Storage Service Provider Summit, Part 2.

Examining the new class of storage vendor

The first part of this article appeared in the October issue of CTR.

Editor's Note: Over the last year, a new concept was added to the storage solutions industry. This was the idea of the Storage Service Provider, a hybrid company which is both producer and consumer of storage products and a new class of services. The SSPs have enjoyed exposure in the trade press, but there has been much skimming and little delving.

To address this new class of storage vendor, Computer Technology Review convened a summit, a conference that included SSPs, a data center that acts as a colocation site, and a well known market research analyst. CTR plans for this summit to become an annual event, so that CTR's readers can be kept current on this new trend: storage services. Participants in this year's summit include:

SSPs: CreekPath Systems: Greg Mangold, vice president of sales and marketing. WorldStor: Steven Bishop, chief technology officer.

StorageWay: Dan Marshall, founder and vp sales; Rob Commins, director, product marketing.

Data/Co-location Center: Inflow: Dag Peak, director of product development; Mary Wagner, product manager for storage services.

Special Guest: Aberdeen Group: David Hill, research director, storage management.

Moderator: Mark Ferelli, Computer Technology Review.

The Issue Of Trust

Mark: I think I would like to take on the trust issue just a bit. The key issue for SSPs is being able to go into a customer and say they can trust their data to you. However, the IT manager's life and breath and being are tied to this data and not everybody is as fortunate as Inflow to have a Mary there that knows the way around mass storage. How do you go in and gain that trust?

Steve: We are basing our business understanding that this is the most significant objection we will see. I believe we are doing much more than what the typical customer would be doing in-house to protect their data. That is at all levels; network IT level security, storage network infrastructure security, personnel security, physical security, and process security. We start from the ground up securing all those aspects and documenting what we do in those areas to present that information and nine times out of ten they don't come close to doing what we are doing. If their in-house guy loses something, that guy loses his job maybe and goes and gets a job for more money somewhere else. If we lose their data, we are out of business. We have a much higher risk involved and responsibility involved in securing that data.

Greg: That is our objective right there. We need to continually prove that companies like us are going to do a much better job than the company can do in-house.

Dan: How do you instill that confidence? I think while we are going through the development of the SSP modeling it is very important that we pick partnerships with vendor suppliers. It would be very hard for me to go in and sell four 9s availability and the question comes up of what type of gear is it on. It would be difficult to sell that if I tell them SCSI. The partnerships you have in place help to validate your expertise and the fact that you can deliver the availability we do within our SLAs.

Mark: With so many fims that you partner with, storage is really not a core competency. How do you get over the hurdle? Inflow is an exception because they have a specialist worrying about the storage all the time. Mary, I am not picking on you, you are just rare.

Dag: To go in and sell availability based on the support from an Inflow or Exodus would be more challenging than going in and supporting availability from walking in with an EMC or HP or IBM. We have to go ahead and help the customer understand the availability of our product and the security of our product and the performance. You have to stand on the technology the vendors are utilizing from a storage perspective.

Greg: All the data centers are trying to develop expertise and some have more than others. All the data centers have a combination of technology people and business people. While we are pitching the technology and vendor brands to one level of that business we all need to keep track of the business opportunities to the financial side of the company. When you pick an EMC supplier, we will try to sell services on that equipment and there are two EMC sales guys calling on whatever account you name. There is not an account in the world that they don't have a guy calling on. You are competing against your own self on the technology logy basis. You compete and have leverage because they are in there saying how great their system is as a turnkey or buy in. Differentiation when it all shakes out even is when you go to the Compaqs and HPs will be margins on services offered and quality of services provided to the end user.

Steve: I think we all agree with that. I disagree with the statement that we are competing with our vendors in terms of a direct sales opportunity. I think that how you manage the relationship with that vendor and make sure that the business relationship is a win-win for all parties really counts. This is including the time to close the sale as opposed to closing a direct sale as well as getting paid the same commission if not even more commission to that rep.

Greg: Good luck. I know that is what EMC's SSP program is. They pitch it all the time. I also know that we are in with the client and that sales guy is trying to sell the equipment and not the s service. He wants to close the systems sale.

Rob: That will be a function of this business model maturing. 'He wants to maintain control of his account and even within EMC they seem to have the most mature model but they are still learning too.

Greg: That is it, right there.

Rob: There is so much business out there between the three SSPs firms: here at the summit now. We rarely bump into each other. We bump into "roll your own" w which will hang out for a while there.

Mary: I would agree. Our sales people will run into an EMC or Hitachi or HP reseller who has convinced them that it is cheaper and easier to do it themselves.

Mark: You may well be in direct competition with your hardware suppliers?

Mary: More often than not.

Dag: They are trying to sell direct to consumers of storage and to the SSPs. They don't have a good story yet on how to approach a co-location provider directly. We have the EMC guys come up and say to buy their boxes and we can turn the service up on it. That doesn't work for me. They are walking up to customers and saying to buy a box and all the storage needs are taken care of. We have to educate the customers on what all the costs of managing storage are and not just the cost of the box. The SSPs and co-locations can offer a significant value when it comes to data storage.

Mark: Dave, what is your view from the top on this competing business model situation?

Dave: I think it will take a while for it to settle out. It is not going to be immediate. It will be in the marketplace and determined which way is best.

Mark: I find it interesting that you guys don't bump into each other too often. According to InFusion, there are about 35 declared SSPs and about 350 co-location facilities. Are we looking for consolidation of these numbers in the near term? Is it too new and will we see more players?

Stray Comment: We are looking for Storage Networks to buy all of us up next quarter.

Dan: I went to the InFusion conference here. The list of SSPs was about 45 and out of that about 30 had decided to do something else. People like IAS and Web Zone, who were trying to declare themselves SSPs, found that the market was not as big as InFusion is saying. I would challenge that number on the amount of SSPs in the market space today.

Dag: We run into people who call themselves SSPs all the time. I would second that a lot are not true SSPs. A lot come out of the systems integration world and think that being an SSP means rolling into a co-lo and building a box and walking away. The number of true SSPs out there...not that many have showed up on our list. Perhaps there will be consolidation in the co-lo area specifically but I don't see Inflow flying under anybody's wings in the near future.

Mary: I think that raises another point about competition. We have never talked about integrators as being competition. SANS Inc. says they will put together best of breed hardware and implement it and train staff and maintain the equipment and to them that is the next best thing to being a storage service provider but at a lower cost.

Mark: I don't know that that class of SSP is addressing the service quantum we are talking about. It is, in part.

Greg: On the co-location side, I hope that there is either a business consolidation or some kind of slowdown or else two-thirds of the country will be under raised floor space. Just add up the 350 guys and how many square feet they think they will build over the next two years and it is tens of thousands of locations.

Dan: Even disputing the amount of SSPs, I believe there will be consolidation. It would be interesting to hear what the hardware vendors classify as an SSP. I know I have sat in meetings at Hitachi and HP and how they classify us. There is this private and public utility distinction. I think potentially there could be overlap where consolidation between a private network provider and public utility provider could make a lot of sense.

Steve: We track a list of about 30 that claim to be SSPs. I think numbers 20-45 are the guys who saw dollar signs after the Storage Networks IPO but we are seeing some barriers to entry being erected here in the form of mind share with VCs. This is both in terms of consuming the capital in this space but also mind share with vendors and data center partners. These guys would love to sell you space and the hardware vendor would love to sell you hardware. The guys we claim are the real SSPs are ones that have long standing relationships in this area and we know the people at Exodus and Global Center and EMC and Hitachi. They know we are real. I think there will be some mind share cutoff there. I believe we are already there. The players popping up now, people are saying 'yeah whatever'.

Mark: Okay. The last question today to the SSPs is if there was a key misconception of storage service providers out in the marketplace, what would it be and what is the corrected version?

Steve: It is what is real today vs. what is real tomorrow. I think the initial misconception today will be fixed to some extent as we go forward and this concept of 'if I engage with an SSP I am getting this utility and I plug in the wall and there is my storage and backup.' Unfortunately today we are closer to a managed public network outsourcing engagement than we are in this pie in the sky utility model that everybody is working toward. The guys here at the summit will agree when you say integrating even with the network in place and the remote management and people in place implementing a combination SAN/NAS solution for the customer optimized for their application that includes things like hot backup for Oracle and Sybase is not just a plug it in and walk away thing.

That takes a pretty reasonable assessment period. It takes some real sitting down and documenting installation and hand holding with them for a while. I don't think that is a bad thing. That is the reality of today. When you are choosing an SSP you need to choose someone with the capabilities and people and experience to do that. Throwing together a SAN is getting easier and carving up capacity based on tools is getting easier and easier. That is the easy part of what we do. It is the real high level function of helping you design storage environments and capacity planning and software integration and hot backups with Oracle, etc; those are the hard things. Those are the things people are paying us to do.

Dan: I reiterate what Steve is saying. This is a complex storage environment like Dave mentioned earlier. It does require professional services and technology assessment. The objective is to get the monthly usage as a utility. There is up-front investment required both on time and professional services to make sure it flies. I think it is more of a 'can this model work' or 'can a SSP manage the critical data and utility and validate it.' Is it real and will the players be around to support it? The termination or divorce clause could be real painful. We have seen SSPs start and stop. It has been very painful on their customer base.

Greg: I will complete the round from the SSP side. I think Rob and Steve both hit the nail on the head. Most customers we talk to don't understand how difficult it is. Customers have a perception that is easy for them to do. We see that from users a lot. It is harder than it looks and they don't know it. The other side is the customers think it might not be safe when the reality is that it is safer than them doing it themselves.

Mark: Dave, have you done any projections on the present and future of the SSP marketplace? If so, what is the trend? Give me your crystal ball view.

Dave: I haven't sized up the market as of yet. However, I think that there are lots of opportunities. I think a lot of the Internet companies have an opportunity to use SSPs because they are growing at hyper growth rates and can't manage their storage. The SSPs can give me a lot longer laundry list but I think there are lots of opportunities in the marketplace and they will have to follow through. It is complex and not an easy process to do that. They will have to work their way through. It has to be played right.

Mark: Ladies and gentlemen, I want to thank you all for the time and effort and imagination you put into this session.