“Large solutions are far too expensive and smaller solutions are too ‘Mickey Mouse’ and still don't give us what we want,” says one mid-market firm's vice president.
Peltz' company has 38 offices nationwide connected by T-3, T-1, Frame Relay and VPN. 900 corporate and support staff service 750 field agents. Over the past seven years, transaction volume has soared from $3 billion to $10.3 billion.
Peltz says the mid-market is comprised of companies in the $100 million to $400 million revenue category. Typically, their IT budgets are 1.5 percent to 4 percent of total revenue — anywhere from $1.5 million to $16 million a year. The internal financial climate is still suffering a hangover from the Y2K/tech bubble days, with CFOs having all the clout and IT being forced to do more with fewer staff and hang onto legacy applications.
"I report to the CEO and CFO," says Peltz. "The CFO works out my annual budget of about $1 million based on a depreciation formula he applies to existing IT resources."
He gives an example of how the mid-market is poorly served based on his own experience.
The company needed a centralized storage and backup solution to eliminate backups at remote sites and replace old servers in key offices. Seven years before, he had replaced Novell servers with Windows NT machines and put in a TCP/IP-based WAN. These servers were on their last legs and urgently needed refreshing, he says.
Vendors proposed SANs and backup units for three hub sites at a cost of $450,000 per location. Each could hold about 200 GB of space for each office. But they would need a cache appliance to achieve this. That added $45,000 to the bill. Cache applications, which cost $10,000 each, and NAS units, which cost $8,000 each, for 35 remote sites brought the total cost to more than $2 million.
''That solution, coming to twice my annual budget, blew that possibility right out of the water,'' says Peltz. ''Even a short-term workaround consisting of new servers to each office along with large backup units would have come to at $420,000.''
Mid-Market Firms Engineer Solutions In-House
But Peltz didn't leave it there.
He interviewed 18 of his peers and gathered a series of similar case studies — mid-market firms that couldn't afford a SAN under the current pricing structure of the large suppliers.
Take the case of one national health care provider and its disaster recovery plan. Three years before, administrators there purchased a storage device for one location. Two years later, they purchased another one for a separate location. When they decided to mirror data between these sites for disaster recovery purposes, the mirroring software came in at a reasonable $97,000.
However, the project derailed when the three-year-old device turned out to be underpowered. Its replacement to make the mirroring project work would cost $300,000. To go to another vendor would mean replacing both storage devices and a total outlay of more than $1 million.
''Large solutions are far too expensive and smaller solutions are too 'Mickey Mouse' and still don't give us what we want,'' says one mid-market firm's vice president. ''So we continue to engineer in-house solutions without the innovation we desire because there are low capital costs attached.''
Peltz found that many others had been forced into the in-house, low-cost route. But few of them were happy with it.
Peltz continues to look for a vendor solution to his own storage woes. So far he has come up blank.
The amazing thing about all this is the sheer magnitude of revenue loss being experienced by the large storage vendors. There are 55,000 mid-market firms in this slice of the market who could potentially be buying a lot of storage gear.
Article courtesy of IT Management
See all articles by Drew Robb