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SSPs: Managing the high cost of storage

Storage as a utility might seem foreign to some, but the experienced storage professional knows it may soon become a reality.

Storage service providers (SSPs), companies that store and manage customers' data much in the same way the electric company provides and manages a business' electrical service, are growing in numbers.

"It's storage as a utility," says Doug Chandler, a senior analyst at Framingham, Massachusetts-based International Data Corp. (IDC). "The idea is to provide storage like any other utility, like a phone or electric bill," he says. "Where the devices are located can vary. They could be on-site at the customer's location, but owned by the storage service provider. Users pay according to capacity."

A typical storage service model is service through remote access. "Theoretically, it's supposed to deliver the same capacity and performance as the on-site model, but there are certain limitations like fibre channel connections," says Chandler. "Right now, they can only stretch about 25 to 30 miles. This limits certain implementations."

Chandler also says that this limitation has caused many SSPs and storage area network (SAN) providers to be set up in metro areas to service the most customers. "The appeal of this new storage utility model lies in its flexibility and in the fact that companies don't need to make an up-front investment in storage devices," he says.

Tufans Technology Corp., a Seattle, Wash.-based Internet start-up company with five employees decided to subscribe to a SSP after it realized that most of the storage solutions available were overkill and overpriced.

Tufan's President and CEO Michael Feldman said, while his company needed "EMC caliber equipment," it was very expensive. "Buying our own EMC box up-front would have strained our budget," he says. "EMC actually recommended that we go to StorageNetworks. Doing so has allowed us to keep our up-front costs extremely low."

StorageNetworks Inc., a SSP based in Waltham, Mass., manages Tufans hardware. "It would be very expensive to maintain on our own," said Feldman. "I'd need a full-time employee just to manage it," he says. "StorageNetworks is definitely providing this service to us at a competitive, if not lower, price than it would cost us if we had to do it ourselves."

According Chandler, Tufans is an example of a company that's ripe for SSPs. "Internet start-ups/dot com companies don't have a lot of money to put into setting up large storage systems," he says.

Mark Vershel, of Matrix Partners, a Waltham, Mass.- based venture firm that recently invested in a new SSP, StorageWay, Inc. of San Jose, Calif., says SSPs who focus on Internet business are going to come out ahead because that is where he sees the most growth in storage needs.

"Customers don't just need disk space," Vershel says. "They need a suite of support services to help them predict, manage and maintain their storage needs. There's going to be a certain level of customers that are going to do it all themselves. They already have big IT staffs and they're going to leverage that. I think we're going to see some mixed-mode customers until they become comfortable with outsourcing their data."

Chandler says that the bigger issue right now is which kind of customers are going to use SSPs. "Initially the targets were big companies, but most aren't comfortable with storing their data off-site. And, if they do decide to go off-site, they don't want to do it with a start-up. They want to do it with a bigger, more established company that they trust and have a working relationship with," he says.

Industry experts agree that security is an area of concern for many businesses. But, SSPs say users have no reason for worry.

"One of our biggest customers is Merryll Lynch. If anyone would have concerns about security it would be them," says Ruya Atac, senior director of services and field marketing for StorageNetworks.

Feldman agrees. "We have no fear. There's a certain level of business trust and StorageNetworks has built up a good reputation."

Atac says that people don't care about bits and bytes, they just want to plug in. She says that one of the greatest benefits of "plugging in" for storage is that it frees up the IT staff. "Finding people, educating them and retaining them--it's insane. People are a tremendous resource right now and that resource is strained. Companies are all struggling for the same IT professionals."

She says that the nightmare of backup and restore swallows up too many hours of the day, and using a SSP solves that problem.

"We have some pretty optimistic and aggressive forecasts for the SSP market," says Chandler. "We're predicting close to $4.8 billion worldwide by 2003. We think that this whole utility model, once certain hurdles like security and bandwidth are cleared, will be very advantageous to customers."

Chandler says that recognizing the growth potential in the SSP arena, a lot of companies have announced their intentions to do something, but not many have followed through yet.

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