Managed Services Resurge

The question is whether the growth is in revenue or simply in marketing

July 21, 2006

4 Min Read
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Is managed storage back? Years after the "storage service provider (SSP)" model exited stage right, a flurry of recent announcements shows renewed interest. The question is, by whom? The chatter about new services may have as much to do with marketing as with actual revenues.

Let's start at the top. Within the last two weeks alone, announcements show firms are freshly interested in selling a range of services related to storing and protecting data. To do that, they're acquiring companies, expanding their current service offerings, and branching out into new kinds of storage-related services. Following are just a few examples:

  • July 19: 3PAR boasts service provider revenue. The vendor claims that about half its "growing customer base" comprises providers of managed storage services. The need to address this particular segment of providers has been echoed in recent announcements from software makers Aptare and Incentra. (See Aptare Adds Data Protection and Incentra Receives $1.4M.)

  • July 11: Iomega buys CSCI. Iomega spent $11.6 million to buy a company that specializes in security VPN "software as a service," and plans are underway to use CSCI's OfficeScreen as the basis for services combining Iomega's SMB storage wares with CSCI's services. (See Storage Shopping Spree.)

  • July 10: MTI buys Collective. The managed storage services provider, one of the few survivors of the SSP bomb-out circa 2001, purchased the IT services firm to expand its range of offerings. (See MTI Completes Collective Buy.)

The above are just the tip of an iceberg that includes not only a rash of storage service announcements, but news of suppliers selling wares to service providers for a diverse range of offerings, including hosting and business continuity, email management and archiving, storage consulting, and disaster recovery. (See XOsoft, AmeriVault Team, AmeriVault Adds Recovery, SunGard, Recall Team Up, and Eze Castle Offers DR.)

Is the SSI model back on its feet with a mission? Service providers say yes. Spokespeople for EVault, for example, say its online backup service for SMBs grew 52 percent last year; its enterprise managed services grew "exponentially"; and professional services, including consulting, grew by 500 percent. As a result, EVault plans to announce a new set of professional service offerings later this month.

At least one analyst thinks managed services are growing. "Not only is customer interest in managed services on the rise, but managed security and storage services are typically among the first forms of managed service that SMBs adopt," wrote Jeff Kaplan, founder of consultancy THINKStrategies consultancy, in a recent blog.Despite this view, and even though service providers insist services are hot -- at least for them individually -- others aren't so sure about the overall market.

"With no hard data to relate, I have to say we're not seeing significant growth, though there is more marketing attention [to services] in the past twelve months," says Doug Chandler, program director at IDC. While there are great arguments for services, he says he hasn't yet seen proof of a lot of new customer activity.

Cost has traditionally been a factor. While many customers appear willing to pay the price to have someone take backup off their hands, they're not saving on hard costs by doing so. (See B&S Insider Looks at Backup.) Instead, users cite more intangible benefits, such as the assurance that data can be retrieved more quickly in case of an outage.

The truth is, services of all kinds still cost a lot: EVault's professional services start at $150 per hour, for instance. And email archiving and management services from PrivacyVault start at about $0.40 per day per user. If you've got 1,000 users -- well, it's not a bargain.

One analyst thinks managed storage will probably be a vehicle for wider adoption of so-called utility pricing model, wherein customers buy storage for applications, backup, or disaster recovery on a "per gig, per month" basis. "We believe that 20 percent of all storage allocated by outsourcers is on a utility model. By 2009, that will be more like 70 percent," says Adam Couture, principal analyst at Gartner.If costs can be whittled down or shifted to a utility model, that could give a boost to service adoption. After all, the providers are there, and they're convinced the market is there. All that's needed, apparently, is a way to bring the two together.

Mary Jander, Site Editor, Byte and Switch

  • Aptare Inc.

  • EVault Inc.

  • Incentra Solutions Inc. (OTCBB: INCS)

  • Iomega Corp. (NYSE: IOM)

  • MTI Technology Corp. (Nasdaq: MTIC)

  • 3PAR Inc.

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