StorageTek, SNI building "storage utilities"
A number of recent partnership deals have underscored the growing trend toward storage outsourcing, in which vendors attempt to provide "storage utility" services to IT organizations. Examples include Hewlett-Packard`s teaming with Qwest Communications and Intera (see related story on this page); StorageTek`s partnering with ISP Fron-tier GlobalCenter and Level 3 Communications; and the ongoing efforts of StorageNetworks Inc. (SNI) and services providers such as Comdisco and Sungard.
Analysts say that these deals, together with initiatives from large vendors such as EMC, IBM Global Services, and Sun Microsystems, are just the tip of the iceberg, and that storage outsourcing will become an important trend next year. "Storage outsourcing is an extremely significant trend, but the business models are still under construction," says Anil Vasudeva, president of Imex Research, in San Jose.
The overall IT outsourcing market is growing at about 22% per year, and will reach $110 billion by 2003, according to market research firm Input, in Mountain View, CA. The hottest segment is Internet management outsourcing (76% annual growth), followed by business process outsourcing (29% annual growth). Input does not track the storage-outsourcing segment.
Vasudeva says the most likely candidates for storage outsourcing are medium-size companies that need maximum uptime, such as the health, telecommunications, and defense industries, as well as e-commerce vendors experiencing rapid storage growth with small or inexperienced IT staffs. Vasudeva predicts that the trend toward storage outsourcing will occur in parallel with the trend toward application services providers (ASPs). In fact, SNI refers to itself as a storage service provider (SSP).
Within the storage vendor community, StorageTek has been one of the most vocal proponents of outsourcing. Earlier this year, STK inked outsourcing deals with Frontier GlobalCenter and RedDotNet. Last month, STK announced a partnership with Level 3 Communications to provide services such as backup and recovery on a pay-as-you-go basis. Under the agreement, STK will provide to Level 3`s Gateway data centers a variety of "Storage Utility" products, including tape libraries, disk arrays, and software in a Fibre Channel-based storage area network (SAN) configuration. IT organizations will contract with StorageTek under the terms of the deal, which STK expects to generate around $400 million by 2002, according to Darrell Royal, STK`s vice president of integrated solutions.
Level 3 provides co-location services and is building an international IP-optimized fiber optic network. STK`s backup and restore services are currently available at Level 3`s San Francisco data center (Atrieva Corp. is an early customer) and will be available in New York, Denver, Dallas, and Seattle by the end of the year.
StorageTek prices its services on a $-per-MB basis, with pricing ranging from less than one cent to several cents per MB per month. However, analysts such as Vasudeva predict that outsourcing will eventually be priced according to services (as in SNI`s approach), rather than on a per-MB basis.
SNI plows ahead
Also last month, SNI announced its PACS (Protection, Availability, Continuity, Scalability, and Secu-rity) services, which fall into three categories: SafePACS (zero data loss), BackPACS (backup and restore), and DataPACS (data-on-demand). SNI`s approach relies heavily on EMC hardware and software located at various storage points of presence (S-POPs) data centers.
According to Ruya Atac, director of services marketing at SNI, the company has more than 50 customers signed up (none were available for comment), and has grown to more than 175 employees since launching its outsourcing services in May. SNI does not provide specific prices for its services, but Atac says that, as an example, one customer is paying $50,000 per month for storage management services covering 500GB of capacity.
So far, SNI has purchased more than 36TB of Symmetrix disk array storage and plans to purchase another two petabytes over the next four years, according to company officials.
But the road to storage outsourcing may not be smooth or rapid. Currently, there`s confusion about pricing, as well as technology hurdles. "There`s a lot of invention that has to occur before storage resources can be shared like a telephone utility, and part of that includes billing and measurement," says John McArthur, program director of storage systems research at International Data Corp., a market research firm in Framingham, MA.
Next month in InfoStor: "How big is the market for storage outsourcing?"