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StorageNetworks changes focus again, markets storage OS

Storage services provider StorageNetworks is making software the main focus of its business, with services coming in a close second. This is the company's second shift in focus in a year.

Hit hard by a slumping economy and the less-than- expected demand for storage service providers, StorageNetworks Inc., is once again attempting to redefine itself. The former pure-play storage service provider is making software its core business and offering services on the side.

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The Waltham, Mass.-based StorageNetworks, announced Tuesday the commercial availability of STORos v5.0 platform, the foundation that supports the company's storage management applications. The company also introduced STORos StorageManager v5.0 software, a policy-based storage management application with integrated backup reporting and administration.

Since the fall of the dot-coms, the concept of the storage service provider (SSP) has changed dramatically. StorageNetworks itself has had to adjust and adapt its business model over the past two years.

This is the company's second shift in focus in less than a year. Last year, it changed from a predominantly hardware-intensive outsourcer to a software and managed services provider.

But, changing direction hasn't been without its hurdles. In addition to having to lay off staff, StorageNetworks was forced to close nine of its Storage Point of Presence (SPOP) data centers and downsize another four last year, leaving 35 SPOPs up and running to support existing customers. The company scaled back to reduce its hardware purchases and lessen the amount of cash necessary to run the business.

The company's stock has dropped 98% since July 2000. It opened this morning at $2.93 a share.

According to analysts the company was losing money hand over fist because their business models just weren't working.

Now, StorageNetworks faces the challenge of having to make its software strategy gain financial traction in a tough IT spending economy and have set expectations that they will achieve certain breakeven milestones by the end of this year, said Tony Prigmore, senior analyst, The Enterprise Storage Group Inc., Milford, Mass.

"Having said all this, it is tough to imagine they go it alone forever ...these are times when being part of a broader value proposition can work to your advantage in terms of client wins," said Prigmore.

The STORos platform and StorageManager v5.0, which StorageNetworks said enables businesses to offer storage as a utility, are the result of the company's four-year development efforts in the area of management software.

The STORos StorageManager v5.0 software incorporates heterogeneous storage area network, network-attached storage, direct-attached storage and backup management in a single application. It also offers policy-based management, organizational hierarchies, service-level agreement (SLA) management and process management capabilities such as provisioning and charge-back.

Peter Bell, chairman and CEO of StorageNetworks said STORos will plug into all of the major enterprise management frameworks through shared application programming interfaces (APIs) and consulting services, letting users use the software with other management software products such as BMC Software's Patrol and Computer Associates' UniCenter.

According to Bell, the software's main goal is achieving a quick return on investment.

Bell said the sales cycle for this software product should be in the six month range, which is faster than the sales cycle for managed services, and that StorOS provides such a rapid payback that it is easy for IT execs to justify implementation costs.

Though official pricing was not announced, StorageNetworks' pricing model will be based on the number of connection points in a given network rather than the industry standard of selling based on capacity.

"The value proposition is about efficiencies. If you're selling based on efficiencies, you shouldn't price based on capacities," said Bell.

As far as total pricing, Bell called STORos an "enterprise product."

"Many customers do have money budgeted for products that do have an immediate ROI," he said.

StorageNetworks' put its software through the paces in its own facilities, which span 42 distribution data centers and 1.5 P Bytes of storage. The company said StorOS delivered 99.99% availability and in that environment and enabled 400% capacity over 18 months without an increase in labor costs.

Bell said STORos will plug into all of the major enterprise management frameworks through shared application programming interfaces (APIs) and consulting services, letting users use the software with other management software products such as BMC Software's Patrol and Computer Associates' UniCenter.

StorageNetworks estimated that it would take six months to obtain full functionality in an enterprise environment.

Bill North, director of research, Storage Software, for International Data Corp., said StorageNetworks offering is worth a look.

"They are seeing the I/O problems, the backup problems, where replication works and where it doesn't on a daily basis...They can aggregate and accumulate that knowledgebase and have been doing so since they started doing business."

"The real value that they're bringing is that they're seeing [I/O, backup and replication] problems in real-time," he said.

North said STORos is a credible, field-proven offering. "StorageNetworks has more first-hand experience in developing software to solve real-world problems."

While he indicated that you can't discount the other storage management vendors like Computer Associates, IBM/Tivoli, EMC, Veritas and HP, he said StorageNetworks has experience that is hard to duplicate and probably unique with using their own products.

The STORos StorageManager v5.0 software is currently in beta testing sites include and will be generally available by the end of the second half of June 2002.

StorageNetworks has not given any guidance as to when it will see revenue from the STORos software, but it hopes to see an impact in the second half of the year.

STORos will find its way to customers via direct sales. StorageNetworks is also going to try to build sales channels through integrators and value added resellers.

IDC analyst Doug Chandler said StorageNetworks also faces some perception problems.

"I get the feeling that [StorageNetworks] is challenged just like most companies these days," said Chandler. "I think there are probably some perception issues in the market, since [StorageNetworks] changed its strategy and model several times over the past four years."

Editors Paul Gillin, Michele Hope and Mark Lewis contributed to this story.

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