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Can SSPs hurdle customer hesitation?

The outlook is good for SSPs say most industry analysts. But, if the future's so bright, why are so many enterprise customers holding back when it comes to turning their data storage needs over to an outsourcer?

Despite a year of positive media coverage and analyst predictions, it appears the IT community still isn't sold on the concept of outsourcing to fill their data storage needs.

In fact, according to a recent searchStorage poll, 93% of storage professionals surveyed said that they do not outsource any storage, while the remaining 7% said they outsource some storage.

Spending figures compiled by the Framingham, Mass.-based research firm International Data Corp. (IDC), indicate that the IT community is still hesitant about outsourcing storage, partly because they want a big name behind the services.

"When customers do outsource some or all of their storage, it tends to be with a name-brand, established company like IBM Global Services or EDS," said Doug Chandler, IDC's program manager for storage and data management services. "Progress has been relatively slow for the pure-play SSPs."

Target customers for SSPs were originally big companies, most of which are not comfortable with letting a third party handle its mission-critical data. This caused the SSP industry to set its sights on the burgeoning field of Internet start-ups, most of which lacked the capital to buy their own enterprise storage systems but had a need for huge amounts of storage capacity. However, the implosion of the dot-com landscape in recent months has taken its toll. SSPs that put all their eggs in the dot-com basket have suffered serious cash flow problems.

"A lot of people are questioning the [outsourcing] model because SSPs keep changing their business models," said Jason Schaffer, vice president of marketing for sed StorageWay, a Fremont, Calif.-based SSP. "The momentum of the market hasn't slowed, just people's impressions of it."

The life-blood for most SSPs, according to Chandler, is backup services. IDC said that backup accounts for approximately 60% to 70% of SSP business, partly because it is a way for customers to test the waters before shipping all their storage management off to a third party.

"It solves an immediate problem for the customer. Most customers say their backup process is a headache or worse, non-existent," said Chandler. "Also, pricing-wise, backup services are cheaper than primary data storage outsourcing."

The storage service provider (SSP) model was born of the pre-millennium, dot-com boom and was based on the idea that the growth of corporate data coupled with a shrinking pool of trained IT professionals would drive businesses to look for new ways to solve their storage headaches.

SSPs come in two basic flavors. The first has storage devices located on-site at the customer's location, but owned and managed by the SSP. The second model is based on remote access, where the storage is located off-site at an Internet Data Center. In both cases the SSP manages and maintains the customer's storage.

According to William Hurley, program manager for the Yankee Group, a Boston-based research firm, customers looking to subscribe to SSP services should look for, among other things, clearly written, robust service level agreements (SLAs) that have explicit remedy language and reference accounts; a comprehensive set of services; the ability to manage primary disk on or off-site; and prices around $25-45 per gigabyte for back-up and network-attached storage (NAS), and $65 per gigabyte for primary disk.

Hurley said since price is the first and last criterion a customer will use to measure a SSP, the rest of the factors become even more important. "Price is actually the most negotiable point on the list, where the other factors are not," he said.

Major players in the SSP space include StorageNetworks Inc., StorageWay Inc., ManagedStorage International Inc., Storability Inc., and Storage Access Inc.

Let us know what you think about the story, e-mail Kevin Komiega, assistant news editor

For more information:

searchStorage Discussion Forum on SSP pricing

searchStorage Technical Tip on availability: Ensuring failure-free SSP service

searchStorage Technical Tip on hosted storage: Too hot to handle?

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