service providers (SSPs) never lived up to all the hype. Many went under,
and those that survived had to change their business models. In this, the
first of a two-part series, we look at what went wrong with the SSP model,
and what lessons it might hold for the new generation of utility
Storage Networks, the company that pioneered the storage utility concept, is
out of business. And only a few surviving SSPs still primarily market
storage as a utility: Arsenal Digital, BluePoint Data Storage (formerly
Storage Access), and Storage Alliance.
One problem with their business model was that customers were hesitant to
give up control of their data. And storage vendors responded to the SSP
threat with storage that was cheaper and easier to manage.
Eric Schott, director of product management at EqualLogic, Inc., Nashua, NH,
says that customers want on-demand provisioning of storage capacity, but
they don’t want to relinquish control of their data, making the outsourced
storage utility model unattractive.
Customers have spoken, he says: the benefits of SSP services do not outweigh
the loss of control and autonomy over their data and operations. “This has
created an opportunity for enterprising storage vendors to sell easy-to-use,
self-managing storage arrays into the kinds of businesses that may have
considered outsourcing,” says Schott.
With the advent of lower-cost alternatives to expensive and
difficult-to-mange Fibre Channel SANs — including the growing number
of iSCSI-based solutions available today — mid-sized companies can
afford to create their own scalable storage utility in-house, he continues.
“You no longer need to be rich or a rocket scientist to install and manage a
single, company-wide pool of storage,” says Schott.
Vendors, SSPs Had Competing Interests
Eran Farajun, vice president of business development at Asigra, Inc.,
Toronto, Canada, thinks that storage vendors viewed Storage Networks and
others as just ‘big customers,’ or distributors of sorts, and didn’t change
their licensing or pricing models for the SSPs, for the most part. While the
SSPs were trying to gain traction, their vendors were busy competing with
them for the same customers, trying to convince the customer to buy products
directly from the vendor. “So the entire vendor/SSP relationship was skewed
from inception, as they both had opposing incentives that we not aligned,”
The fundamental service that SSPs were trying to sell — primary disk
by the TB — was not something that customers were ready for, and still
“Look at the traditional outsourcing companies,” Farajun says. “They had
been doing the management for storage for their enterprise customers for
years before SSPs came around and they are still doing it today.” But the
difference is that the customer ‘owns’ the technology and the service is
sold as part of a wider Service Level Agreement. “At the end, it hasn’t
affected the vendors at all,” he concludes.
As far as storage customers go, Farajun feels they are shy about giving
ownership of their primary disk to anyone but themselves or as part of a
larger outsourcing contract. However, he says, customers are not shy about
letting others take care of their backup/restore problems, only because this
is such a problematic issue for customers that they can’t ignore it.
Page 2: Profitability and Focus Matter
Profitability and Focus Matter
So what exactly prompted so many SSPs to radically alter their business
models? Schott thinks the answer is really quite simple — they were
“The accessibility and efficient flow of data is the lifeblood of any
business — and safe storage and protection from unforeseen disasters
is a major concern,” he says. Simply put, Schott believes that customers
don’t want to entrust their family jewels to an outsider.
Farajun says the service that the SSPs led with was flawed from the start.
Handing over primary disk was too much of a stretch for many customers. The
technologies that the SSPs were using were not built for service
provisioning, he says, and many had to create their own software band-aid
solutions to accommodate a service-based offering.
Farajun thinks SSPs should have started with backup as a service, and
supported the incumbent IT admins. “The vendors were talking out of both
sides of their mouths and never really supported the SSPs in a meaningful
way,” he says. “They sold against them behind their backs. So they had no
choice but to alter their business models. And then they ran out of
SSPs also had to alter their business model because their customers did not
realize how they saved money. “The SSPs bought storage by the truckload and
sold it by the carload,” Farajun says. “But many of the customers they
approached were buying storage by the shipload, and so it was more expensive
to let an SSP in.”
Farajun also believes that one of the fundamental arguments that SSPs were
making to justify themselves was that storage was ‘really hard to do’ and
there weren’t enough storage skills. “Well guess what? The vendors made
managing storage easier, better solutions evolved, and customers figured out
they could do this themselves,” he says. “The products dropped in price
dramatically, and the vendors themselves put SSPs out of business by selling
against them, making their products simpler, and dropping their prices.”
Could SSPs Make a Comeback?
According to Schott, if outsourced storage services become very popular with
customers, the effect on the storage industry could be to concentrate buying
power with SSPs. “Vendors would likely respond by creating their own SSPs in
order to maintain direct customer interaction,” says Schott.
For vendors, Farajun says, it will increasingly matter how customers are
buying their products — in the form of a service, or in the form of a
solution. This will in turn cause the vendors to introduce features that
will make their products more amenable to service providers. “The concept of
utility will still matter to customers that are buying a solution because
some create internal SSPs,” he says. “So ‘service-esque’ functionality will
appear, and this is already happening with some vendors’ products.”
Storage customers will continue to think about whether they want to buy
storage technology as a service or as a solution wholly owned and managed by
them. Some enterprises today buy storage products and let outsourcers manage
it for them, Farajun notes. So the outsourcers are really playing the role
of SSP, they’re just not labeling it as such.
What else prompted so many SSPs to radically change their business models?
And what does the future hold for storage on demand? We’ll address those
questions in Part II of this series.