In terms of the AT&T/BellSouth merger, service changes are questionable

February 10, 2007

3 Min Read
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With the FCC's long-awaited approval of AT&T's merger with BellSouth finally in place, the companies face the formidable task of converging their customers, products, and services -- including storage ones. (See FCC Welcomes 'Ma Bell' Back.)

But the largest telecom merger in U.S. history, a deal valued at about $85 billion, may not produce much change in storage services -- at least not for awhile. "We're in the process of integrating our product portfolios now that the merger has closed. But it's too soon to talk about specific products or services in detail," states AT&T spokesman Brad Mays.

The integration may be the easy part. A tougher task will be to identify the market for managed storage services -- a problem the merger won't help to solve.

Managed storage services of various kinds just haven't done well for telecom service providers. In September 2006, consultancy Thinkstrategies and several CMP publications revealed that of 320 respondents polled, 58 percent are not considering using any managed storage services; 16 percent were considering them; 6 percent plan to use them; and 20 percent are actively using them.

These results are roughly equivalent to what Thinkstrategies found in a similar survey in 2003. "Although this may simply indicate that trade press coverage does not equate with market acceptance, it also shows that MSPs [managed service providers] in these segments still have work to do when it comes to educating customers about the value of their services," wrote Thinkstrategies managing director Jeff Kaplan in his summary.But educating customers requires telecom providers to know what to sell, and here's the sticking point: While there is interest in business continuity and disaster recovery services for large enterprises, it's been tough to find the market for SMBs and consumers. As a result, the landscape of storage services remains uneven and unfocused.

It's not for want of trying. AT&T has been particularly aggressive over the last few years in adding storage-related services to its enterprise business lineup. Storage equipment from EMC for SAN and NAS is part of the platform for AT&T Ultravailable Network services. (See Managed Storage Moves On.) And both AT&T and BellSouth OEM remote backup services from Arsenal for SMBs. (See Sorting Out Laptop Backup.)

For its part, BellSouth has pursued the market for VPN services, which encompasses remote mirroring and backup. (See Banking Services Choose BellSouth.) But after generating some publicity around storage services a few years back, BellSouth has stayed away from storage pitches.

At least one analyst thinks the potential for lucre in managed storage lies with SMBs and consumers, and it is up to AT&T and BellSouth to determine how to approach that market. "The jury is still out," says IDC program director Doug Chandler. Some customers may want storage as an add-on to a Web service, for instance, while others might buy it as a standalone service.

But Chandler, like others, sees growth in managed storage services nonetheless, though he says it will be moderate, not robust.The question may be whether traditional telecom firms can find a profitable toehold in storage services, which are playing a key role in many enterprise deployments. Indeed, storage suppliers say services, albeit of the more hands-on consulting type, are key to their success. And storage is a factor in many new deployments, such as IBM and Siemens' deal with the German military. (See Top Storage Predictions for 2007 and Federal Armed Forces Agency.)

One thing is certain: The eyes of many will be on AT&T and BellSouth as they wind their way through the managed services maze.

Mary Jander, Site Editor, Byte and Switch

  • Arsenal Digital Solutions Worldwide Inc.

  • AT&T Inc. (NYSE: T)

  • BellSouth Corp. (NYSE: BLS)

  • IBM Corp. (NYSE: IBM)

  • IDC

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