Looks best for small and mid size companies without an IT staff or with a small one...
Apr. 21, 2000 (InternetWeek - CMP via COMTEX) -- As e-business demands widen but
the talent pool narrows, more companies are expected to outsource their storage
systems.
Look for more managed storage offerings to emerge in the coming months,
according to vendors and industry analysts. Many companies will turn their data
management over to what is being called storage service providers, or SSPs, to
manage data either on site or at a vendor hosting facility.
Like other outsourced IT services, hosted storage lets IT organizations offload
a cumbersome but critical function. When a customer requires more capacity, it
doesn't need to add more disk drives or arrays-administrators just alert the
provider.
However, if you don't use an SSP today, you're not alone. Most large companies
still choose to manage their own storage systems.
Spending on managed storage services, a mere $11 million last year, will grow to
$140 million this year and $4.8 billion in three years, according to
International Data Corp.
A key driver will be mounting capacity requirements. In addition, the difficulty
and cost of hiring people to manage storage systems will persuade many companies
to outsource that function, analysts said.
"Storage demand is doubling every year," said Dataquest analyst Adam Couture.
"While the cost of storage hardware is going down 25 percent to 30 percent
annually, the cost of managing it is five to seven times the hardware costs."
Growing volumes of e-mail, which in many cases must be archived, are the No. 1
storage hog, according to a Dataquest survey of IT organizations.
Acutely affected are financial services firms, which are required by law to
archive all communications with customers. E-Trade turned to storage service
provider Zantaz.com to archive e-mail for compliance purposes.
"From a customer service standpoint, it's better for our customers because it
allows us to access customer e-mails more quickly," said Tom Bevilacqua,
E-Trade's corporate development chief. E-Trade will use Zantaz.com for archiving
other types of content as those services become available later this year, said
Zantaz.com CEO Ralph Mele.
Many dotcoms are also farming out their storage because they don't want the cost
or headache of managing storage hardware.
For example, iExplore, an online travel agency, opted to have Conxion host its
400 gigabytes of archived data. Chief technology officer Bill Bernahl said that
volume is increasing all the time, especially as the agency gets into streaming
media.
IExplore's contract with Conxion is for 500 gigabytes of storage, but if the
agency should need to double that amount, it could do so without investing in
any hardware, Bernahl said. "If we wanted to make that change to an internal
storage infrastructure, we'd have to upgrade a lot of machines and controllers
across our entire environment," Bernahl said.
Service On Tap
Several vendors are rolling out hosted storage services. Compaq Computer and
Storage Networks Inc. last week said they will jointly develop managed storage
services based on Compaq technology. Compaq made an undisclosed equity
investment in service provider Storage Networks.
Hitachi Data Systems also plans to become a hosted storage provider, said John
Lovejoy, general manager of HDS's IT Services Group.
"We're currently in talks with three potential dotcom customers, but we haven't
locked in any deals yet," Lovejoy said.
The leading storage hardware suppliers-EMC and IBM-say they have no immediate
plans to offer hosted services. However, Ed Johnson, IBM's director of storage
area network integration, didn't rule out future hosted offerings from IBM
Global Services. Both hardware vendors said they're supplying systems to service
providers.
Conxion is conducting final tests with IBM's high-end storage system, the
Enterprise Storage Server (known as Shark), for its newly launched Edge SAN
hosting service. The service will use Shark and SAN data gateways attached to
Unix systems as well as IBM Netfinity servers to let content providers update
stored static files, said John Seamster, Conxion's director of marketing.
Some IT organizations with internal storage systems have started outsourcing
portions of it, saying they can't keep up with the demand for capacity.
"We had a previously built internal archival system that was fairly useless
because data volumes had gotten so large it would take us weeks or a month or
two to retrieve small amounts of data," said an IT manager at a large financial
brokerage firm, which, like E-Trade, is using Zantaz.com to archive e-mail.
"This allows us to leverage highly skilled personnel to do much more important
work that's good for the firm as a whole instead of doing this grunt work,
data-scrubbing sort of job."
What's The Benefit?
Still, most companies with dedicated storage systems don't plan to move them off
site, according to analysts. Many don't want to give up the control, while
others think it's risky to move data off one platform to another.
Prudential Securities Inc., for example, has seen storage requirements increase
30 percent a year. A customer of IBM's Shark, Prudential wouldn't even consider
using an SSP. "What's the benefit of having someone else run it?" said William
H. Anderson, executive VP and CIO, Information Systems & Communications
Division, Prudential Securities.
David Wade, CIO of Primerica Financial Services, said he would consider
outsourcing storage, but the loss of control concerns him. "Once you lose
control, you have vulnerabilities meeting service level agreements," Wade said.
Trust, security and privacy will keep companies with sensitive data, such as
Prudential and Primerica, from moving the management of their storage to SSPs,
said Giga Information Group analyst Art Williams.
That mind-set will gradually change, said Dataquest's Couture. Many companies
are holding back "because they have entrenched infrastructure and staffing," he
said.
It's also likely that conventional application service providers will add
storage to their roster of services, said Yankee Group analyst Joanna Makris.
"It seems like the SAN as a managed service is one of the many elements the
hosting providers are adding to their service bundle," Makris said.
Giga Information analyst Williams said hosted storage may appeal most to small
businesses and dotcoms than to more established companies with storage in place.
"Factors that drive ASPs are time to market, which in hosted storage means a
customer can be put in business instantaneously," he said. "Also, it relieves
smaller companies of problems in finding technical personnel in a tight labor
market."
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WHAT TO CONSIDER WITH HOsted storage services
Advantages
-Hosted services don't require investment in gear and IT personnel
-There are no infrastructure requirements; deployment is instant
- As needs arise, capacity can be added immediately
Disadvantages
- Companies that already have storage infrastructure could find it disruptive to
move data to other systems
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