IDC Forecasts Large Increase in Storage Utility Services Spending

A new study by IDC has revealed that worldwide spending on storage utility services will reach more than $1.2 billion by 2006, representing a compound annual growth rate (CAGR) of 32%. Based on new assumptions taking into account changing market forces, this study shows that much storage-on-demand spending to date has been done as part of other, larger contracts, such as Web hosting.

According to IDC’s report, the storage utility or “on demand” model has been adopted by three types of companies: large, established outsourcers such as IBM Global Services and EDS; telcos like AT&T, BellSouth and Qwest; and niche players that want to provide storage applications such as digital archiving, backup, and vaulting services over the Internet including LiveVault, eVault, Zantaz.

“Clearly, the parties that will deliver most of the storage capacity as a utility over the next few years will not be small start-up firms, but larger, established services organizations that have already made the investments to deliver ‘IT on tap,'” said Doug Chandler, director of IDC’s Storage and Data Management Services research program. “In addition, storage-on-demand, as a discrete value proposition, is not strong enough to stand on its own. Service providers will bundle storage as an element in a larger portfolio of infrastructure services, including processing power and network bandwidth — and, in the case of the telcos, voice and network services.”

Looking ahead, as the broader IT-as-utility concept becomes more widely adopted on both the supply side and the demand side, storage will be an important element in this business, IDC believes. SSPs that wish to compete successfully must be aware that ultimately they are competing with customers’ established strategies and policies around storage and data management. When a storage utility provider can offer a service that is cheaper, more reliable, more scalable, and better managed than customers can accomplish themselves, these services will be purchased as a way of gaining competitive advantage. Until then, SSPs of any stripe will struggle to convince customers that they should turn over management and ownership of their storage infrastructure to a third party.

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