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With the 1999-2000 holiday season fast approaching, just as important is the deal's capacity-on-demand feature, McCormack says. "In spike periods, we can add another terabyte of capacity in a day or two, as needed. If we had to do that ourselves, it would take a lot longer than that and cost a lot more money."

Pay-As-You-Grow

Fast-growing, speed-hungry, newly capitalized Internet-based businesses have been the earliest adopters of storage utilities, says Dataquest's Couture. They generally need to ramp up complex systems quickly, and they often don't have an infrastructure already in place. In addition, by outsourcing their storage to an SSP on a "pay-as-you-go, pay-as-you-grow" basis, these companies can reserve precious capital for other essential tasks such as product development.

Ongoing Cost of Data Storage

Source: Cahners In-Stat Group

Corporate datacenters, on the other hand, have been cautious to date about moving to SSPs. The reasons: lingering fears about loss of control of critical data combined with doubts about data security in off-site hosting facilities and the deep investments already made in in-house storage architectures.

As a result, Dataquest estimates that by 2003, fully 85% of SSP client rosters will still be made up of Internet-related businesses using an SSP co-located at an Internet datacenter--like Exodus--and only 15% will be traditional corporate datacenter customers.

New entrants in the SSP market are cropping up every day. Some of the earliest contenders were formed by storage executives who have broken away from such established storage industry companies as Storage Technology Corp. (StorageTek), EMC, Compaq Computer Corp., and Exabyte Corp. Among the new SSP companies are: Arsenal Digital Solutions Inc., of Raleigh, N.C.; CreekPath Systems Inc., of Boulder, Colo.; Managed Storage International (MSI), of Westminster, Colo.; StorageNetworks; StorageWay Inc., of Fremont, Calif.; and S4R Inc., of Carlsbad, Calif.

The cost of off-site storage utility services, according to Couture, is currently hovering around $50,000 per managed terabyte of data stored per month. "I have seen vendors offering it as low as $30,000," he says. "But you must always ask what level of service and reliability you're getting for those fees."

The Private Alternative

Other new or established storage companies are considering ways of providing storage services that don't rely on co-location with Internet datacenters, Couture says. These companies are focusing on ways to service established corporate datacenter customers. Compaq, for instance, as well as newcomer Storability Inc., of Southborough, Mass., are targeting large customers who are unwilling to move their data outside the walls of the enterprise.

What these companies offer, in essence, is a "private storage utility," Couture says, where data is managed at the customer site. Rather than locally managing data that is remote from the customer's corporate location, they can offer remote management of data stored locally at the customer's site, explains Kirby Wadsworth, vice president of marketing for Storability, which is currently beta testing its service at several customer sites. Wadsworth will not name the beta sites.

This model is almost inevitably higher priced than the standard off-site SSP, Couture says, and for that reason is less appealing to many newer and smaller companies.

He adds that while fees for private storage utilities are hard to pin down because they vary so much from company to company, the reasons this type of offering could be more expensive are clear. It costs much more for an SSP to tailor service to an enterprise's needs and build something specific to that enterprise than it does to offer a more generic option in a centralized location. In addition, more personnel generally will be required to monitor and service each enterprise, especially if that firm requires someone at its site all the time. Finally, enterprises tend to have much larger storage needs than start-ups.

According to Compaq executives, however, pricing for its on-site Private Storage Utility services is competitive with the remote SSP model, costing from $35 to $55 per gigabyte per month. That service includes rental of Compaq hardware and software installed at the customer site as well as remote management from one of Compaq's 20 worldwide operations management centers.

New to the Neighborhood

Given the youth of the SSP companies themselves--none is more than a couple of years old--it may be no wonder other start-ups are the most willing to give the newcomers a try.


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