Q&A: SSPs and storage outsourcing

Posted on October 01, 2000

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The following Q&A session was excerpted from an online chat session with David Hill, research director, Aberdeen Group. The session was hosted by searchstorage.com, a Web-based search engine site for storage-related articles and information. For more information, visit www.searchstorage.com. Questions were posted by end users.

What is the difference between the terms storage outsourcing, storage utility, and storage service provider?

Storage outsourcing means to give custodial responsibility for managing storage at a remote location to a third party. A storage utility provides I/Os on demand, much like an electrical company provides electricity. Confusion exists because internal IS organizations can also become a "storage utility." Storage service provider is a good description of the service provided. However, even though the term is very explicit, it is also a little vague, because internal IS is a storage service provider as well.

Why would anyone want to consider storage outsourcing?

Storage is growing rapidly, but head counts and budgets are not, so every system administrator is continually fighting a losing battle to do more with less time. Outsourcing is a way to perform a business- critical function while saving IS's scarcest resource-the time of its skilled people.

Working with an outsourcer requires a service level agreement (SLA). My organization has never put together an SLA. How do we know what to look for in an SLA?

Outsourcers will work with you to set up an SLA. Of course, the SLA will have subtle biases in favor of the outsourcer. If your organization is not familiar with SLAs, you might consider employing a neutral professional services organization to represent your interests in the negotiating process.

Do I want to keep my data close to my servers for latency reasons?

Latency is an important issue for some data-intensive online transaction processing systems. You have to know how much latency you can tolerate and whether or not the outsourcer can operate within those latency guidelines.

Can just anybody get into the SSP business? Isn't one company as good as the next?

Any company can issue press releases saying that it is getting into the storage outsourcing business. Almost any company can equip and staff a data center. However, making a storage outsourcing business work is much more sophisticated than putting in place a physical architecture and hiring staff. The key is in the software and business processes that a storage outsourcer uses to deliver a storage utility service. For example, an SLA is a useless piece of paper unless there is software in place to meter usage and track against the metrics in the SLA to determine compliance. Moreover, the storage services provider has to put processes in place to ensure that the right physical infrastructure and trained people are in place to meet the needs.

What is the long-range trend for storage outsourcing?
Is it a fad that will go away, a niche market, or a compelling trend that enterprises would be foolish not to be part of?

There is a strong likelihood that storage outsourcing will become a compelling trend. Aberdeen sees a strong trend toward Web-based companies using the services of a storage services provider. Managing the complexity of storage growth, including finding qualified people to manage storage, is not a core competency of Web-enabled companies, and should not be.

As all companies become part of the Web economy, the same principles will apply to them as well, although the Fortune 500 will be slower to move simply because of the entanglements of their current IS investments. But, at some point, perhaps more than five years out, they will cut the Gordian knot and move to storage outsourcing.

All the companies in the field will not succeed. What happens if the company I choose fails?

Typically, if a company were to fail, another company would take over responsibility for your business. However, you should discuss this with your outsourcer. You do not want your outsourcer declaring bankruptcy, laying off all staff, and closing the doors with your data locked on disks and tapes that are inaccessible.

Make sure that your contract has an escape clause. The escape may be escrow funds that would continue the operation of the outsourcer for a period of time long enough for you to move your data safely to an alternative outsourcer (or in house).

What happens if a company I choose merges with another company and I don't like the service? How do I get out of my contract?

Service can have two meanings in this context. One is whether or not the new company is maintaining the SLA. If not, the penalty clauses in the original contract should suffice. The second meaning of "service" is the relationship that you have with the people at the storage service provider. That relationship can change any time, even without a merger, such as through reorganization or staff changes. At that time, having a good SLA is important because the emphasis of the relationship may shift from the spirit to the letter of the SLA.

If I decided to go to an SSP model, what kind of hardware installations are still required onsite?

The only part of the physical infrastructure that disappears from your onsite installation is external storage. Your servers plug into a "storage port" that connects to a network that the SSP uses.

Would it cost more to outsource my storage than to keep it inside?

Old-time outsourcing was about saving money. A user would be guaranteed a fixed level of costs for the length of the contract. The outsourcer, with sales and marketing overhead as well as profit margins to figure into its cost basis, depended on falling technology prices over time as well as economies of scale and standardization to survive.

Therefore, the outsourcer might have taken a profit hit in the first few years of a long-term contract. Storage outsourcers want to make profits as they go-a good idea for staying in business. A storage outsourcer may cost more because of that, but few organizations really know the cost of a managed gigabyte of storage anyway (and often underestimate it). Storage outsourcers will sell on value-add, rather than cost, to make up any price differences.

What is the most important element of an outsourced storage solution?

Peace of mind. Can you sleep better at night knowing that an organization whose core competency is managing storage is providing what you need? Are the performance levels (fast response time to requests for data), availability (there when you need it), security, etc. what you want? If the answer is yes, you have found the most important element.

If I outsource, why don't I outsource my servers and even my applications?

The make vs. buy decision (i.e., internal vs. external sourcing) for IT is an ongoing process, and you may want to consider outsourcing servers and applications as well. However, each element of the outsourcing decision stands on its own.

As new SSPs are being formed each week, how do I choose which one to use for my storage outsourcing needs?

With established SSPs, you can check references and do onsite tire kicking. Because you may be an early customer for a new SSP, you have a lot of work to do. How well funded is the company? How closely does the SSP's business model fit with your needs? How confident are you that the new SSP can really deliver as it has promised?

There is a lot of work that you have to do. The advantage is that you may get a good price and good concessions (for being a reference) that later customers might not get.

Who would want to become a storage service provider? It seems to be a low margin business, with shrinking margins in the future.

Like many businesses, there will be a rush of SSP entrants, but many of these will fall by the wayside as they find it isn't as easy as they thought. Being an SSP requires good software to manage service level agreements, as well as the right business processes. That is more difficult than it might seem. As a customer, I would rather pay more to ensure that it is done right than take a risk. That implies value-add and therefore high, not low, margins.

Can you comment on the time-to-market advantages that a customer might gain from storage outsourcing, as opposed to building an infrastructure on its own?

Time-to-market is especially important for Web economy enterprises whose storage demands change, and increase, very rapidly. These enterprises do not have to find and hire scarce storage administrator skills, acquire facilities, and plan/order/install physical equipment. In the world of Internet time, that can be a time savings on the order of months-and time means money.

What applications, besides e-mail, are good candidates for storage outsourcing?

Obviously, personal productivity ap-plications, such as e-mail, are good candidates for outsourcing. Rich media content, including video, audio, document repositories, etc. are other possibilities. However, online transaction processing systems (OLTP) systems can also use storage outsourcing. The only potential drawback is distance from your site to the outsourcer's location, which may cause latency problems, but that is typically not an issue. Other applications, including business intelligence applications, customer relationship management, sales force automation, and enterprise resource planning are also good candidates for outsourcing.

What types of customers are adopting outsourced storage?

Web-based companies are rapidly adopting a storage-outsourcing model. Small to midsize companies will indirectly adopt storage outsourcing, partially through the use of Internet-based storage services where documents, spreadsheets, and presentations can be stored and shared.

You mentioned that "Storage is actually network storage." What is your position on direct-attached storage for high I/O environments?

Most storage today is still direct attached to a single server. There is nothing wrong with that for many applications. However, that storage is still typically network storage because the application delivers data to users at their desktops over a network, such as a LAN. Thus, the end user does not care if the storage is DAS (direct-attached storage), NAS (network-attached storage), or SAN (storage area network).

To protect companies that are not as knowledgeable about the issues is there some sort of independent certification of the storage provider that addresses reliability, security, etc.?

No. That is why knowing your SSP well and checking references is so vital. If you are not experienced in making that kind of a decision, you may want to consider using a third-party professional to assist you.

What do you think will be the key differentiating factors between SSPs in the near term?

It all comes down to software. Software that manages the SLAs enables customers to gather more information on what is really happening with their storage than they could in-house, and enables them to more flexibly perform tasks, such as replicate rich content to multiple sites quickly to meet an unexpected rise in demand.

What are the dangers of outsourced storage?

The danger is that, if you haven't done your homework, you may sign up with an SSP that will not be able to live up to its promises. Penalty clauses for non-performance may not be sufficient to cover your losses.

If I outsource, should I be concerned about the SSP's storage platform, in terms of hardware, or just trust the SLA?

Your relationship is with the SSP, not the underlying storage platforms. Your protection is the SLA. Let the SSP determine the best technology for your needs. That is its expertise.

What are the current and future technology limitations-e.g., network bandwidth or length of Fibre Channel transmissions-if I go with an SSP?

The only technology limitation might be if you have a very user- and data-intensive online transaction processing system that for latency reasons needs to have the server and storage in relatively close proximity, say under 125 miles. Otherwise, there is enough dark fiber available that I don't think there will be any problems either at the metropolitan or wide-area-network level.

Is it a good option to keep my production storage in-house and only outsource my disaster-recovery needs?

Not really. Any data can be outsourced. You just have to examine whether it is better to make or buy. If buy, then you have to make sure that you are comfortable with having data offsite managed by a third party. Once you get past that, you can evaluate an SSP that best meets your needs.

Are big financial organizations that have mission-critical data and government regulations to deal with choosing to utilize SSP services?

Actually, yes. Managing storage is a key core competency of an SSP, and not of most other companies. The economic principle of division of labor enables each type of company to do what it does best. More and more companies will consider using storage outsourcing for their mission-critical systems.

David Hill is research director for storage and storage management at the Aberdeen Group consulting firm in Boston, MA.


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