VAR Goldmine Hidden In Midrange Banking Storage

The midrange storage space, which includes products ranging from EMC's Clariion line and Network Appliance's NAS subsystems to lower-price devices from a variety of second-tier vendors, has become a big market for solution providers due to a variety of factors. As financial institutions try to bring together disparate storage systems or improve existing infrastructures, or as a result of mergers and acquisitions, solution providers are increasingly called on to offer solutions. Plus, solution providers said there is less competition from vendors in the financial space than in other markets, leaving the opportunities wide open for them.

"[Financial institutions have] the money," said John Zammett, president of solution provider HorizonTek, Huntington, N.Y. "They've always had the budget."

Both Zammett and Kevin Kelly, vice president of Agile360, an Irvine, Calif.-based solution provider, said that mergers and acquisitions, instead of reducing midrange storage needs as companies reduce resources and combine databases, in reality result in an increase in storage needs.

"Multiple acquisitions actually drive midrange storage," Kelly said. "[Financial institutions] want to do better management of data on new boxes, than retire or reconfigure their old boxes."

Advanced Systems Group, a Denver-based VAR, is seeing the same growth. Seven out of every 10 of the company's storage sales hit what CTO Mark Teter calls the midrange sweet spot between 300 Gbytes and 3.0 Tbytes of initial capacity.

The strength of the midrange storage sector has resulted in increased competition among vendors, both from those looking to grow storage sales to compensate for the downturn in the enterprise space and from those bringing new technologies to the market.

For instance, Teter said vendors are offering both SANs built for specific architectures such as Fibre Channel and IP-based technology and those that can combine multiple architectures.

Vendors that allow scaling from the midrange to enterprise are also desirable partners, said Teter, who cited Hitachi Data Systems and EMC as examples. "Companies doing different pieces are the ones we like to work with," Teter said. "Companies with only one technology like IP storage are harder, because if the customer's requirements change, they can't do anything with the technology."

Solution providers caution that a lot of vendors enter the midrange space without providing sufficient sales and support infrastructure, which are necessary to help vendors and solution providers deal with the wide range of customers in the market. "In this space, business still depends on smiles and dials," said Michael Fanelli, western regional manager of solution provider SSI hubcity, Metuchen, N.J.

Fanelli also wonders what will happen with such vendors when the enterprise storage business picks up again. "Will they turn around and run away from this market?" he said.

Analyst firm IDC predicts revenue for disk-storage systems in the banking depository market to reach $440.7 million in 2007, up from $434.1 million in 2002. Revenue in the financial services market is expected to hit $430.5 million in 2007, up from $427.1 million in 2002.

This growth reflects a larger trend, as IDC predicts the total U.S. market for external disk-based storage to hit $5.8 billion by 2007 from 5.4 billion in 2003. IDC predicts business, legal and financial services to be key drivers for the NAS sector, which is expected to grow about 5.4 percent through 2007. Meanwhile, banking depository and utilities will push direct-attach storage sales.