Storage Services Surge update from July 2005

The world of storage services appears to be in a growth spurt, judging by the news from several providers. But closer scrutiny shows some surprising blips on an otherwise heartening scan.

Fast facts: Users worldwide will spend close to $28 billion in 2005 on storage services like professional consulting and systems integration, according to IDC. This figure will continue to rise at a worldwide compound annual growth rate of about 5.8 percent annually through 2009, the firm maintains.

The uptick in storage services is reflected in recent news from a range of suppliers:

In addition to all this, EMC Corp. (NYSE: EMC) says that in the first quarter of 2005, revenue from professional services, systems maintenance, and other services rose 26 percent to a whopping $375 million.

All this is surely good news. But there are some subtle downsides, as well: For the six-month period prior to its latest report, Datalink showed a net loss of $4.3 million, or $0.41 per diluted share. Minus a one-time, non-cash charge, the company still showed a net loss of $753,000 or $0.07 per diluted share for the six-month period.SANZ's uptick in its speciality storage business isn't reflected in the rest of the company's earnings. Total quarterly revenue is expected to be between $13.3 million and $13.5 million, which would be down from $15.5 million in the March quarter. MTI's $35.6 million is also a 10 percent sequential decline from the previous quarter. And GlassHouse said last year that revenues were growing at 30 percent quarter-on-quarter, a bit more than they're reporting this year.

What's more, it may be that even figures as big as EMC's hold the kitchen sink. IDC, for example, doesn't usually include maintenance of software or systems with professional services.

Bottom line? The market for storage services is growing, beyond a doubt. But eschew the rose-colored shades. Even revenues from compliance services, the subject of this month's Byte and Switch Insider report (see Compliance Services: Get What You Pay For), are dwindling in some areas, such as help related to U.S. Sarbanes-Oxley compliance.

At least one expert thinks it's all in the natural course. Doug Chandler, program director at IDC, says firms worldwide are driven to hire professional help as they install more networked storage and attempt to deal with heftier data management requirements.

"Other drivers in the near-term will be virtualization, which will require some professional services up front for implementation; ILM, to the degree that customers adopt this strategy; and compliance," he writes in an email today. While firms large and small have beefed up their services accordingly, the market will eventually start to slant downward a bit here and there, as organizations get a better handle on what they're doing in various areas.Mary Jander, Site Editor, Byte and Switch