Storage Steps It Up


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The economy is in a downturn, businesses are looking to cut costs and storage vendors report slowing or even possible negative product growth.

But those facts haven't exactly dimmed solution providers' optimism. In fact, one big conclusion of Everything Channel's 2008 State of Technology: Storage survey is that it seems like a good time for solution providers to invest in the storage business.

About 55 percent of solution providers surveyed said their storage business grew from 2007 to 2008, with median growth of 15 percent, while only 8 percent saw a drop in sales.

About 69 percent of solution providers cited increased demand as a key growth driver, while 48 percent said that the addition of new storage expertise and solutions was the second-most important driver.

And the biggest driver of profit in the business is the move to attach more services and value-added components to their sales, according to 59 percent of the solution providers surveyed.

Storage growth in the channel comes even as the economy heads toward a recession because, while customers might take a hit on their sales, they can't stop collecting data or looking for new ways to manage it, solution providers agreed.

For instance, 78 percent of solution providers surveyed cited disaster recovery and/or business continuity as the No. 1 reason for storage product and service purchases, followed by 57 percent who cited either expanding customer infrastructures or the need to cut costs, while 55 cited loss prevention. All of these are services customers need regardless of the economy.

The only impact on storage sales is a slight slowing down in the decision-making process, said Dan Carson, vice president of marketing and business development at Open Systems Solutions Inc., a Willow Grove, Pa.-based solution provider.

Hope Hayes, president of Alliance Technology Group LLC, a Hanover, Md.-based solution provider, said she is planning for the worst, but so far is not getting indications of a slowdown.

The most recent example of a storage boom during market doom came right after 9/11, Hayes said. "Everybody said things would be terrible," she said. "I said the same thing. But in the end, things were fine."

Read on for a category-by-category breakdown and discussion of major topics from this year's survey.

Next: Components

COMPONENTS
The expanding infrastructure needs of customers is a top demand driver for storage solutions, say more than half of solution providers surveyed in Everything Channel's 2008 State of Technology: Storage survey. The same number--57 percent--say that cutting storage costs is just as important to their clients.

Does it seem like we have a dilemma on our hands? Not so fast. More storage for less money is quite possibly the most important story in high-tech over the past five years, with the rate of storage hardware improvements arguably outpacing even the Moore's Law-driven trajectory of increased processor performance at lower and lower prices.

"It's just amazing how inexpensive storage is now," said Brian Corn of Source Code Corp. Corn, vice president of marketing and business development at the Norwood, Mass.-based system integrator, said Source Code--like 55 percent of surveyed solution providers--is still seeing revenue growth in its storage products and services business.

Storage hardware sales remain the largest revenue earner in solution providers' storage mix, and Corn has some ideas about the components that are driving sales for white-box builders like Source Code.

With 1.5-TB drives available from the likes of Seagate Technology Inc., Scotts Valley, Calif., the hard disk business is booming, Corn said. The rise of SATA, too, is driving hard disk sales--though the success of this data transfer interface has stifled the more dependable, and more expensive, SAS technology.

"Seagate's still really trying to crank SAS up. But it's a slow adopter for us, and I attribute that to the success of SATA. It's so inexpensive, and even though the failure rates are higher, the cost savings are worth it to a lot of people," Corn said.

Add in a technology like iSCSI, which Corn describes as "a poor man's SAN" that vastly simplifies the management of basic storage arrays for administrators, and the complement of storage offerings for VARs has never been better.

But if hard disk capacity and innovation are getting better every day, the real future of storage lies in solid state, according to Corn. Jonny Brownleader, vice president of sales at RocketDisk Inc., a Beverly Hills, Calif.-based distributor of SSDs, agrees.

Brownleader predicts SSDs will continue to get cheaper. "Prices will keep dropping month-on-month," he said. But he warns storage sellers to pay attention to differences between multi-level cell (MLC)-based drives and single-level cell (SLC)-based SSDs. RocketDisk only sells more dependable, albeit costlier, SLC components from China-based Memoright Co. and Toshiba subsidiary Mtron Co., but Brownleader is closely monitoring advances in MLC technology.

Nor does solid state's future lie only in client systems, though that's where the technology's biggest impact has been so far, Corn said. The Source Code executive predicts that fully half of all storage drives could be solid state within five years, and that includes a robust presence in data centers.

"We're starting to see some action on the server side as well," Corn added, "especially with Intel's introduction of their SSDs."

--Damon Poeter

SYSTEMS
While managed services are growing in the storage arena, VARs say that traditional storage systems such as NAS and SANs continue to generate profit and create opportunity.

According to Everything Channel's 2008 State of Technology: Storage survey, almost half of the VARs surveyed--49 percent--maintain that storage hardware dominates the majority of their revenue source.

No doubt, storage hardware's domination might slowly change as partners make the transition to service-based models. And while only 32 percent of surveyed VARs say that storage services is their biggest revenue generator, partners anticipate that revenue from services will continue to grow in 2009.

Partners say that while traditional storage system offerings are still profitable, they're increasingly required to include value-added components that often come in the form of implementation or consulting services, in order to stay competitive in the marketplace.

"For the ability to drive better margin, there has to be professional services. You're solving major business problems," said Joe Kadlec, vice president and senior partner of Consiliant Technologies LLC, based in Irvine, Calif.

According to the survey, almost 60 percent of partners say that they are currently applying a hybrid services/hardware model, deploying on-premises hardware linked to either a third-party Internet-based service or an Internet-based storage solution hosted by the partner.

Partners also maintain that storage systems continue to be profitable due to the fact that they are increasingly being adopted by lower market segments. Of those surveyed, an overwhelming majority of storage systems VARs indicated their target market was medium businesses with 100 to 499 employees--a trend that is driven, in part, by surmounting disaster recovery and regulatory compliance needs.

"These smaller and midsize companies now have to provide for disaster recovery whereas they didn't have to three or four years ago," Kadlec said. "Typically, they don't have that in-house."

--Stefanie Hoffman

Next: Infrastructure Hardware

INFRASTRUCTURE HARDWARE
Solution providers see infrastructure hardware as one of the top sales drivers in the storage market, according to the 2008 State of Technology: Storage survey.

Respondents to the survey said that infrastructure hardware like Fibre Channel switches, Ethernet switches and WAN acceleration devices are fueling growth and generating profits, and that segment shows no sign of slowing.

The number of solution providers selling Ethernet switches is much higher than those who offer SAN hardware, illustrating that IP networks are becoming an integral media to share data. While Ethernet connectivity has become the main technology driving today's enterprise networks, it's also starting to move into data center and storage as the proliferation of 10-Gigabit Ethernet and Fibre Channel over Ethernet steadily increases.

Additionally, VARs surveyed say that hardware is still the dominant force for their storage revenue, with 49 percent saying it makes up the bulk of the dollars driven by storage.

VARs also see strong opportunities for infrastructure hardware in midsize businesses--described as having 500 to 999 employees--where 29 percent of VARs see the strongest growth potential. Midsize businesses are followed by large enterprises--described as 1,000 to 4,999 employees--which 24 percent of VARs say offer the greatest growth potential.

And when it comes to vendors, San Jose, Calif.-based Cisco Systems Inc. wears the crown among storage infrastructure hardware providers. Adaptec Inc., Milpitas, Calif.; Hewlett-Packard Co., Palo Alto, Calif.; IBM Corp., White Plains, N.Y. and Intel Corp., Santa Clara, Calif., respectively, rounded out the top five vendor partners named as best able to meet their technology needs.

Tyler Dikman, president and CEO of CoolTronics, a Tampa, Fla.-based solution provider, said infrastructure hardware is becoming a necessary component in a storage VAR's arsenal because of the increasing need to back up and replicate data while also avoiding critical downtime.

"One of the biggest challenges [customers] face is dealing with any kind of downtime," Dikman said, adding that oftentimes solution providers are tapped to set up a completely separate network to enable replication and avoid the lag time that can be created running the same process over the same network channels as day-to-day traffic.

Dikman also noted that WAN acceleration solutions will also become increasingly important and has been popping up on customers' radar screens as they see increased bandwidth needs while having to manage off-site data storage, backup and replication.

--Andrew R. Hickey

ARCHIVING AND CONTENT STORAGE
If you could somehow see the ever-increasing volume of data, e-mails and electronic documents many businesses are storing today, it might look like a house bursting with junk in one of those home makeover TV shows. But it'll take more than a yard sale to get things organized.

Solution providers see data archiving, and content storage technology and services as a growth opportunity, ranking content-addressed storage, e-mail archiving and database archiving as the three technologies with the greatest value-add potential, according to Everything Channel's 2008 State of Technology: Storage survey.

Government regulations like Sarbanes-Oxley and HIPAA continue to drive many sales of data storage and archiving systems, said Brooks Byerly, president of Soccour Solutions LP, a Dallas-based solution provider specializing in data storage and protection, storage area networks, and backup and recovery systems.

But Byerly said the major driver today is the growing number of companies that understand they need quick access to only a small percentage of the increasingly large volumes of information they are storing. "So they're trying to be more efficient in how they store that data," he said.

That agrees with the survey's finding, in which 57 percent of the respondents pointed to the need for lower costs and/or greater efficiencies as a demand driver for storage product and service purchases. Government compliance requirements were cited by 35 percent of respondents.

Soccour resells data de-duplication systems from Data Domain Inc., Santa Clara, Calif., and Byerly expects de-duplication technology to be in great demand in 2009 given that more companies are using disks for near-line storage. Fifteen percent of survey respondents expect data de-duplication and compression products to generate the fastest sales growth during the next 12 months. And 11 percent of respondents that currently don't sell de-duplication and compression products plan to do so within a year.

Thirty percent of the survey respondents are targeting sales of archiving and content storage software to companies with 500 to 999 employees, while 26 percent are targeting businesses with 100 to 499 workers.

--Rick Whiting

Next: Backup And Recovery

BACKUP AND RECOVERY
Data backup and recovery is not a glamorous part of the storage industry by any means, but it remains a mainstay of solution providers' businesses and will continue to do so for the future.

Regardless of what new technology or service a customer employs--disaster recovery, e-mail archiving, compliance and e-discovery, replication, server virtualization--none of them work unless data is backed up safely and is recoverable.

And because so many storage services depend on those safe and recoverable backups, it is fast becoming a service itself.

For instance, managed storage, which solution providers named as the fastest-growing and most profitable technology, consists mainly of helping customers find ways to manage the backup and recovery process.

This includes online data backups, which solution providers can either provide as a service on their own or contract to third-party providers, and which can be done in conjunction with customers' existing storage software and hardware.

In fact, linking local storage hardware with a third-party, Internet-based backup service is the most popular way to do storage as a service, followed closely by linking local storage hardware with a service provided by solution providers themselves, according to the State of Technology: Storage survey.

And that helps explain why four of the top five backup/recovery software vendors have all acquired storage service providers in the last couple of years.

Solution providers are constantly adding new tools to their data backup and recovery practices. One tool widely adopted in the last year or so is continuous data protection (CDP), a technology that allows changes to data to be backed up either immediately after they are made, or within a set time afterwards. Data that becomes lost or corrupted can be instantly recovered without the need to do a full restore.

Greg Knieriemen, vice president of marketing at Chi Corp., a Cleveland-based solution provider, said CDP brings customers faster recoveries and shrinks backup windows--huge benefits as the amount of data stored continues to grow.

CDP also cuts the cost of backup software licenses, Knieriemen said. "A company with 500 servers traditionally needs 500 backup licenses," he said. "With CDP, changes can be copied to a central server, which is backed up, saving the cost of almost 500 licenses. That's very significant."

Other new technologies, such as disk-based storage devices, with or without attached tape, have changed the data backup and recovery business, said John Zammett, president of HorizonTek, a Huntington, N.Y.-based solution provider.

Overall, he said, traditional backup and recovery is a very stable business, Zammett said. "It's not a growth business, because prices keep going down," he said. "We still ship as many units as we ever have."

--Joseph F. Kovar

SAN MANAGEMENT
The allure of a single solution to manage multivendor SANs is strong, but it's an area whose potential continues to be held back while better tools become available.

Storage resource management and SAN management, two related tools often lumped together under the SAN management category, is software that can manage multivendor SANs under a single user interface, allowing such services as configuration management, capacity trending, troubleshooting, dynamic workload management and performance monitoring.

SAN management is No. 6 on solution providers' list of storage technologies with the highest value-add potential, and No. 6 on partners' list of storage technologies they think are most profitable, according to the survey.

Yet the category barely makes the Top 10 list of technologies with the greatest growth potential because of its primary market being in the enterprise, with some bleed into the midrange.

The biggest holdback to SAN management is its proprietary nature, said Gordon McKemie, owner of Ohio Valley Storage Consultants, an Anchorage, Ky.-based solution provider.

"It's based on whatever disk array each vendor has," McKemie said. "Customers talk about interoperability between multivendor SANs, but most people use the SAN vendors' products."

That focus on vendor-specific SAN management tools shows in the survey. Of the top 10 vendors of SAN management software, only three--Symantec Corp., Cupertino, Calif., CA Inc., Islandia, N.Y. and Microsoft Corp.--are not tied to a specific storage hardware vendor.

It's a situation that has to change, especially as more and more data center environments become virtualized, said Keith Norbie, director of the storage division of Nexus Information Systems, a Minnetonka, Minn.-based solution provider.

"The new school of SAN management has to be done from a VMware construct," Norbie said. "It will encompass classic Fibre Channel, but will also include iSCSI and eventually Fibre Channel over Ethernet. Customers will have multiple vendors, all hooked together in an infrastructure that changes day to day."

Ideally, SAN management tools should be as ubiquitous as network management tools, said Dan Carson, vice president of marketing and business development at Open Systems Solutions Inc., a Willow Grove, Pa.-based solution provider.

"In the network world, you can use tools to truly touch the network and manage it," Carson said. "But the SAN and iSCSI management tools are nowhere near as mature. I think there's a huge need in the marketplace for a heterogeneous tool set."

--Joseph F. Kovar

SERVICES
The best way to increase profits in the storage business is to add services. Nearly 60 percent of solution providers surveyed for the 2008 State of Technology: Storage survey say that attaching services and other high-value components to their sales was the key driver of profit growth, while nearly one-third said higher profits came specifically from shifting their business to focus more on services.

According to the survey, just about half of solution providers currently sell deployment services as part of their storage business, while more than 40 percent sell managed storage services and more than 40 percent sell maintenance services. However, storage managed services seems to be the fastest growing of the three, with 45 percent of solution providers not currently offering managed services expecting to add them within the next 12 months.

It's not hard to see why. Of all the different storage products and services solution providers can sell, managed services is at the top in terms of both sales growth and profitability expectations, the survey found.

And customers rely on the services that solution providers offer as much as the solution providers do, said Hope Hayes, president of Alliance Technology Group LLC, Hanover, Md.

"Customers think about virtualization," she said. "But we really help them think it through beyond just virtualization. We look at all the ways we can help customers use it."

Same with adding new services such as data de-duplication, Hayes said. "Customers adding storage and servers want to add de-dupe," she added. "But then they are not sure if they are doing it correctly. They need our help to do it right."

Sometimes, customers who need a storage-related service are better off not knowing they are getting it, Hayes said. She said her company approaches customers about assessment services very carefully for that reason.

"If we say, 'Let's do an assessment,' they say, 'No way, you're just trying to mess us up with services,'" Hayes said. "Instead, we go in and talk to them about their perceived storage and server needs, and then do the assessment."

Storage solution providers can take advantage of several new services available to their customers, said Mark Teter, CTO of Advanced Systems Group, a Denver-based solution provider.

One of those is helping them increase their data center efficiency, and, therefore, reducing their overall energy costs, Teter said. Others include helping customers migrate data from old technology to new technology, compliance and data leak protection, and disaster recovery, he said.

--Joseph F. Kovar

GREATEST GROWTH POTENTIAL PER COMPANY-SIZED MARKET

More than one-third of large VARs see growth potential in Storage Resource Management Software

Category Very Large 5,000 Employees Large
1,000-4,999 Employees
Midsize
500-999 Employees
Medium
100-499 Employees
Small
20-99 Employees
Very Small
20 Employees
Storage Resource Management Software 14% 36% 18%

21%

7% 4%

Backup and Recovery Software

0% 13% 25% 28% 19% 15%

Archiving and Content Storage Software

4% 19% 30% 26% 9% 11%
Storage Infrastructure Hardware 6% 24% 18% 29% 8% 16%
Storage Systems 4% 19% 14% 33% 19% 11%
Storage Components

 

0% 7% 14% 21% 28% 31%
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