Outsourcing Storage: Part-time Help - Industry Trend or Event

Telecommunications, July, 2001 by Ted McKenna

Although SANs are all the rage, storage service providers are finding too much room at the inn.

Internet content and corporate data seem to breed like rabbits. To cope, businesses can add servers or deploy new Fibre Channel technology to facilitate faster data retrieval, yet the mess only gets worse. While SSPs (storage service providers) have sprung up to help, most providers of outsourced storage serve businesses only part-time--providing, for example, data replication, disaster recovery or storage management services.

The notion of storing all data off-site at colocation centers--purchasing storage by the slice and avoiding the cost of owning the storage resources--doesn't jibe for most customers of outsourced storage. The businesses with the most money to pay for outsourced services are typically Fortune 1000 companies whose existing storage resources represent quite a large investment.

That's not how a number of SSPs thought it would be. In the last two years, at least 20 SSPs have been created. Through new software, these companies offer management services at in-house data centers or third-party IDCs (Internet data centers), using either their own or their customers' storage equipment.

The dotcom businesses were expected to be prime customers. Lacking the cash to pay for storage assets--which can start at $300,000 and skyrocket--startups would simply pay a set amount pet gigabyte of storage, typically anywhere from $30 to $120, depending on the range of services chosen.

Storage as a commodity available from public data centers remains the future, according to ManagedStorage CEO and President Tom Sweeney "Those data centers located at the intersection of both metropolitan and long-haul networks become very efficient places to put all the computing, storage and applications infrastructure because people can access them from anywhere," he says.

Whether outsourcing is done in-house or at IDCs, businesses will be doing more and more of it, if only because the sheer amount of data in the world is growing constantly. Outsourced storage in 1999 generated $11 million in revenues, according to International Data Corp., which predicts a rise to $4.9 billion in 2003. In a Qwest TV ad conveying the types of demands service providers could place on telecom networks, a weary business traveler checks in to a motel on a dusty highway. He asks whether his room has cable. The clerk says, "Every room has every movie ever made in any language day or night." Movies, insurance records, financial transactions, medical images--all that data is overwhelming small and large businesses.

Gradual Acceptance

Some companies need help managing existing resources, because of fast increases in storage needs, for example, or because of acquisitions and mergers that leave a multitude of storage resources that are difficult to meld. StorageNetworks Inc. appears to be successfully targeting large enterprises, providing dedicated sets of resources and personnel to customers such as Ford and Germany's Westdeutsche Landesbank, which continue to maintain their in-house data centers.

The bulk of SANs--as much as 90 percent--may consist of equipment from one vendor, but companies often operate with heterogeneous networks they lack the expertise to run for maximum effect. So, storage from one application may be 20 percent underutilized while another may be bursting at the seams, according to Susan Frankle, StorageNetworks' senior director of marketing communications.

"They don't have the red light on the dash that tells them, 'Hey, you're about to run out of storage over here, so maybe you should move some storage from application A to application B,'" Frankle says.

But if businesses are moving toward centralization of data storage and the widespread use of public data resources, the shift is gradual. Sweeney says businesses will first move "externally facing" applications or systems like Web hosting or e-commerce onto public data centers, with mission-critical applications remaining in-house until they have a higher comfort level and feel the business case is strong enough.

"Outsourcing some of your telecom or IT infrastructure is always a difficult question, because you have the issues of security, control and QoS," Sweeney says. "The decision to relocate where your data is physically stored is a big deal."

Enterprise Storage Group senior analyst Steve Duplessie doesn't see any trend toward companies outsourcing all their storage needs at an IDC. "Storage infrastructure is so complicated and so costly, and the cost of screwing it up is so big, that the market is definitely moving toward the outsourcing model, but the SSPs as you know them today are probably not the ultimate succeeding entity," Duplessie says. "Really, it's going to be more boring than that. It's going to become more body-shop-type traditional outsourcing, a la EDS, Cambridge Technology Partners or Sapient."

And with big net-work service providers such as Qwest, AT&T, WorldCom and Sprint already offering or planning to offer outsourced storage services, the upstarts face some stiff competition from companies supported by a lot of network assets. "Big telephone companies--guys with huge market caps and actually profitable businesses--in my mind will probably acquire the kind of talent represented by" these new SSPs, according to Alan Jones, EMC's senior vice president of technology services.