New things in store

IBM Global Services recently joined a small but growing number of companies

offering data storage capacity and management services that customers can

rent for a monthly fee. However, it remains to be seen whether this new

outsourcing model will make sense for federal agencies that have big investments

in their own storage equipment and staff already on the payroll to manage

it.

"It's a model we would consider, but there are a lot of issues that

would need to be addressed before we go that way," said Brooks Carter, manager

of information technology strategic and capital planning and policy at the

Federal Energy Regulatory Commission in Washington, D.C. Primary issues

of concern for Carter include security of the data maintained by an outside

party and the specific cost/benefit in using the service.

What is clear is that federal IT shops are being inundated with new

data created by a host of e-mail, general office and e-government applications.

With the volume of data managed by most large organizations doubling annually,

according to the market research firm Enterprise Storage Group Inc., the

government is spending an increasing portion of its IT budget on storage.

The aim of IBM's new Managed Storage Services offering and others like

it is not only to provide the disks and tape devices to store and make backup

copies of that growing mountain of data, but also the expertise to maintain

the whole storage infrastructure. In many ways, the people skills are far

more difficult and expensive for agencies to obtain, said Roger Schwanhausser,

director for storage and storage-area network services for IBM Global Services.

"The problem is compounded by the fact that you often have multiple

technologies, such as Unix, Windows NT and System 390 [mainframe], that

support different applications, and maintaining all those skills is a real

problem," he said.

For between $25 to $75 per gigabyte per month in most cases, IBM will

supply and manage the storage systems, allowing the customer's own IT staff

to focus on tasks other than storage, such as application development or

solving users' IT problems. The price varies with the types of services

that customers buy, which might include raw storage capacity for primary

data as well as backup and recovery services and even data mirroring, an

expensive procedure in which two copies of data are always created in case

one system fails.

Analysts say IBM's new storage service adds more credibility to a market

that was pioneered about two years ago by a company called StorageNetworks

Inc. in Waltham, Mass. Most of the early customers of managed storage

services have been deep-pocketed dot-com startups. These companies like

the model because they often have little or no IT infrastructure of their

own. But they are eager to use their venture capital to rent ready-made,

pay-as-you-go storage capacity from a storage service provider (SSP).

It is much less certain whether established organizations such as government

agencies or traditional brick-and-mortar companies will have the same enthusiasm

for the SSP model because they have already spent significant amounts of

money on a storage infrastructure. In fact, the Gartner Group Inc.'s market

research firm Dataquest predicts that by 2003 less than 15 percent of overall

SSP revenue will come from traditional corporate or government data centers.

"We believe this group will be the last to come over to this model,"

said Adam Couture, a senior analyst at Dataquest in Lowell, Mass. "The issue

is that they have entrenched infrastructures and IT organizations. They

are also concerned about security and loss of control. Once you outsource

an operation, you lose control and you can lose staff."

But there may be reason to believe that the Dataquest estimates will

understate the government's interest in SSPs.

Those market estimates were based on surveys conducted earlier this

year, when the predominant model for SSPs, as illustrated by the offering

from Storage-Networks, located the storage systems at the SSP's facility,

not the customer's. The customer's servers are typically connected to the

SSP's storage infrastructure via a fiber-optic network. With this arrangement,

potential customers were especially concerned about the security of their

data.

Since then, the market has begun to evolve in a way that may make the

service more palatable to agencies and other large customers. In June,

Compaq Computer Corp. introduced a storage management service, called the

Private Storage Utility, that locates the Compaq-owned and maintained storage

equipment at the customer's premises.

"When you look at the people signing up for our service, it's the top

customers," said Rich Avis, director of Compaq's storage networks and solutions

business unit in Shrewsbury, Mass. "They want the [equipment] on their site,

they don't want to share it [with other customers], and they don't want

to have to connect to it over long distances." Prices for Compaq's storage

service start at about $30 per gigabyte per month, Avis said.

IBM's new Managed Storage Services offers customers both hosting options:

IBM will locate its storage equipment at the customer's site or at one or

more of IBM's 175 data centers around the world.

And now StorageNetworks plans to join the competition and soon add its

own service option that places the storage equipment at the customer site

and allows it to operate in conjunction with the customer's legacy storage,

said Bill Brodnitzki, the company's director of services marketing.

"We realized that full outsourcing can be quite a bit for a customer

to swallow," he said. "There's a psychological hurdle that this [new option]

will help people overcome." Brodnitzki declined to provide pricing information

for the company's services.

Of course, other variations of storage outsourcing will evolve over

time. What the SSPs are assuming is that, as specialists, they have the

expertise to manage storage more cost-effectively than their customers can.

And to succeed, SSPs will need to be flexible enough to fit the right blend

of services to each customer's unique needs and comfort level.

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