AMI-Partners' 2004-5 Global Studies Indicate Total Small and Medium Business -SMB- Storage Spending Exceeded US$10 Billion in 2004 and is Projected to Double by 2009.

NEW YORK -- AMI'S 2004-5 Studies Reveal Very High Interest in Adopting SANs Among Small and Medium Businesses: Defying Expectations, Interest in Fiber Channel SANs Equals Interest in iSCSI

Total global small and medium business (SMB) spending on IT storage hardware, software and services exceeded US$10 billion in 2004 as SMBs tried to cope with their rapidly increasing data requirements - driven by their increasing reliance on e-business and network-based applications as well as increasing use of multimedia and regulatory compliance. AMI projects this spending will double over the next five years, driven by adoption of SAN/NAS solutions and higher spending on data backup and disaster recovery solutions. Global SMBs have repeatedly listed IT storage among their top concerns in recent years and this concern is being reflected in their spending.

The above findings were released today by New York-based Access Markets International (AMI) Partners, Inc. based on its surveys of SMBs in leading developed and emerging market countries that account for almost three-fourths of total SMB IT spending. AMI is a leading consulting firm that specializes in IT, Internet, telecommunications and business services market intelligence -- with a strong focus on global small and medium business (SMB) enterprises. AMI-Partners conducts the industry's most comprehensive annual tracking surveys of SMBs in more than 20 countries, including North America (U.S. and Canada); Europe (U.K., France, Germany, Czech Republic, Poland and Russia); Asia-Pacific (Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan and Thailand); and Latin America (Mexico and Brazil).

The global surveys found that SMBs in most countries list enhancing their IT storage infrastructures among their most important priorities for the next year. "Increasing data volumes, concerns over 24/7 data availability and regulatory compliance are driving SMBs to consider some of the more sophisticated storage solutions that they might have shunned until recently," observed Anil Miglani, Senior Vice President at AMI Partners. While direct-attached storage and tape remain popular storage solutions among SMBs, and are likely to remain so in the foreseeable future, networked-storage solutions like NAS and SAN are becoming increasingly common as their prices have dropped significantly in recent years. In addition, SMBs also exhibit strong interest in storage services offered by third parties to avoid the upfront capital costs as well as ongoing support and maintenance.

SMB Adoption of Storage Area Networks Reaching Take-Off Point

SMBs in most developed countries showed strong interest in storage area networks, although they are keeping their options open between fiber channel and iSCSI SANs. While many vendors expect iSCSI to grow rapidly in the SMB market, SMBs appear to be driven by the reputation of FC SANs for high reliability and performance, while keeping open minds about iSCSI. Overall, 25 to 40% of medium businesses in many developed countries show an interest in adopting storage area networks while interest level is also increasing in the emerging markets. Similarly, the proportion of SBs interested in SANs reaches double digits in some developed countries.

SMBs have been showing increasing interest in network storage solutions over the last two to three years but have been deterred by their cost and complexity. SMBs often lack adequate in-house IT staff to manage their IT infrastructure, relying either on part-time employees or local channel partners to provide such maintenance and support. "SMB adoption of SANs will increase rapidly as vendors develop bundled SAN solutions that are easy to install and maintain and are also priced with SMBs' budgets in mind," said Miglani. Any such SAN adoption will very likely reduce potential demand for NAS.

Network Storage Vendors Focus in on the SMB Market

Not surprisingly, large vendors have been positioning themselves to serve the SMB market. These include EMC/Dell, Hitachi Data Systems (HDS), HP, IBM et al., each of which has announced SMB products in recent times. Entry-level SANs are now available for under $10,000, driven by the sharp declines in prices of FC components as well as the emergence of iSCSI as a viable option.

Despite such announcements, however, channel participation in the SAN programs of most vendors remains rather limited. Given the large and fragmented nature of the SMB market, channel partners play a crucial role in helping vendors sell their products and services to SMBs. Due to the lack of wider channel participation in reselling SANs, many interested SMBs have been driven to purchase NAS solutions. With the limited channel coverage by large vendors, many smaller companies have also started offering SAN solutions of their own.

SMB Market Segmentation

A detailed analysis grouped the 6.2 million U.S. SMBs into four tiers based on factors like their current and planned adoption of new technologies, attitudes towards technology etc. (In addition, these four tiers also vary significantly in their average size, industry specialization, types of customers and suppliers, employee mobility and so on.) The analysis revealed that only about one-fourth of all SMBs belong to Tier 1 and Tier 2, but they account for a majority of IT storage-related spending by all SMBs. These SMBs tend to be early adopters of most new technologies, have a high technological orientation, and view IT as an integral part of their business. On average, they spend several times as much on IT as their counterparts in Tier 3 and Tier 4.

In sharp contrast to these high spenders, the remaining three-fourths of the SMBs that belong to Tier 3 and Tier 4 are somewhat reluctant adopters of new technologies, waiting for new products to become commonplace and more affordable before acquiring them. Interest in SAN and NAS solutions is quite negligible among these SMBs.

About Access Markets International (AMI) Partners, Inc.

AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital, and actionable market intelligence -- focusing on global small and medium business (SMB) enterprises. The AMI-Partners mission is to empower clients for success with the highest quality data, business planning and "go-to-market" solutions. AMI was founded in 1996 under the name of Access Media International (USA), Inc. by Andy Bose, formerly a group vice president at IDC. Since its inception, the firm has built a world-class management team, each with ten to fifteen years' experience in IT, telecom, online communications or multimedia.

AMI-Partners has helped shape the go-to-market SMB strategies of more than 150 leading IT, Internet, telecommunications and business services companies over the last eight years. The firm is well known for its IT and Internet adoption-based segmentation of the SMB markets; its annual retainership services based on global SMB tracking surveys in more than 20 countries; and its proprietary database of SMBs and SMB channel partners in the Americas, Europe and Asia-Pacific. The firm invests significantly in collecting survey-based information from several thousand SMBs annually, and is considered the premier source for global SMB trends and analysis.

For more information on AMI-Partners or our global SMB surveys, please visit www.ami-partners.com or call 212-944-5100.