By Zachary Shess
Today's IT shops suffer from several storage-related maladies, with symptoms such as relentless capacity and access demands, a significant skills shortage, and complex storage network implementations. With management costs far exceeding the price of raw capacity, companies, especially dotcoms, are slowly warming up to the idea of outsourcing to storage service providers (SSPs).
StorageNetworks Inc. (SNI) began evangelizing storage outsourcing in 1998 by introducing regional storage points of presence (S-POPs) where companies could have their data stored and managed remotely. Since SNI's entrance, several SSP startups, most recently Storability and StorageWay, have launched services targeting both traditional and Internet businesses. While each company has a divergent focus and business model from SNI, both justify jumping into a still unproven market by reciting IT storage problems and optimistic forecasts from industry analysts.
Dataquest, a market research firm based in San Jose, predicts the pay-as-you-go storage utility market will grow from $10 million in 1999 to $8 billion in 2003. International Data Corp. (IDC), in Framingham, MA, predicts that storage utility spending will exceed $4.8 billion by 2003.
To justify storage services, SSPs and customers first consult on a service-level agreement (SLA). During this process, SSPs help customers assess existing needs and future growth and availability requirements. Pricing for SLAs ranges dramatically, depending on the type and breadth of services offered and the guaranteed level of data availability. While SSPs are tight-lipped about specific pricing structures, industry analysts anticipate a range of $30 to $80 per managed GB per month.
Despite the complexities of procuring, implementing, and managing storage, hesitancy to turn over data to another party, especially a startup, remains a gating factor among end users. With that in mind, Storability founders believe end users will be more likely to embrace these services if they can keep data under their own roof, but without the burden and cost of managing it.
Kirby Wadsworth, vice president of marketing at Storability, in Southborough, MA, says that many storage service companies try to solve management problems by asking customers to change the way they conduct business. "It makes no sense. You don't solve customer problems by telling them they're doing everything wrong. You have to solve problems non-disruptively, and set them up for the future," he says.
Under Storability's AssuredAbility and AssuredStorage service programs, customers retain control of their stored data. The AssuredStorage service provides enterprise-level capacity and services on a pay-for-service basis, which includes implementation, monitoring, product repair, and procuring and financing additional equipment. The AssuredAbility consulting services include design, implementation, and management.
Doug Chandler, a storage outsourcing analyst at IDC, acknowledges that Storability's model could appeal to companies "who have issues with the physical location of the storage." However, even with a pay-as-you-go type of service, Storability and other SSPs must successfully convey-and then deliver-a differentiated value proposition.
"Just offering storage as a utility has a relatively low barrier of market entry, and it's something that established storage vendors could offer in a minute," says Chandler.
While Storability offers its services at the customer site, StorageWay has aligned with data centers and co-location facilities to focus its services toward Internet companies who have already outsourced with partners such as AboveNet, Exodus, and Level 3. StorageWay has its own data centers installed at its partners' sites, linked via high-speed fiber to customers' servers. Eventually, StorageWay plans to deploy its storage centers in 35 locations worldwide, each of which will accommodate from 23TB to 100TB.
Many Internet companies have already accepted storage outsourcing, says Dan Marshall, StorageWay's vice president of sales and market development, in part because they haven't established a history with a storage vendor.
"Because they've adopted outsourcing, you don't have to go through a whole new education process. It makes for a quicker time to market," says Marshall. He adds that the enormous capacities of the data centers can help these types of businesses overcome the challenge of scaling storage capacity.
"Internet companies can't predict their capacity growth, and it's a real problem for them when it comes to managing costs," says Marshall.
Through its OutStore and OutBack services, StorageWay offers storage management services that include backup and restore, disaster recovery, verification, and archiving. Eventually, the company expects to offer storage application integration services such as data mining.
Despite an apparent market need and optimistic analyst forecasts, SSPs still face obstacles, such as convincing corporations to give up control of their data and achieving overall market validation. "Emerging SSPs need market validation more than competitiveness," says IDC's Chandler. "Startups need an SNI, for example, to succeed in a very high-profile model because there's no guarantee that this market is going to take off."