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Technology Stocks : StorageNetworks, Inc. (STOR)
STOR 32.210.0%Feb 3 4:00 PM EST
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To: The Other Analyst who wrote (47)7/21/2000 1:42:39 PM
From: Bill Fischofer  Read Replies (1) of 187
 
Actually it is a new market. When the interstate highway system was built in the 1950s the initial beneficiaries were the companies that helped to build it, but the real value came into being as the users of the highway created new markets. The same is true of the Internet. Once you have a real broadband infrastructure in place there are hundreds of new things you can do which simply weren't feasible before. Outsourced storage is just one of them, but it is part of the large application service provider (ASP) opportunity.

As I've been preaching on the EMC thread for some time, the key to understanding the storage market is to appreciate the growing gap between storage demand and storage productivity. When a company quadruples its storage needs it simply cannot afford to quadruple its IT staff to match those needs. Even it if had the money (and few do) there just simply aren't enough trained data management professionals around to support this sort of growth. What is required, then, is for storage productivity to grow at a rate commensurate with the rate of overall storage demand growth so that one's existing IT staff can keep pace. This need for constant productivity growth is the key to understanding the entire dynamic of the storage industry. Productivity must keep doubling and redoubling year after year because underlying storage demand growth is relentless and insatiable.

This is fine for large organizations which already have an IT staff, but there are an enormous number of small and mid sized businesses that have little if anything in the way of a professional IT staff and little hope of building one. This is the market for outsourced storage management and ASPs and I expect this to be a huge growth area over the next decade as companies start to use all of that communications capacity that the telecom carriers have been building. This is also the reason, I suspect, why STOR is enjoying seemingly lofty valuations.
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