It is a happy coincidence that the cost and complexity of storage solutions are coming down, at the same time that demand for storage is growing in the small to medium business (SMB) sector. While the technologies now available to this sector are slightly scaled down versions of those already present in the enterprise, the SMB marketplace represents a whole new challenge for storage specialists. Not in the least because the market is vast and varied.
Whether it's a legal office heavily reliant on document management software, a real estate agent looking to broadcast digital videos in its shop windows, a wedding photographer switching to digital, a market research company with constantly updating databases or a publicly listed mining outfit heavily burdened with reporting requirements. It's all SMB, and it all represents opportunities for resellers who can combine coalface knowledge with emerging technologies.
Who are we dealing with?
According to HP there are about 720,000 businesses in Australia operating with a staff of less than 100. Granular and highly unstable, these companies nonetheless spend an average of $62,000 each year on IT, contributing $4.5 billion to the tech sector.
At the next level, we have 5600 companies with 100-500 employees, whose tech spend averages $12 million each, to add an overall figure of $6.8 billion to the IT sector.
However, unlike expenditure at the top end of town, which is characteristically lumpy and largely focused on high-end IT outsourcers and direct relationships with vendors, the SMB sector necessarily belongs to the channel.
Storage business manager for Sun Microsystems in Australia and New Zealand, Dan Kieran, explained why.
"A significant number of our workgroup products go to our customers in the SMB space, and they all go out through our channel because of the service level these customers expect," Kieran said.
"It is common that they also require a totally different cost structure as well."
As high-end storage solutions make their way down into this sector, vendors are locked in a scramble to skill up resellers in their wares. HP recently took 120 resellers on a three-day storage training camp, and plans to run more in the future.
"The SMB sector traditionally deals with people they know," director of network storage solutions for HP, Andrew Manners, said. "We have 4000 registered resellers targeting this sector, and we are happy to provide training for those wanting to include storage in their product line-up."
Similarly, IBM is about to embark on a reseller drive to coincide with the launch of its low-end solutions.
"Up until three months ago we were focussed on the mid-range solutions that start at around $13,000," IBM Storage business unit executive for A/NZ, Wayne Glynne, said. "Now we are looking to expand the channel in order to target investment in the storage space for 2005."
Given the expected growth in the demand in the SME sector it is not all that surprising the big guns have it in their sights.
IDC associate vice-president for storage in the Asia-Pacific region, Graham Penn, said growth in the sector would rapidly outstrip the supply of specialist resellers required to install and run the new wave of storage solutions. While a skills shortage also hampered growth in the enterprise storage market a few years back, Penn said the pending deficit would be more strongly felt due in part to the nature of the SMB sector.
"What we generally find in the mid-sector is that there is very little IT knowledge in house," he said. "If there is it is usually down to one or two people who are not about to work 14-hour days to solve a storage problem, when they already work 12-hour days to solve all their other issues.
"Unlike enterprise customers, SMBs are very, very dependent on their supplier."
Playing mix and match
Storage business manager for Sun Microsystems A/NZ, Dan Kieran, said selling storage into the SMB sector is about creating bundles of products which took business requirements into account.
"In the SMB space it is really about how to bundle up these storage products and how to take away the need to understand the technology," Kieran said. "They want to know that their data is backed up and safe from flood and fire, they don't need to know how to create a networked storage architecture."
While there is scope to maintain in-house IT talent in the enterprise, businesses with under fifty staff are hard pressed to maintain the in-house skills to focus on their core business. For this reason products earmarked for the sector often feature paired down management requirements, or even offer full automation of the data management aspect of storage.
"Low cost, high function is what is driving storage into the SME sector," Manners said.
"We're seeing interest in entry level network attached storage and disk arrays. Once end-users get a taste for external drives they tend to continue to expand."
Commercial channels and OEM sales manager for storage vendor StorageTek Australia and New Zealand, Sam Srinivasan, said an increasing emphasis on business continuity coupled with falling tape prices had seen Storage Area Networks become more popular in the mid-sector.
"The cost has dropped significantly, it has gone from 25c per Mg to 1c per Mg," Srinivasan said. "Demand is coming particularly from customers in the small to medium enterprise area. A lot of the complexity associated with SANs has also been reduced thanks to standardisation."
IDC's Penn points out that, outside the constraints of cost and complexity, the storage demand generated in the SMB sector is difficult to pin down. On the one hand, he said the overall employee numbers often did not reflect the number of knowledge workers, or the extent to which the data they generated was crucial to their operations.
"The issues are different in different vertical markets," Penn said.
"They are typically reactive rather than proactive because they don't have time to plan their IT infrastructure.
"More than any other sector they are dependent on their IT supplier to create the right infrastructure and prevent them from incurring unnecessary costs."
A case in point is the need to regularly back-up data. While most businesses in the sector would recognise the need to back up their data in some way, few would have the time or resources to actually carry out such a process.
That is not to say that they are not just as dependent on their data than the big end of town, in fact in the wake of a massive data loss some studies suggest they are even more likely to go out of business than their larger counterparts.
With this in mind, director of DYO Services, Col Poulter, has put together a remotely managed-hosted data package aimed at the 1.2 million businesses of ten people or less.
"Most of these businesses have IT consultants that visit them regularly, but not often enough to back up their data effectively," Poulter said.
"The DYO technology doesn't require IT staff, at an appointed time every day the software searched for files that have been changed, encrypts the data and stores it in an encrypted state at a secure remote location."
The benefits of the DYO technology was brought into sharp relief for Poulter recently when his own company's files were lost when a hard-disk failed.
"I actually called a local computer dealer to install a new system, and I was able to retrieve all the data in a matter of minutes," Poulter said.
"The dealer was so impressed now we've got him as a reseller."
However, after several failed attempts to launch similar services in the enterprise storage vendors are wary of taking the plunge into the remote data hosting.
"The concept of remotely hosted data is very good," HP's Manners said.
"Where it failed at the enterprise level was in the question of security and privacy, the question of who owns the data was not satisfactorily resolved."
IDC's Penn agreed, and said it would take time to overcome some of the issues associated with the technology.
"Remote hosting is still marginal for a combination of reasons," Penn said.
"Most organisations are unwilling to lose control of their data. What happens if the company hosting their data goes out of business, once the receiver's padlocks go on gate they simply won't get access to their own data.
"The cost of broadband to download the data is also an issue. However, this hurdle can be minimised with compression and partial data transfer."
Moreover Manners said the hurdles faced in the enterprise sector would not prove as relevant in the SMB market place.
"Worrying about who owns the data is not really a customer need. Keeping the business running is more their concern," Manners said.
"So long as they are getting commitments that the data should be available when they need it, SMBs will probably be convinced."
And while remote hosting is still up in the air, remote monitoring and management is an increasingly popular option in the mid-sector.
StorageTek's Srinivasan hasn't seen a huge demand for remotely hosted and managed storage because of sensitivities regarding who owns the data.
"We are seeing increasing demand for remote monitoring and management of storage, where the data remains on the customers premises but is managed from a remote location," Srinivasan said. "The customer still has ownership of the asset, which is very important for many."
Despite their misgivings most storage vendors predict such services will be commonplace within the next 12-18 months, so resellers may do well to get in on the ground level.