New Demand Seen for Data Storage
By IAN AUSTEN
nytimes.com
THE recent scandals on Wall Street involving missing, misplaced and just plain embarrassing internal memos and e-mail have been very good for at least one industry: data storage, traditionally one of technology's sleepiest sectors.
The renewed emphasis on keeping records in a way that will satisfy regulators has become a sales opening for makers of storage hardware, which have been struggling with falling prices for years, to package higher-margin software for managing data with their disk and tape drives.
"This has obviously been a huge market opportunity because it goes beyond selling disk drives," said Mark S. Lewis, the chief technology officer at the EMC Corporation, a storage systems company based in Hopkinton, Mass.
Mr. Lewis has also found that many of his traditional customers find themselves in new territory. "You have these poor I.T. people who used to keep data for data's sake," he said, "now have lawyers all over them."
Thanks to archived e-mail, the recent securities investigations offered everyone a peek at the inside world of high finance. The electronic record-keeping system at Citigroup, for example, let the world read the e-mail of the former analyst Jack B. Grubman, boasting that his ratings on AT&T's stock helped secure a place for his children in a prestigious nursery school.
Beyond providing voyeuristic thrills, those archives proved a valuable tool for investigators. That importance was underscored late last year when the Securities and Exchange Commission, NASD and the New York Stock Exchange fined five major brokerage firms a total of $8.25 million for not preserving e-mail. Since then, the S.E.C. has introduced new rules for storing electronic records related to audits, including many e-mail messages, for up to seven years, rules that will be felt by every public company.
Other regulators are demanding better storage, as well. Recently, the Food and Drug Administration strengthened its requirements for documents related to drug approvals.
In a stroke of good timing, about a year ago EMC introduced a new system, Centera, that meets regulatory storage requirements. Since then, the company has installed a total four billion megabytes of capacity in systems that use the technology. "This product has the fastest sales cycle we've ever seen," Mr. Lewis said.
I.B.M., as well, has seen improvements in its storage business although company executives do not attribute them entirely to the regulatory reaction. Revenue at its storage, or "content management" business, as the company prefers, is up 64 percent over a year ago, the company says.
Most new e-mail systems archive and duplicate every single piece of incoming mail, including spam and unread messages, even though all those functions are not specifically required by the new regulations. Companies would rather save it all, according to Mr. Lewis, than be sorry later when facing investigators.
"What they don't want is the `missing minutes on the tape' situation," he said. "They don't want to have to say, `It looks like we have all our e-mail, except what you want.' "
Mr. Lewis said that with many current storage systems, there was little to prevent people with some computer knowledge from altering records stored in digital archives to hide their misdeeds. To thwart that, the Centera system establishes what EMC calls a digital fingerprint. Essentially, it is a long data set that represents the state of a group of records. To change even a single character will create a mismatch with the fingerprint and cause the server to reject the alteration.
With many new storage systems, companies also include improved software for sifting through data. "But that's more for their own reasons than any regulatory demand," said Nancy Marrone, senior analyst at the Enterprise Storage Group, a storage consulting company based in Milford, Mass. "If you can access particular data, such as one user's e-mail, you don't have to turn over a whole tape that has somebody else's e-mail and that might contain something incriminating," she said.
While not every company is likely to be thrilled with spending money to accumulate old e-mail, Theresa O'Neil, director of strategy for I.B.M. Tivoli Storage Software, said that the S.E.C. and other regulators might indirectly be doing them a favor by defining how they should handle old data.
"In one of my previous lives, I did data mining," she said. "And sometimes policies about data are the hardest things to get set. In this case, the S.E.C. and the F.D.A. have set the policies for them. It's really taken the burden off companies."
Another consolation, she added, is that improved storage systems might allow companies to use information that currently lies dormant. By way of an example, she said that a good searching system could allow customer service representatives to summon all e-mail related to a purchase while they deal with a customer's complaint. "We hope that over time storage can seem like some kind of benefit to our customers," she said.
According to Ms. Marrone, the sales potential to hardware and software companies from all this has yet to be fully realized. "But this is lending itself to becoming a bit of a boon," she added.
Last week, she was surprised to see a crowd of 300 attend a trade show session held by her company about the new regulations. "Before people really didn't think about this," she said. "Now this is something that you cannot ignore." |
