SMB storage market welcomes the big boys

Computer Technology Review, Dec, 2004 by Mark Ferelli

Over the past two to three years, the storage community has been paying more attention to the Small/Medium Business marketplace. And it is a rational place to be, since enterprise data center budgets only exhibit modest single-digit growth. Not so the SMB market space, which has its own IT problems to address.

Recent surveys from the Yankee Group show that:

* Approximately 46% of SMBs have three or fewer dedicated IT employees

* Nearly 60% of SMBs have a total storage budget of $50,000 or less

* Roughly 69% of SMBs are willing to spend less than $10,000 on storage systems and storage networking equipment to deploy 1TB of external storage

* Nearly 38% of SMBs have less than 1TB of storage in their IT environment.

Going hand in hand with these challenges is an opportunity. As demand for storage devices of all kinds (drives, HBAs, switches, enclosures, etc.) grows, prices have been falling far enough to meet the budgets of smaller organizations. This represents a breakthrough for network storage.

In the past year, vendors across the storage industry have targeted the SMB segment as an area for considerable growth. Most SMBs rely on basic internal server disks or direct-attached storage for storing data. The needs of these businesses to store and manage the ever-increasing amount of data with limited resources are similar to large businesses. Nonetheless, vendors have gone through several iterations of product development, packaging and pricing to enter this market segment. With budgets as modest as they are, the iterations have cost control as a primary goal.

Hard Costs vs. Soft Costs

The Yankee Group survey concerning skilled employees represents another challenge all by itself: Since the average SMB IT staffer is apt to be on information overload and severely underpaid, it's unlikely he or she will have either the time or the inclination to become an overnight expert in storage networking. That means technology originally designed for large-enterprise applications--and teams of storage specialists--must be simplified for SMB consumption and adapted to smaller budgets. This simplification addresses the soft costs connected with storage: specialist training.

Some technologies do not lend themselves to simplification. Fibre Channel SAN technology is an example. FC is a technology requiring comparatively expensive expertise, and therefore a trained expert. That, coupled with the current perport cost of FC, makes the technology an unlikely match for the SMB. On the contrary, the growing interest over the past 12-18 months in iSCSI and SATA-based disk drives for arrays and SANs creates a new opportunity.

Upward Mobility

Certain product characteristics exemplify the product suites that will appeal to an SMB buyer:

* Provide product interoperability with existing components in the SMB infrastructure

* Mask the complexity of all the necessary storage-related components

* Reduce the costs and bundle the components together to simplify the procurement process, but maintain enough basic functionality so that these businesses can still share, manage and protect their data

* Develop a strong, SMB channel strategy

Strangely, the industry is exhibiting a trend, not so much toward simplification, but to feature richness. David Freund at Illuminata notes that there is a cascading down of enterprise features into midrange subsystems. For example, replication and migration have become standard in the midrange, and it is difficult to compete there without these features. Does this mean that some of these enterprise features will become commodity across different market segments? Perhaps, but is that a bad thing? Commodity to some degree implies affordability, which is a key driver in SMB purchasing.

Freund also cautions, though, that the push for feature rich products in the midrange tempts some to mislabel their hardware or software as appropriate for the SMB. But a careful look at the pricing and the feature sets demand careful reflection. And the integrator or VAR that accepts such labeling at face value may end up facing returns.

Emphasis on the "M"

The problem that will really address the SMB storage market is that of scale. Analyst firm AMI in New York suggests that most SMB players would be unwilling to spend more than $25,000 on a single solution. This is in an industry where solutions from $125,000-$500,000 and beyond are commonplace.

Let's look at the products. One reason the market is ready for SMBs is that equipment is commoditizing. Yes, the dreaded "c" word. Up to now, it's been an undesirable reference (even a dirty word) to vendors addressing the SAN segment, where we're used to thinking of products as specialized and expensive. Indeed, I used the "c" word in conversation with Dan Colby, general manager of storage systems at IBM Corp. last year and he balked--though he eventually conceded that it is taking place in the lower reaches of the market.

In his next breath, however, Colby told me: "You want SATA? I'll give you SATA by the end of the year, and I'll be OEMing the box, not making it myself." Sure enough, IBM went on to offer low-end SATA drives on the FastT RAID arrays from Engenio Information Technologies, Inc.