Enron launches capacity-trading market

Posted on March 01, 2001

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BY LISA COLEMAN

Drawing on its experience in establishing the market for bandwidth trading (buying and selling telelcommunications capacity) in 1999, Enron Broadband Services has created a trading market to bring together buyers and sellers of surplus storage capacity available from storage service providers (SSPs). End users looking for capacity could benefit from some standardization and uniformity in storage services while SSPs benefit from exposure to customers previously unavailable to them, say analysts.

Enron has enlisted the help of StorageNetworks Inc. to provide capacity and software technology. Six other

SSPs are also negotiating with Enron, which has been a trading market maker for natural gas and electricity. "We felt that the SSP industry was a natural extension of our bandwidth-trading activity," says Ravi Thuraisingham, director of global bandwidth risk management at Enron.

Enron is also working with traditional IT outsourcing companies that are aggressively moving toward storage outsourcing. It is also interested in backup, data replication, and data-transfer services. "We're not here to dabble in any one technology or any one service provider approach. We're here to create liquidity in the market," says Thuraisingham.

Storage capacity owned by SSPs will be pooled into Enron's hubs and then provisioned to create the physical capability to deliver data storage capability. Enron will leverage its 25 pooling points worldwide; 18 are in the U.S., one in Asia, and six in Europe. These pooling points provide an interconnection and switching platform for enabling and monitoring bandwidth and storage transactions between buyers and sellers.

According to Thuraisingham, "Over time, we will have many SSPs supplying into a metropolitan market. Also, many customers would enable us to build a physical portfolio that's customer-based and supplier-based." Enron expects its typical pricing model to be $25 to $55 for one managed gigabyte/month, depending on the customer's needs. It will also provide service-level agreements that offer from 99.9% to 99.99% availability but with much harsher penalties for non-availability than SSPs offer.

Brokering services is not new, says Adam Couture, senior analyst, IT services, at Gartner Dataquest, "although this is the first time I've seen storage as a utility brokered. The nice thing is that SSPs have a ready-made trading-partner market, and this should give them some additional exposure to customers they might not otherwise have seen."

One of the first companies to buy its storage capacity using this new model is Best Buy Co., a retailer of consumer electronics, PCs, and appliances. The company has agreed to purchase storage capacity from Enron to support its customer-relationship management application. StorageNetworks will provide capacity, software technology, and management services to Best Buy.


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