drive technologies such as Serial ATA (SATA).

Lower disk costs. The cost of disk storage has been declining by as much 30% per year for the past several years. Meanwhile, new low-cost disk drive technologies such as SATA have driven down the cost of disk space for near-line storage even further.

Wide-area networking for the masses. During the past two years, telecommunications service providers have been steadily improving their SLAs. They have rolled out a spectrum of WAN options such as synchronous optical network (SONET), Ethernet, and IP to meet a range of cost points and distance requirements. Premium, high-end network transports such as dense wavelength division multiplexing (DWDM) over fiber are no longer the only option. The advent of these new networking options represents a sea change in storage-related network transport services.

Storage management software matures. Storage resource management (SRM) software has increased the number of terabytes that a single administrator can manage and has made it easier both to provision shared storage and to monitor service levels.

Backup and replication optimized for the WAN. Vendors have optimized their backup and replication technologies to operate over the WAN. Today, you can manage a global instance of a data protection application to back up or replicate data over the WAN to a central site. In addition, these applications require much less bandwidth than in the past because they now send only differential or incremental changes.

Attitudes have changed. In recent interviews, enterprises suggested that they were comfortable outsourcing secondary storage. They viewed outsourcing as a way to refocus their limited IT staff on more value-added IT operations.

What services do SSPs provide?
For each storage service you're considering outsourcing, you need to know four things: 1) what the service is (different providers may use different terminology), 2) whether the customer has a choice in the technology employed, 3) who maintains ownership of the IT infrastructure, and 4) whether the pricing model is standard or custom. In order to offer a repeatable and scalable service with a pay-per-use pricing model (i.e., a per-capacity or per-user monthly basis), the SSP must base the service on a standard set of technologies and infrastructure. If you want to select the infrastructure and technologies yourself, you should expect custom—and higher—pricing. Here are the categories of services that you should expect SSPs to offer:

Hosted primary storage. Usually, service providers offer to host primary storage to existing clients that already host applications with them, but a few SSPs have the ability to offer primary storage access and capacity over the WAN. In this service, the SSP manages the SAN or NAS and provides capacity on-demand. Typically, they have standardized on one storage platform and offer hosted primary storage on a per-GB monthly basis.

Outsourced remote storage management. As part of this service, an enterprise will outsource some aspect of managing its storage infrastructure to an SSP. As part of a storage management service, the SSP may: 1) remotely monitor the health and status of the client's storage infrastructure; 2) provide capacity planning services; 3) administer and monitor backups; or 4) even actually configure and provision storage capacity to hosts. In outsourced storage management, the client maintains ownership of its infrastructure wherever it is located (at its own sites or colocated at the SSP's site). The SSP selects a key storage management tool or set of tools to remotely manage the client's infrastructure. SSPs typically price storage management services on a per-capacity monthly basis.

Managed remote backup and recovery. These services currently attract the most interest from medium-size businesses and enterprises with multiple remote locations. In this service, the SSP remotely backs up PCs and servers to a shared storage infrastructure at the SSP's facility. The SSP chooses the backup software and storage infrastructure it employs to provide this service, which allows it to offer a pricing model on a per-capacity monthly basis. The service provider can also offer different service levels at different price points. For example, if you needed a better recovery point or recovery time objective, the SSP could offer you a more advanced service. Pricing is as low as a few dollars per GB but averages $15 per GB backed up.

Managed disaster recovery—basic. A basic outsourced disaster recovery service provides remote replication for recovery with less data loss than you can achieve with remote backup to tape or remote backup to disk. However, basic disaster recovery services don't offer hot-site, warm-site, or cold-site recovery services. Typically, the SSP uses a standard host-based or appliance-based replication solution, which allows the SSP to be storage-agnostic. Thus, the SSP can offer these services regardless of what primary storage the enterprise has, and the SSP can select the most cost-effective storage to deploy at its facility. Examples of host- and appliance-based replication solutions include Veritas Volume Replicator, EMC Legato RepliStor, and offerings from emerging companies such as Kashya, Topio, and XOsoft.

Managed disaster recovery—advanced. Advanced disaster recovery services include not only remote mirroring and replication but all the infrastructure, expertise, and services to facilitate a hot-site, warm-site, or cold-site recovery. SSPs that offer this service have expertise in host-, appliance-, and array-based mirroring and replication technologies, clustering technologies, and the applications and databases themselves. SSPs always custom-design and custom-price their advanced disaster recovery services.

Managed remote archiving. Here, the SSP remotely archives enterprise data with a standardized set of technologies to a shared storage infrastructure at the SSP's site. Regulatory and corporate compliance requirements and firms' desires to reduce the risk and costs associated with legal discovery are driving demand for this service. Clients subscribe to this service on either a per-capacity, per-user, or per-mailbox monthly basis.

Today, the SSP competitive landscape is fragmented among large systems vendors, telecommunications service providers, pure-play SSPs, regional players, and niche players. To be a market leader doesn't necessarily require the most advanced and in-depth services (such as advanced disaster recovery), but it does require the most standardized and cost-effective service offerings in key areas such as managed remote backup and managed remote archiving. Transparency in pricing will also be critical; services and their prices need to be easy to find and research on company Web sites.

The following is an overview of the competitive landscape and representative providers; it is not an exhaustive list of SSPs.

Systems and services vendors expand beyond custom storage services
Systems giants with professional services arms such as Hewlett-Packard and IBM have global reach and expertise in deploying servers, storage, networking, and software, and they offer consulting services for design, planning, and implementation. In addition, these vendors provide complex and highly customized outsourced storage services (such as hot-site disaster recovery) to their large enterprise clients and can accommodate nearly any infrastructure deployment scenario—infrastructure located at the client's site, infrastructure colocated at the vendor's sites, infrastructure hosted and owned by the vendor, or any combination thereof. However, the systems vendors currently lack a breadth of standardized outsourced storage service offerings for medium-size businesses and remote locations.

Telecommunications providers offer value-added storage services to existing clients
Telcos are continually looking for new services that complement their existing offerings. Telecommunications providers are in a good position to capitalize on the trend to outsource storage services, because: 1) Their extensive global networks and data centers give them both geographic reach and the ability to enforce network service levels; 2) they already possess vast customer bases that consume network-centric services; 3) they know how to price, deliver and manage services; and 4) they're rapidly developing storage expertise. For example, AT&T, British Telecommunications (BT), NTT America, and Verizon are all developing a full range of standardized storage service offerings that address the needs of both medium-size businesses and large enterprises.

Pure-play storage and data service providers
Pure-play SSPs, such as Iron Mountain, will concentrate on storage and related data services as their core expertise rather than expand into other services such as application hosting. This focus will allow SSPs to build up on data protection and archiving services while developing vertical expertise in industries such as healthcare or specialized expertise in areas such as compliance and eDiscovery.

Other storage service options include regional and niche providers
Before systems vendors and telecommunications providers even realized that there were huge opportunities in outsourced storage services, regional and niche providers were first to market. They partnered with best-of-breed technology vendors and realized the need to offer services on a pay-per-capacity basis.

Regional providers offer industry expertise and personalized service. There are dozens of regional service providers in both North America and Europe. These providers focus on particular geographies, industries, or even particular IT environments (such as the mainframe). These types of providers lack the global reach of larger providers, but they focus on meeting the needs of medium-size businesses within their regions efficiently and cost-effectively.

Niche providers capitalize on immediate necessities. Niche providers emerged to take advantage of immediate market opportunities, such as to fill the need for message archiving services to meet regulatory requirements (examples include FivePoints Compliance, LiveOffice, Smarsh, and Zantaz) or to provide backup for small and medium-size businesses (e.g., EVault).

Every firm—regardless of whether it has nine employees or 90,000—has to back up its critical information. Similarly, every company needs a set of contingency plans in the event of a disaster or other unforeseen event. These operations are critical to your overall risk management strategy, but they don't usually help you outsell your competitors. However, implementing and maintaining them properly does absorb an enormous amount of your staff's time and energy. Outsourcing frees up these precious resources for IT projects that help your firm compete, such as helping get products and services to market more rapidly, responding to new business opportunities, ramping up IT resources to support sales campaigns, and providing more timely and granular business intelligence to decision-makers.

Stephanie Balaouras is an analyst with Forrester Research. This article was excerpted from a larger report. For more information, visit www.forrester.com.


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