Special Report: Providers Source Storage for Disaster Planning Portfolio

Posted: 11/2001

Special Report

Restoring America’s

Providers Source Storage for Disaster Planning Portfolio
By Khali Henderson

The shocking attack on our people was, for the nation’s executives, a painful reminder of what they already knew: Business data are vulnerable.

Companies remiss in business continuity and disaster planning are less likely to continue their procrastination, giving a much-needed boost to the fledgling storage service provider (SSP) industry. For additional credibility, these startups are turning to carriers, telephony resellers and systems integrators as partners to deliver data storage services to their end users.

“What happened on September 11 made all of those companies realize that they have got to have a disaster plan,” said Kirby Wadsworth, vice president of marketing for Storability Inc., a provider of storage system delivery platforms and automated storage management services. “We all became vulnerable, everywhere. The unthinkable happened. You can’t put disaster tolerance behind you anymore. It can’t be on the back burner. It has to be done.”

Exactly what must be done is a matter of opinion. Solutions can range for static disk capacity rental to periodic backup and recovery services to real-time data system replication plus requisite management services.

In the last two years SSPs — also known as storage-on-demand services, storage utilities or managed storage services — have emerged as a new class of data storage outsourcing provider. Storage Networking World Online reports there are about 20 companies offer SSP services. About three-fourths of them are pure-play storage companies, reports the online trade publication, noting that a few are hardware vendors, such as Compaq Computer Corp,, or telecommunications companies, such as Qwest Communications International Inc.

Research house IDC forecast that the market would jump from $559 million this year to $3.6 billion by 2003 and $6.6 billion by 2005. Analyst Doug Chandler, a director for IDC who covers SSPs, said the research firm is revising its long-term forecasts downward “significantly.”

Chandler says that several pure-plays had partnerships with Exodus
Communications Inc., which filed for Chapter 11 bankruptcy protection Sept. 26, and are trying to get out of those data centers. He suggests the SSPs that survive will have changed their business models to include more management services, leaving the storage utility offerings to bigger players like the telephone companies that have a greater ability to leverage infrastructure and commodity products.

Storability has been doing just that by enabling CLEC CTC Communications Corp as well as Qwest to provide storage

as a service. The company, in late September, decided to package its delivery platform as the AssuredStorage
Management System (ASMS).

“Think of it as a franchise,” says Storability’s Wadsworth. “We have technology and best practices and procedures, training for sales people … product management and product marketing support, collateral material — everything they need to get into the storage business.”

ASMS, which sits on top of the disk drive, allows telcos to manage service delivery to multiple customers and enables the data feeds for billing and

customer relationship management. It also enables the telco to leverage its investment in bandwidth, data center and human resources.

Qwest has been offering storage services using the Storability platform since September. Qwest channel partners can sell the full suite for a monthly recurring commission, including primary storage, dedicated managed storage, tape backup, point-in-time copy and non-disruptive back up. Errett Kroeter, Qwest’s director of marketing for indirect channels in global business markets, says there is a lot of interest so far from the channel community, particularly systems or network integrators that cater to its main target market: enterprises with Web infrastructures that are generating rapidly growing volumes of data.

However, Qwest is encouraging less datacentric partners, such as agents, to sell smaller customers into a shared storage environment.

“That is less technically daunting and more affordable for the small- to medium-sized customer,” says Kroeter. He says he has received a lot of inquiries on how storage fits in the overall dedicated hosting environment at Qwest CyberCenters.

Qwest expects demand to increase because of Sept. 11. “We already have sales activity and expect that activity to accelerate as customers become more concerned with protecting their valuable data assets and planning,” says Kroeter.

Newcomer Data Storage Corporation (DSC) also has agents in mind to distribute its new storage-on-demand services that are sold under the brand name
E-DataSOS (Storage Online Service) and through a branded website Telephony service veterans, the company’s principals seek to leverage their roots to distribute services through telephony resellers, agents and systems integrators.

DSC is targeting the low end of the market, which has not had access to affordable data storage services. Consumers and SOHOs with less than 2 GB storage requirements for direct sales through its website. Sales to SOHOs, small and mid-size businesses with 2 GB to 50 GB storage requirements are expected to come from agents that are installing LANs or high-speed Internet access, e.g. T1s, DSL or cable modems.

“Companies with less than 50 GB of data storage requirements are not using

off-site data storage,” says CEO Charles M. Piluso. “Rather they are using internal hard drives or on-site tape backup and are dependent on internal, nontechnical staff to protect their data.”

For these customers, DSC offers two flavors of data storage, including storage folders for specific data backup needs and routine backup and recovery services. The former is ideal for loading conference presentations that need to be accessed by a large group or for holding files that are needed while telecommuting or traveling. The latter requires a client download that enables the end user to specify frequency of backups and to initiate a backup

on demand.

Agent commissions start at 33 percent for the first year of service to the customer. A 2 GB deal is $680 retail, says Piluso. He notes storage requirements are predicted to go up 100 percent year over year. Commission models using 250 customers, a small churn rate and 50 percent year-over-year growth, result in $300,000 to the agent over the five-year term of the agreement, he notes.

Piluso says company hopes to overcome the credibility issue for a startup, which all SSPs are, by winning over agents and systems integrators that already have a relationship with the customer. He also points to the company’s commitment to real estate, including owning the building, PM200 gas for fire protection, generator backup power, Libert air conditioning and redundant fiber optics.

Storability also wants to capitalize on telcos’ credibility, both with its private-labeled reseller program and its ASMS enablement program.

“Telecommunications have deep relationships with their customers,” says Wadsworth. “They provide the networks that the corporate data actually runs on. So companies are already trusting data to facilities that are owned or managed by the telco in the normal course of their day-to-day operations. What the telcos need is to convince the customers that they understand something about storage.”

This is where partners like Storability and DSC come in.

The value proposition doesn’t stop with bandwidth and storage or even with the obvious addition of web hosting.

“The win — and I think this falls very squarely on the telecommunications space — is the ability to offer not just storage on demand, but computing on demand,” says Wadsworth. “So they combine the networking, the storage expertise and a computing platform so that they can effectively sell a computing infrastructure on some sort of a utilization basis.”

–Tara Seals contributed

to this article.

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