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SSPs Switch to Selling Software: Page 2 of 4

Others have been hit even harder. StorageNetworks Inc. (Nasdaq: STOR) for instance, just laid off a third of its workforce, or 220 employees, and reported a $32 million loss, or 33 cents a share, on $33 million revenues (see StorageNetworks: Big Layoff).

It is now attempting to refocus on two small but growing business segments that are less capital intensive and presumably more resistant to the economic downturn. Both are service oriented but rely more heavily on StorageNetworks’ proprietary virtualization software. The first, called STORmanage, helps businesses manage their own storage systems. The second, STORfusion, provides a similar service for carriers and service providers.

ManagedStorage International Inc. is also rumored to be shifting towards selling software instead of services and is thought to be increasing its engineering resources in order to make the transition. “We are not ready to announce this yet,” an insider at the company told Byte and Switch. [Ed.note: That’s alright. You just did.]

It seems there is a subtle shift going on, away from the traditional idea of the service provider managing and monitoring the service, towards selling products that let the company run and manage the service themselves.

Storability Inc., one of the more recent recruits to the SSP army, spotted the trend early and has based its entire business on selling software that lets organizations manage their storage resources on the company premises. If necessary, Storability can provide remote monitoring services, but, on the whole, the idea is to sell software.