And the storage vendors are missing out on a huge market.
But still, the two sides haven't been able to come together.
The big storage vendors recently gathered at Storage Networking World to discuss the new wave of storage products aimed at the small and mid-sized business (SMB) market. Microsoft, EMC, Computer Associates, Dell and Emulex were all present.
''As SMB customers want the same benefits as larger companies, we've made Windows Server much easier to deploy in a SAN,'' says Claude Lorenson, Microsoft's technical manager of storage technologies. ''The needs of SMB are largely the same as those of the enterprise -- data protection, business continuance, backup -- but SMB's don't have the same skill sets or budget.''
In stark contrast, though, stands an analysis done by Marcus and Millichap, a mid-size real estate brokerage firm with a large IT infrastructure.
''We found that most SAN products were designed for enterprise customers and much too expensive for us to deploy,'' says Rick Peltz, CIO of Marcus and Millichap. ''We couldn't understand why Fortune 500 storage suppliers don't scale these products down to fit the mid-market.''
Peltz' company has 38 offices nationwide connected by T-3, T-1, Frame Relay and VPN. A total of 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.
He 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 CFO's 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, wich 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.''
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 as 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 offers 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.