As data-storage needs continue to surge, some companies are turning to storage service providers (SSPs) ­ vendors that provide managed storage and/or hosted storage for businesses ­ as the answer to their prayers.

SSPs offer a viable alternative to pricey, space-consuming data-storage systems and complex storage area networks (SANs). Additionally, because SSPs provide storage-management expertise, companies don't have to worry about training and retaining skilled storage personnel. It's considered a nascent market today, but one that is expected to grow to between $5 billion and $8 billion by 2003/2004, according to various estimates.

Recently, Summit Strategies analysts looked at the various shades of the SSP model, as well as the two main types of vendors operating in this market: "pure-play" SSPs and storage hardware vendors. SSP vendors face various challenges in building credibility and spurring adoption among customers. In addition, there also exists an inherent conflict between the pure-play SSPs and storage vendors, and that friction could ultimately impact market acceptance.

The Two Camps

SSP vendors fall roughly into two camps, though there is a fine line between them. The first consists of the pure-play SSPs, which offer provisioned, per-megabyte storage on equipment that is owned and managed by the SSP. These companies were created for the sole purpose of providing managed storage for a fee, and most are only a few years (or a few months) old.

Pure-play SSPs offer hosted Internet storage, where data from a business is sent over the Internet to storage systems that reside at secure remote sites. The remote sites could include the SSP's own data center, but most often the storage systems reside at the facilities of a back-end capacity service provider (CSP).

Traditional storage vendors, which compose the second camp, generally offer a hybrid of a pure-play SSP model and managed storage services ­ outsourced management of a customer's data and equipment, residing either at the customer's location or at another site such as a CSP. To complicate matters, some pure-play SSPs also operate as managed-storage providers, managing customer-owned storage equipment either off site or at a customer- owned facility.

The overlap in services illustrates the unusual relationship between these two groups. Pure-play SSPs find themselves in the curious, and perhaps unnerving, position of competing against their suppliers ­ a situation that could lead to friction in the future. In addition, SSPs and storage vendors generally try to make money from both the provision and management of storage, as well as from professional services surrounding storage systems. SSPs ­ be they pure-play or storage-vendor operated ­ back up their offerings with various service level agreements (SLAs), depending on customer requirements.

The Early Years

At this early stage in their evolution, most of the pure-play SSPs are concerned with proving the viability of their delivery model and attracting reference customers. The ranks of SSPs are still fairly small, but more of these players are sure to enter the market in the coming months.

Some of the leading pure-play contenders today include Storage-Networks (arguably the first SSP), StorageWay, CreekPath Systems, StorageProvider and Storability. These firms offer various programs for managing storage via a subscription- based model which may or may not include fees for professional services. Typically, pricing is based on how much storage is needed and the length of contract charged on a per-gigabyte or per-terabyte basis. This utility-based model allows businesses to scale their storage as needed.

Traditional storage vendors want a piece of the action. These vendors initially seemed to pay scant attention to the rising crop of pure-play SSPs. When StorageNetworks appeared on the scene in early 1998, for example, storage vendors took a somewhat blasé position and said they would be SSP enablers ­ providing the storage, servers, consulting and integration on the back end ­ while continuing to push SAN hardware and software directly to their corporate customers. Many said they had no immediate plans to provide managed Internet storage services themselves.

Two years later, some of the storage vendors still tout the "enabler" message, but have also joined the hunt for SSP customers. The vendors believe they can leverage their storage expertise and familiarity with their own platforms into customer wins and maintain their offerings in storage-network consulting, design and integration as part of total storage solutions.

Compaq was arguably the first storage vendor to enter the managed-storage market, although its early offerings were provided on a somewhat informal basis. In June 2000, the company rolled out its Compaq Private Storage Utility. With that service, Compaq will install hardware and software at a customer's site. Compaq will then provide remote storage management ­ using its own management products as well as those from vendors such as VERITAS Software ­ from one of its 20 operation management centers around the world.

IBM also recently announced its pay-as-you-go Managed Storage Services. IBM officials say that the company was responding to requests from customers for managed storage which IBM previously had been offering, like Compaq, on an informal basis.

IBM will market the services to its large, worldwide base of installed enterprise customers, but says it will also market its offerings to the mid-market. In addition to selling its services directly, IBM also plans to offer them through CSPs, Internet service providers (ISPs), application service providers (ASPs) and other partners.

The Enablers

EMC continues to be the leader in the storage-hardware market, even as the other storage vendors mount aggressive campaigns in attempts to catch up. With its brand name, product coverage and reputation for customer support, EMC would seem to be in a position to become one of the more compelling SSPs in the market. For now, however, EMC maintains that it will only be an SSP enabler.

Hewlett- Packard (HP) is taking a position similar to that of EMC, in that the company is choosing to enable SSPs ­ and service providers in general ­ rather than become an SSP itself. Despite recent moves by Compaq and IBM into the SSP space, HP says it is not going to pursue a path in which it directly offers storage on a utility model or managed storage services.

Sun Microsystems has strengthened its storage-hardware division in the past year by adding new management to the group and by declaring that storage will be a larger priority going forward. Like other vendors, Sun ­ working from its "The Dot in .Com" philosophy ­ has billed itself as an enabler of SSPs and has not yet announced a managed-storage service.

Storage Technology, commonly called StorageTek, entered the SSP market last year with its Managed- Storage International unit. Managed-Storage International offers on-demand, pay- as-you-go storage services that are categorized into four groups: Storage-on- Demand, which is marketed as a utility; Server Backup, which is the storage and archiving of server data; Content Management, which consists of data repositories that capture, index and archive any form of digital content (from e-mails to audio, from still images to movies); and PowerBAK, an automated PC backup service.

Love and War

So how will this emerging and confusing market shake out? For now, the two major camps of players are appealing to divergent customer bases. Both, however, intend to spread into other sectors as the market starts accepting the basic premise of third-party management of storage. This market acceptance is the key hurdle. Data represents a corporation's life-blood, and it's not easy to cede its care to others. On the other hand, many customers will feel compelled to accept the SSP model over time because they will have no ability to address their storage needs internally. This hard reality will be the most important factor spurring adoption of the SSP model.

For the foreseeable future, the "co-opetition" among pure-play SSPs and traditional storage vendors will continue because of the nascent nature of the market and the hosted-storage model. Both groups acknowledge that they are working with each other as well as competing against each other. Both also say that, for now, there will be enough business for everyone. However, things may not stay so amicable once the Internet hosting model truly takes off and SSPs prove they can manage companies' data reliably and securely. Businesses may be the ultimate winners of this uneasy alliance between SSPs and storage vendors in terms of pricing and competitive SLAs.

One way or another, the SSP model ­ which is essentially following an evolutionary path that parallels the broader ASP model ­ will take hold. With storage taking on critical proportions in many IT environments, customers are clamoring for cost-effective and reliable methods to manage this essential resource. Many SSPs still must prove they are up to the task of securely managing storage environments. However, those able to relieve the storage- management headache afflicting many businesses should find this sector one of the more profitable offshoots of the hosted-services trend.

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