Storage Comes of Age January 5, 2011 Issue Amy Larsen DeCarlo Current Analysis Principal Analyst, Security and Data Center Services In this prolonged period of economic stagnation, data storage stands out as a bright spot in the technology sector. The exponential growth in the volume of digital information is resulting in almost unbridled growth in demand for storage capacity. Nor is there any sign of a slowdown anytime in the near future, with some industry estimates that individual storage volumes could continue to grow 90 to 100 percent year over year for the forseeable future. Companies particularly mid-sized businesses with between 100 and 1000 employees that of late have become more comfortable with third-party hosted options - are looking for cost-effective OpEx-based managed storage solutions that allow them to avoid the upfront capital costs and many of the ongoing maintenance expenses that can make reliable storage expensive. Enter cloud storage a flexible, efficient managed service model that takes advantage of a virtualized infrastructure that is inexpensive relative to traditional on-premise or managed options, letting organizations pay for just the capacity they actually need. storage services also make it possible for businesses to expand storage as needed. Managed IT service providers of all stripes from system integrators and hosting providers to carriers and specialized storage vendors -- are racing into the cloud with new cloud storage services. Seeing the current demand and the future revenue potential, venture capital firms are pouring investment dollars into the segment. The result is a crowded and complicated market with a host of newcomers like Leverage jockeying for position against much longer-established rivals. This advisory assesses the current landscape, with a particular focus on companies supplying cloud storage solutions to mid-tier companies. This report addresses the interconnected ecosystem of technology providers, paying particular attention to the role channel partners play and how innovative business models are changing what is still very much an evolving sector. Current Perspective storage is all the rage today, but it is not an entirely new model. For years, providers have been offering businesses and consumers online backup and other storage services. However, as was the case with other areas of outsourcing, organizations balked at moving a significant portion of their data online. Concerns about stability, security, and data integrity kept storage largely in-house. High profile incidents like the 2008 failure of the online storage service The Linkup (known earlier as MediaMax), which left nearly half of the company s 20,000 users permanently without access to their data, didn t exactly inspire confidence either. However, over time maturing technology and business models, and pressures on IT budgets, have Europe +33 (0) 1 41 14 83 15. Or visit our Web site: www.currentanalysis.com 1
Report: Storage Comes of Age Business Network and IT Services helped organizations become more comfortable with the idea of using a cloud service, at least in theory. Storage is a natural fit for this kind of delivery model, because as precious as much of the information is, storage as a discipline is more tactical than strategic. At the same time, the combination of an increasing reliance on digital communications and regulations and legal mandates requiring data be archived for an extended period of time are driving a proliferation of new data. Add the increased budget pressure that went hand in hand with the recession, and businesses are scrutinizing every aspect of their spending, applying a new rigor to questioning what IT functions should remain in house. On Demand, In Demand Expectations are that data volumes will only continue to grow at a rapid rate, and that cost cutting will continue to drive companies to look for outside stable and reliable solutions. Given these pressures, especially on the mid-tier market, more providers began looking for ways to deploy infrastructure to deliver online storage services that could meet their customers reliability requirements and budget constraints. In cloud storage, customer data is stored in a virtual server environment in the provider s data center, accessed either via a virtual private network (VPN) connection or through the public Internet using a password and other security measures. This is an appealing model for providers, which can deliver managed storage services at low costs by sharing their deployed infrastructure across many customers. Server virtualization consolidates multiple servers into one virtual machine, improving utilization efficiency and lowering costs. That greater efficiency makes cloud storage an affordable alternative for either do it yourself (DIY) or traditional dedicated hosted models. Online storage appeals to businesses that want to take out the cost associated with acquiring hardware they may never fully use, and that want to eliminate IT expenses associated with supporting that data. In many cases, providers simply use excess storage and server capacity to deliver on-demand storage and sister on-demand compute services. In some cases, providers are able to apply abundant, previously unused data center resources to support new cloud services. In the case of Amazon Web Services, for example, data center resources were left over from the provider s ecommerce business. The result can be a highly efficient way to support customers variable storage requirements. Over time, storage providers can extend their services to include a host of complementary services. For Amazon, this bet has turned into a nice $500 million side business. Amazon s success has not gone unnoticed, and other IT providers have jumped onto the bandwagon. Typically, providers will enlist partners that can fill in their capability gaps to build out an infrastructure to support efficient management of customer storage. This has led to multi-layered partnering. For example, storage vendor Symantec supplied the underlying backup and archiving software that cloud storage provider Nirvanix used in its Storage Delivery Network (SDN), which Verizon in turn used to expedite the launch of its own branded Storage solution in summer 2010, with the intention of later supporting service delivery from its own data centers. Verizon rival AT&T took a similar tack when it introduced its own Synaptic Storage as Service solution a year earlier, using EMC s Atmos technology as the platform for the offer. Both Verizon and AT&T were able to save on development and deployment time while still leveraging their own networks to deliver services to early cloud adopter enterprise clients that were already experimenting with on-demand compute services for testing and development. Verizon now offers a comparable cloud storage service targeted toward mid-market clients. As is the case with infrastructure as a service (IaaS) offers in other areas such as on-demand computing, providers focus their efforts around technology delivery and business models. storage providers often charge customers on a subscription basis and just for the capacity they use. Plans vary by provider in terms of minimum contract time, as well as whether the provider charges bandwidth fees to access and store data in their data center. Customers can manage their cloud storage services through the provider s online portal. These self-service dashboards allow the customer to Europe +33 (0) 1 41 14 83 15. Or visit our Web site: www.currentanalysis.com 2
Report: Storage Comes of Age Business Network and IT Services order and provision storage resources, as well as to access stored files. When a provider resells another company s service, it not only provides the interface to the service and the first line support, but it can often capitalize on its own resources to provide attractive package pricing. For example, a telecommunications provider like AT&T or Verizon can draw on its network to offer attractive bandwidth pricing plans for customers backing up and retrieving their data. Thus far, there has been little differentiation around service level agreements (SLAs), with 99.9% availability in a given billing cycle serving as the industry standard. Providers will exceed that with 100% data availability guarantees if customers opt to store their files in multiple locations. Making their Mark(et) Though the market is crowded, there is still room for providers that can tailor solutions to meet the requirements of various segments of the market. There is a place for providers that can meet the cost and support requirements of small and medium enterprise (SME) customers, which are often missed as providers choose to focus either on smaller or larger customers. That said, it helps to have a playbook to understand what providers are offering what types of cloud storage solutions in today s competitive landscape. The table on the next page is a sample of some of the larger and/or more interesting providers in storage services today. The cloud storage services from the providers listed in the table support an array of use cases, from data backup of structured and unstructured data and archiving for compliance and other purposes, to more specialized content storage and distribution of rich media (e.g. video). Providers of cloud storage services also target constituencies such as web applications and cloud developers (e.g. Amazon Web Services S3, Google Storage for Developers, Microsoft Azure Storage). Others cloud storage applications are created more specifically for enterprise system administrators to augment existing storage (e.g. Iron Mountain Live Vault). Providers like Iron Mountain also often provide industry-specific cloud solutions to address particular vertical challenges (e.g. cloud-based records management for healthcare). Providers differentiate their services in a number of ways, from the underlying storage technology they apply and the methodology they use to protect the integrity of the data (e.g. redundant storage across multiple facilities). Providers also distinguish their services on the basis of the data center and, in the case of telecom providers, the network infrastructure they use to support storage service delivery. The providers included in the table have facilities located in multiple regions, which not only can help speed transfer and access times for customers, but also provides built-in geographic diversity options for redundancy. Security is another factor that helps cloud storage services stand out from their rivals. Traditional telecom providers can often supply layers of protection associated with safeguarding data both in motion and at rest as a value-add. This is clearly a sensitive point for many organizations, particularly those in industries ruled by compliance mandates. Many providers offer cloud storage in conjunction with, or as a complement to, other cloud services used to support both platform as a service (PaaS) and software as a service (SaaS) applications. In some cases, providers with extensive managed service portfolios can tie together their cloud storage services with much larger packages that include other hosted and managed services such as managed application services. Ultimately what sets apart one service from another can come down to pricing. Almost all cloud storage services apply a consumption-based model that charge users based on the amount stored. But many offer tiered pricing, in which the cost per GigaByte decreases as a customer stores higher volumes of data. Some providers also make retention time a factor (e.g. the customer commits to storing the data for a period of time; the longer that period is, the lower the price). Pricing on factors Europe +33 (0) 1 41 14 83 15. Or visit our Web site: www.currentanalysis.com 3
Nine Storage Providers to Watch Provider Solution Solution Description Data Center Infrastructure Amazon Web Services S3 Targeted toward the developer community S3 provides online storage service accessible through a REST or SOAP interface. Purposefully built using a limited feature set to keep cost down. Uses same infrastructure as Amazon e-commerce site and relies on a BitTorrent interface to support low-cost, highscale distribution Doesn t disclose data center locations but reportedly delivers S3 from at least 15 facilities in U.S., Europe, and Asia-Pac; Public and private cloud options Leverage Storage Windows-focused but supports other OSes as well. Positions as enterprise class storage accessible in real time via a number of interfaces and devices including its own Web Services API, Windows Desktop Application, Windows Sync Client, WebDAV for Windows, Mac & Linux, Blackberry and iphone; hierachial and tagbased fi le organization for easy fi le search and retrieval. Delivered from 9 data centers in North America, Europe, Asia (Dallas, TX; Fremont, CA; Seattle, WA; New York, NY; Toronto, Canada; London, U.K.; Mumbai, India; Singapore City, Singapore). Public and private cloud EMC Atmos Policy-based enterprise online storage service accessible via REST and SOAP and fi le access via CIFS/ NFS/Installable File System Hosted exclusively by third party partners such as PEER-1 and AT&T Sales Model Pricing Model Strengths Weaknesses Sells direct, online, and through channel partners. White labelling available. Resellers include Jungle Disk, Zmanda First 50 TB / Month of Storage Used for 99.99% availability - 0.100 per GB; Next 50 TB $.093 per GB; First 50 TB / Month of Storage Used -$0.150 per GB; 11-9s availability; Next 50 TB / Month of Storage Used $0.140 per GB Scale, Redundant infrastructure, Marketmaking innovation, Aggressive Pricing Model Perception issues around security and reliability; seen as too low-end and more PC than server-oriented, minimal feature set; limited support and very developer-oriented Sells direct and through partners. White labelling available $.09 per GB per month for 1st data center (1-10 TB); $08 per GB per month (10-40 TB); $.08 per GB for second data center (1-10 TB); $.06 per GB for second data center (10-40 TB) Scale and geographic reach; disruptive pricing model; up to 100 percent availability SLA if copies are stored in 3 or more data centers Scale and geographic reach; disruptive pricing model; up to 100 percent availability SLA if copies are stored in 3 or more data centers Ended direct sales earlier this year - thirdparty partner sales only; Channel partners include AT&T, Peer 1, Hosted Solutions Varies by provider Flexibility, enterprise focus, strong channel with major enterprise customers EMC no longer hosts which opens up questions about stability and future of the solution; branding confusion (Continued) Europe +33 (0) 1 41 14 83 15. Or visit our Web site: www.currentanalysis.com 4
Nine Storage Providers to Watch (Continued) Provider Solution Solution Description Data Center Infrastructure EMC MozyPro Multi-user online backup and recovery program which is designed to be relatively easy to use, cost-effective and stable Supported through several Mozy facilities including a facility in Salt Lake City but no locations given Google Google Storage for Developers Secure online storage access via SSL aimed at developers; allows for access to metadata; Google doesn t disclose location or other specifi cs about data center faciliites but apears to have a substantial infrastructure; Data replicated in multiple data centers across the U.S. and within the same data center IBM Smart Business Storage Smart Business Storage is a an online with public and private cloud options that provides a unique scale-out clustered model Support for multiple petabytes of capacity. Delivered from seven cloud facilities in North America, Europe, and Australia Iron Mountain Storage as a Service Solutions (Live Vault Data Protection and for Microsoft DPM) and verticallyspecifi c solutions Fully automated offsite data vault solution for backup and recovery (Live Vault) and online data protection solution for Microsoft servers Data is mirrored and stored in an underground facility located in a former limestone mine 22 stories underground in PA. storage services are delivered from fi ve facilities. Sales Model Pricing Model Strengths Weaknesses Direct sales and sales through partners such as Apptix, Cox Business Services, Comcast $6.95 license fee +$.50 per GB Competitively priced; delivers enterpriseclass backup support for a low price; claims 50,000 business customers Seen as primarily consumer-focused; Some branding confusion Sold directly Storage $0.17/GB/ month; Network - Upload data to Google $0.10/GB, Download Data - 0.15/GB for Americas and EMEA $0.30/GB for Asia- Pacifi c; Requests: PUT, POST, LIST $0.01 per 1,000 requests GET, HEAD $0.01 per 10,000 requests Solid feature set. Good brand, potential for bundling Novice in the storage space; seen as too lightweight - too consumer-oriented through IBM business partners Priced per GB stored with no fee for access or transfers Fully redundant infrastructure; Respected leader in enterprise storage; full complement of cloud and managed IT solutions; Extensive consulting capabilities Lack of pricing transparency; Perceived as too expensive for all but the largest enterprise customers; through partners that include Dell, HP, Microsoft, and NetApp Based on amount of data stored and retention period. First 100 GB - $1.00/GB (90 day retention period); $1.50/GB (1 year), $2.00 per GB (seven year retention); next 150 GB -$.50 GB (90 day retention); $1.40 per GB (1 year) Established reputation for enterpriseclass data protection services; Unique delivery facility reassures client about stability and security of data; Continuous backup protection with fast recovery options Unclear SLAs; Good overall record marred by some high-profi le outages and data loss issues; limited presence outside the U.S. (Continued) Europe +33 (0) 1 41 14 83 15. Or visit our Web site: www.currentanalysis.com 5
Nine Storage Providers to Watch (Continued) Provider Solution Solution Description Data Center Infrastructure Microsoft Azure Storage Services Persistent, durable storage aimed primarily at cloud application developers using Offers a REST API and managed API for administratorsi; Locations not disclosed but believed to have facilities in San Antonio, TX as well as Dublin, and Amsterdam Nirvanix Storage Delivery Network (SDN) Fully managed intelligent storage service that stores delivers and processes requests at the best location Facilities in New Jersey, California, Texas, Germany, and Japan Rackspace Files Online fi le and media storage to support functions such as backup/recovery, media server, secondary/ tertiary storage; and general variable storage requirements Nine (9) Data Centers: San Antonio, TX (2); Dallas, TX; Herndon, VA; Chicago, IL; Ashburn, VA; London, UK; Slough, UK; Hong Kong Sales Model Pricing Model Strengths Weaknesses Microsoft business partners Storage = $0.15 / GB stored / month; Storage transactions = $0.01 / 10K; Storage transactions = $0.01 / 10Kilobytes Scale, Brand recognition. Flexibility, cost, complementary PaaS solutions; Claims 10,000 customers Limited experience and lack of signifi cant scale; Lack of transparency around data center locations, protections through partners that include Verizon Business Flat rate $0.25 GB/ month $0.48 GB/month $0.71 GB/month data stored Early mover advantage in the cloud storage space means the company is considered a leader - Intel has a stake in the company; Broad base of partners - both resale and developers; Claims much faster transfer rates than rival Amazon More expensive than some options; Not as well known as some other through reseller partners Storage: $0.15/GB per month Transfer: Data Transfer in - $0.08/GB Data Transfer out: 0.22/GB Sizable infrastructure and increasing scale; Broad brand recognition and large customer base; Complementary cloud and managed hosting services Signifi cant past outages cast the company s services as less than enterprise-class; caters to the lower end of the market; more limited international presence than some of its competitors Europe +33 (0) 1 41 14 83 15. Or visit our Web site: www.currentanalysis.com 6
Report: Storage Comes of Age Business Network and IT Services such as data transfer also varies, While the cost-effective nature of cloud storage is what attracts organizations to the model, the provider with the lowest price is not always the winner. Customers need to have confidence in the security, reliability, data integrity, and accessibility before they will make the leap to any cloud-based service. Forward Advance storage has come a long way in a short period of time, and more organizations have become willing at least to experiment with the medium. However, there are still incidents and outages that rightly give prospective clients pause. While demand is on the rise, growth in this space will only continue if providers are able to assure customers of the quality of their solutions. storage providers also will need to continue to prove to clients that their solutions are superior to other models in other ways besides price. For providers that are able to assure customers not only that cloud is the right choice for them but that the customer gets secure, better performing, more reliable service than in-house solutions in the bargain, the sky is the limit. Recommended Actions Recommended Vendor Actions storage providers need to develop a channel that will effectively augment whatever direct sales force they have to reach a broader set of their target prospects. However, in this case quality is more important than quantity. Providers should cultivate reseller relationships with companies that can provide key value adds in terms of consulting and pre- and post-implementation support. Providers should also have the right mix of complementary services that will make the Storage a compelling value add. Telecommunications providers that are lacking a cloud storage solution are missing a prime opportunity to get into a potentially lucrative business and increase stickiness with existing clients. Carriers should weigh their options, looking for cloud storage specialists with solutions that are already proven in the market. Carriers also need to be able to dedicate the appropriate resources to marketing these services as another element in a portfolio of managed services that will help customers improve their own efficiency. Providers should look to develop more vertically-oriented cloud storage solutions to meet the particular compliance and industry needs of sectors like financial services and healthcare. While there are many established solutions in areas such as electronic records management for healthcare, if a provider is able to package the solution with other complementary design, deployment, and post-implementation capabilities (e.g. meaningful use consulting for healthcare), they have a real opportunity to win contracts they might have otherwise missed. storage providers should look at ways to improve the stability and reliability of their current service offerings, and thus be able to better differentiate their services around SLAs. While some promise 100 percent availability today, they typically charge the customer extra because they require customers to pay for redundant storage in multiple data centers. Recommended User Actions Businesses that in the past have been reticent about moving to the cloud should take another look at whether, and for what applications, cloud storage might be a good fit. Many managed storage services have matured nicely, and the economics are too compelling to ignore. However, cloud storage may not make sense in all cases for all types of data, so prospective customers need to educate themselves on their options as they begin their investigation. Organizations that are already using an on-demand computing service to support development Europe +33 (0) 1 41 14 83 15. Or visit our Web site: www.currentanalysis.com 7
Report: Storage Comes of Age Business Network and IT Services and testing activities should inquire about deals to include storage in the mix. Most providers offer incentives and discounts that encourage customers to bundle together multiple cloud services. Companies looking for a more cost-effective way to distribute rich media inside their organization should consider cloud storage as an option. In certain situations, this can be a more cost-effective alternative to CDN services. Europe +33 (0) 1 41 14 83 15. Or visit our Web site: www.currentanalysis.com 8