Jul 16, 2001 12:00 PM,

HEAVY LOADING ZONE

by Hanna Hurley

Almost 20 storage service providers (SSPs) — survivors of a brutal market shakeout — remain scattered across major U.S. cities. Among those left standing, more than half are wounded and weary, destined to close up shop by the end of 2001. Eager to step into their place, though, are Qwest Communications, AT&T and other network providers that consider storage an opportunity to expand their service sets and fill their network pipes.

It's tough letting go

To gain traction with enterprises, SSPs had to offer storage services that allowed Fortune 2000 companies to keep their data on their networks. These companies' IT staffs like to keep close tabs on their corporate property, and the idea of sending their mission-critical data offsite goes against their principles, explains Jon Oltsik, vice president of corporate marketing and strategy for GiantLoop.

“Enterprises are concerned about performance. They are scared offsite management will introduce latency problems and their systems will time out and need to be rebooted,” he says. “Security is another worry. They don't know who is sitting next to them in the hosting center or if their data is protected.”

Security, performance and an investment in their own storage architectures and technical personnel are a few reasons enterprises shy away from moving their storage offsite. Given these concerns, some enterprises will never choose outsourcing, but market analysts are predicting that a large percentage of businesses will eventually turn to some type of managed storage service (Figure 1). Gartner Dataquest has projected that the SSP market will be $7.5 billion in 2003.

This type of encouraging research is bringing software and equipment makers to the storage arena. Optical platform developer Akara has high expectations for the market based on Web hosting's success.

“We are seeing significant growth from enterprise customers that have had successful Web hosting experiences,” says Ed Ogonek, president and CEO of Akara. “Instead of adding additional storage capabilities to their networks, they want to gain scalability and efficiency through an SSP.”

Some companies may be eager to outsource their storage needs after positive experiences with Web hosting. Others may outsource because of the tightening economy. Sanrise's Cordell claims outsourcing can cut total cost of ownership between 30% and 50%.

Banks, airlines, retailers and insurance firms are a sampling of the industries choosing SSPs (Table 1).

SSP StorageWay says 30% to 35% of its customers are enterprise customers, and it expects that number will grow. “Outsourcing is not a new idea. IT managers accept outsourcing, but storage is new to them,” says Jason Schaffer, vice president of marketing for StorageWay. “In this early stage, we have to gain the trust of our customers. Once we've proven ourselves, customer requirements will grow.”

Turf wars

The surviving SSPs are having to defend their burgeoning market. But while they name well-known companies such as EDS and IBM as competitors, they tend to write off carriers. “Telcos haven't figured storage out. It's one thing to manage a network, but managing storage is completely different,” says Sanrise's Cordell. “It's much more complex.”

Storage does require expertise. Most storage networks use Fibre Channel, which is not standardized or as well-known as IP or other protocols. Storage also requires in-depth knowledge of the applications on the network. “We map each application and its system components to each customer. Carriers don't tie applications to customers,” says Schaffer.

Cordell adds other storage necessities. “To manage storage, you manage the resources on specific servers. You must know thresholds, capacity planning, charge-back accounting, change management, monitoring, maintenance and asset management. You must know if the backup was completed successfully, how much volume was backed up, and be able to restore specific files.”

But to claim that carriers don't have storage expertise may be a bit misleading.

Qwest's Cohen points out that his company had already created a dense storage network for its own personnel. It only had to extend that experience to its customers. “Our internal network is hundreds of terabytes, much larger than many focused SSPs. And we've been doing storage for a long time, giving us more years of experience than most of the start-ups.”

But Cohen doesn't dismiss the possibility of partnering with an SSP and then branding the service as Qwest. “We don't want to give up control. We want to deliver services seamlessly so that a customer can get an integrated solution where there's no chance for finger-pointing.”

Sanrise, StorageWay and StorageNetworks provide branded service for Exodus Communications and other Internet data center providers. StorageNetworks expects that even traditional providers will want to offer storage. Through STORfusion, StorageNetworks opens the door for storage services to all carriers.

“We're turning telcos into storage providers through a combination of branding and integrated processes,” says Mark Kincaid, vice president of network engineering for StorageNetworks. “Telco guys don't have a clue about storage, and storage folks don't have a clue about communication networks, but together we can meet the customers' needs.”

Kincaid even goes so far as to dismiss Qwest and other carriers as potential rivals. “Our biggest competitors are those enterprises that believe they can provide storage themselves. A significant amount of people thought they could do it themselves, then they come to us. People find out quickly how much resources and effort it requires to store their data.”

Distributing storage's surplus

Broadband wholesalers comprise another carrier segment eager to see storage succeed. Yipes Communications, Enron Broadband Services, Telseon and XO Communications are all partnering with the SSPs to help them deliver data at faster speeds and higher rates. They are courting the SSPs with their bigger pipes and quick provisioning capabilities. They are also trolling for customers, and storage would help fill their pipes.

In June Yipes announced that it had signed one national SSP and three regional ones as customers. “The SSPs use our networks to provide their services. They don't need to build a link to their customer because they are connected to Yipes,” says Ron Young, co-founder and chief marketing officer at Yipes. “It's less expensive than RBOC lines and offers flexibility. We can give the SSPs a big pipe or a little pipe and have it connected in half the time.”

With the broadband suppliers as partners, the SSPs are bringing their customers onto their networks more quickly. “We can turn up a terabyte in less than three days,” says Sanrise's Cordell. “It takes the RBOCs that much time for an order to go through their provisioning system.”

Not only is the customer provisioned more quickly, SSPs can also offer a selection of bandwidth options. Because Yipes provides its SSP customers with bandwidth on demand, SSPs can offer this option to their storage customers. “SSPs can offer trickle backup 24/7 and do a full system restore. They can increase bandwidth by 10 and shorten the downtime of the network or do a complete reboot,” says Young.

These partnerships, plus the SSPs' suite of storage products, also improve management capabilities. “Our software ensures that we validate our [storage level agreements],” says StorageNetworks' Kincaid. “Our customers can see minute-by-minute statistical analysis of how capacity is being used through a Web interface.”

Although GiantLoop does not fit into the SSP model, Oltsik says manageability is a key factor for enterprises considering storage services. When GiantLoop builds its optical networks for enterprise customers, it gives enterprises a view into the pipes.

“We build [dense wave division multiplexing] networks that provide connectivity for circuits and a fully managed environment,” says Oltsik. “We provide the eyes and ears to the middle of the network. Enterprises are blind to that in a telco network. We can manage storage applications and the Ethernet and Fibre Channel switches and gather error bit rate information, throughput measurements and thresholds.”

Storage soothsayers

Most industry watchers are still bullish on storage. Companies such as Enron Broadband Services are still making investments in the sector, and Wall Street continues to show restrained support for equipment manufacturer EMC and SSP leader StorageNetworks.

Storage is still in its infancy. As in any market coming to age, the players can expect more changes and shakeouts. Aberdeen's Shess expects the number of pure-play SSPs to continue to decline. “Ultimately, four or five SSPs will survive because they offer a broad range of services and have strong partnerships with data centers and storage vendors,” he says.

Sanrise's Cordell rates SSPs' survival prospects by looking at six criteria: technical capabilities, financial strength, scalability and coverage, extensible business model, management capabilities and customer base. SSPs that don't get high marks in all those areas will wither on the vine, says Cordell. “We have some real strong players and some weak sisters that won't make it to the end of the fourth quarter.”

As these SSPs drop out of the market, expect managed service providers to quickly step into their space. They have been honing their storage service offerings as they wait for more widespread adoption from enterprises. “Storage is only a short-term niche,” says GiantLoop's Oltsik. “The big guys will come after this space because it is so lucrative.”

And when the incumbents join the fray, Akara's Ogonek says they will legitimize and prove the initial market. “The whole industry is waking up to storage.”

Hanna Hurley is a freelance writer based in Alameda, Calif. Her e-mail address is hrhurley@hotmail.com.

Storage snippets

Outsourced storage services have two models: offsite and onsite. Onsite storage allows the customer to keep the company's data on its internal network. In some cases, the storage service provider (SSP) owns the storage infrastructure, but most often the storage network belongs to the enterprise. Regardless of who owns the equipment, the SSP manages and maintains the enterprise's storage network at the site or remotely over the Internet.

Offsite storage, as the name implies, moves the data to the SSP's facilities. The SSP may rent space at an Internet data center or a co-location facility. Unlike onsite storage, many SSP customers share the storage network.

In both scenarios the SSP is responsible for data storage management and availability, and offers a three- to five-nines service level agreement (SLA) for availability to data. SLAs also address recovery, restoration and maintenance.

Under these two storage models, SSPs are offering an array of services. Backup and restore, remote mirroring, content delivery, primary disk storage and archiving are a few of the typical services available. Billing options vary; some are based on usage, others follow the flat-rate model.
— Hanna Hurley