As the IT sector continues to embrace service as a means of revenue, the different types of services available continue to grow. In recent times we have seen the emergence of managed service providers and application service providers, to name but two. Storage is no different, with storage service providers (SSPs) now making their play.
The concept is quite simple. Rather than owning their storage infrastructure, users pay SSPs a fee for the storage they use, which is typically on a per-megabyte basis. In more familiar terms, storage providers replicate the utility models employed by city water suppliers or electricity providers.
Initially, the model, first put forward by SSPs in the US over 18 months ago, emerged in a market that is well and truly extinct today - the dotcom sector. Dotcoms generally spent more time marketing wacky ideas than actually investing in tangible resources such as IT hardware equipment like servers and storage boxes.
"The SSP model has appeal to rapidly growing companies starting from scratch," says Andrew Manners, Compaq's manager of enterprise storage. "These were the companies that started with nothing and wanted everything tomorrow."
The hard sell
In the dotcom era, the need for an SSP was apparent. But for bricks-and-mortar companies, selling storage provision as a solution is a hard slog. It seems that it's difficult for the management of a company, which typically has invested significant amounts into storage, to let it all go to a SSP, says Johna Johnson, senior vice president and CTO of Greenwich Technology Partners, a network consulting and engineering firm based in the US.
"Enterprises rarely have a coherent storage strategy. And if they do, they are very reluctant to outsource their efforts to an SSP," she says.
Glen Noble, Macquarie Telecom-munications' general manager of next-generation integrated carrier services, holds a different view. He believes the SSP model has appeal, especially to small and medium companies that don't have the in-house skills to do it themselves, although "people are still getting their heads around not doing it themselves", he admits.
By turning to Macquarie, Noble says customers don't have to worry about the infrastructure costs or the management costs, which according to IDC is the primary reason why storage will soar in the years ahead.
"It is fairly new and emerging," says Doug Oates, the managing director of hosting company Pihana and a partner of StorageNetworks. "It is a hot topic, and something our customers are thinking about doing. We are at the start of a curve going up."
To that end, there is a small but steady army of SSPs raising their heads in Australia. The players are mainly existing storage providers that are branching into the services model, often striking partnerships with the increasing number of telcos that realise their data centres can serve customers' storage needs in addition to voice and data services.
While these SSPs won't disclose
revenue projections, a report from
The Yankee Group predicts the worldwide market for outsourced storage services will reach $US2.2 billion by the end of 2002. Realistically, Greenwich's Johnson believes it will be less than half of that.
In the current environment, Telstra and Macquarie Corporate Telecom-munications have both rolled out offerings this year, although Optus hasn't followed suit. Given that Optus has spent an estimated $50 million on its ASP service, the telco may consider such a move - but it would not comment on such speculation.
Both Telstra and Macquarie have partnered with hardware and software provider EMC. Melbourne-based Uecomm is also in on the act, via a series of partnerships with eServ, Pihana and Hitachi Data Systems' subsidiary, hojo8.
The services offered by hojo8 include Internet backup, business data protection, managed storage, managed applications, and storage consultancy. Uecomm, which has a fibre-optic cable network throughout Australia, is linking customer sites to the data centres of hojo8 and other partners.
For Mark Norman, Uecomm's national sales manager, the reason for partnering was simple. "We can provide an additional value-added service to our customers and one that is becoming increasingly important," he said at hojo8's launch in February.
The fact that Uecomm is backing the SSP model and involving itself with systems integrators like eServ and Pihana suggests there is a value proposition and money to be made.
The telco has been providing storage management services to large financial institutions in Australia since 1997, according to Fernando Calero, business development manager at Uecomm. However, these new relationships allow it to expand the offering to the mid and small enterprise space.
"We're aiming to properly productise the SSP service. If someone approaches us [for storage provision] we can either push them to an SI if it's complex, or connect them straight to a data centre if it's not," said Calero.
But it's not just telcos that are exploring SSP avenues. There are newer players in storage services, such as StorageNetworks. Unlike its parent in the US, which is a storage software vendor as well as an actual SSP with the whole data centre setup, StorageNetworks Asia-Pacific only provides its tools and methodologies to other companies so they can become SSPs. It does this through a product called STORfusion.
"Independently we market to larger players like Fujitsu and hosting companies like Pihana who put it into their broader storage contribution," says Steven Hedge, StorageNetworks' Asia-Pacific vice president. Currently, StorageNetworks has only two customers. "Naturally we want more."
For StorageNetworks, pitching to companies such as Pihana is logical. Similar to the solutions provided by telco providers, Pihana already offers its customers software and network management services. Adding storage to its repertoire becomes quite easy as it already has the mechanisms in place, Pihana's Oates says.
Telstra has gone about its service by dealing directly with its partners. For hardware sales, it struck a deal with EMC. "We deal directly with the companies [partners such as EMC]," says Andrew Inwood, Telstra's manager of hosting and apps. Telstra does not even deal with the local subsidiaries of such companies, but goes straight to the source. In this case, that is EMC's US headquarters. "The best people do not reside in Australia," Inwood says.
EMC supplies not only hardware but technical people, who are contracted out to Telstra for its SSP solutions. Aside from EMC, other companies Telstra looks to are "Big 5" companies CSC and EDS.
Compaq has aggressively pushed its service. It has 13 partners in Australia that focus on storage. These include the likes of Data#3, Fujitsu, Starcom Group, Avnet and CSC. "We went out there over a year ago to build a storage channel," Compaq's Manners says. All up, it has taken these partners anywhere from six to 12 months to build the technical and sales capacity required to work with Compaq.
Similarly, hojo8 does not have a direct sales force. Rather, it acts as a wholesaler of storage services solutions and relies upon strategic resellers and channel partners to sell its solutions to customers. In this sales model, channel partners are essential to hojo8's success.
"Given the nature of the SSP market, hojo8 is selective about choosing the appropriate channel partners who have the sales bandwidth and access to the right customers for SSP solutions," says hojo8 marketing director Brendan O'Reilly. "For this reason, traditional storage companies, such as Hitachi Data Systems, which have extensive experience and reputation in the storage industry, in combination with the larger telecommunication companies and ISPs, clearly represent the most appropriate channel partners for selling SSP solutions.
"Hojo8 provides resellers with a value-added storage services solution to their existing hardware offerings. With hojo8 they are now able to provide an end-to-end solution, expanding their sales potential to the entire market."
For interested parties wishing to get on board, O'Reilly says the requirement is quite simple. "The channel partner needs the sales bandwidth and focus to break into this emerging market. Hojo8 provides the rest."
The Scorecard so far
In its first six months of play, Telstra had signed up three customers. Inwood did not reveal who the customers were, although he did say that US firms, namely investments and financial institutions which had a local presence in Australia, were very aware of the benefits of storage providers. Overall, the storage requirements of Telstra's existing customers are varied. For some customers, Telstra is housing their financial information; for others, their mail servers. Another company has its training videos housed. All up, Inwood says the information stored in its SSP site varies from the "high-frequency" data, which is constantly being requested, through to "important data, but which is hardly ever used".
Hojo8 has sold and is delivering "multiple" terabytes of managed storage to customers in Melbourne and Brisbane through its resellers. It has also recently installed infrastructure that includes significant storage hardware in order to support a new managed storage initiative in Sydney.
O'Reilly doesn't deny it will be a challenge. "The market interest is very real and is increasing, although the uptake of managed storage in Australia has been slower than expected," he says.
"However, we have confidence that the acceptance of the SSP model will increase and growth will be strong over the next 12 months."