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Storage service providers: Another Internet bust?

Another big Internet bust-up story in the making? Read what Ashok Kumar has to say about the outlook for storage service providers, a cyber breed that may be living on borrowed time.

In the Internet infrastructure category, storage service providers--companies that manage data storage on behalf of their customers--have garnered a lot of attention.

Consistent with many other Internet phenomena, the expectations for the success of these so-called SSPs have been quite high. But while there is no question that corporate information technology directors need administrative help in managing their facilities, including storage, it is far from clear whether companies will want to put their treasured information jewels in external Internet data centers for safekeeping.

Contrary to hype, the storage requirements of Internet sites can be surprisingly small. Certainly, there are examples of Web sites that have grown rapidly and have had horrendous storage problems. However, these sites are the minority and do not constitute an enormous market opportunity for multi-terabyte storage installations.

As disk drives increase areal density, disk subsystems of sufficient capacity can be easily purchased. Standard RAID (Redundant Array of Inexpensive Disks) cabinets will soon have terabytes of storage and be available from many storage vendors at affordable prices.

The barriers to entry are small. Any company providing Internet infrastructure services components can add storage to their services menu. For the most part, SSPs do not bring much of their own intellectual property to bear. That means hosting companies, co-location companies, ASPs (application service providers) and any other service providers can offer services that compete directly with SSPs.

If the revenue opportunity for SSPs manages to become more than a blip on the radar screen, count on this: There will be plenty of competition siphoning off revenues.

For services outside of Internet data centers, the SSPs must rely on network bandwidth that either does not exist yet or is not sufficient. SSPs and their proponents espouse the belief that bandwidth will be readily available at virtually no cost. It is entirely possible that those who believe this do not understand the enormous bandwidth requirements of storage. That's especially so when one considers the types of valuable services the SSPs will need to offer their subscribers to attract their attention and make the risk worthwhile.

For example, OC-48 switches and network links are being used as MAN (metropolitan area network) and LAN (local area network) backbones capable of carrying traffic for thousands of users. At 2.45 gigabits per second, an OC-48 link is capable of carrying the traffic for only three or four storage channels. In other words, a single storage channel can consume a quarter of the bandwidth planned for thousands of subscribers.

One can ask how SSPs and their customers will provision such an enormous amount of the available bandwidth for affordable costs. There are three paths for this business: one, it works; two, it's too expensive; or three, margins get crushed by costs.

Even if all the bandwidth were available at low cost, it's unlikely that SSPs could provide the range of services that would be meaningful to corporate subscribers. The technology does not yet exist for a storage subsystem to manage the data contents that reside on it.

Bulk data storage at SSP locations is simply that: bulk data. There is no way for the SSP to identify particular files, or groups of file folders, that may need special treatment. One exception to this is network-attached storage such as that offered by Network Appliance, EMC and others. However, network-attached storage is not generally acceptable as storage for databases. While it could be terrific to offer full-tier storage services, it is unlikely to happen soon enough for the SSPs, which need to start attracting customers with service contracts that can support the SSP industry.

Without sufficient subscription contracts from a critical mass of customers, the entire SSP concept is a house of cards. Risk-averse IT managers will not risk placing their data with the service provider that may be out of business in 18 months. This brings the most difficult question to bear on the entire SSP model: What happens if my SSP goes out of business? This is not entirely unheard of these days in the Internet environment.

In conclusion, the SSP concept has merit and there is a need for these companies' services. But it is unlikely that the market will attain a critical mass in time for the industry to take flight. Even if the financial backing for SSPs works differently than that for dot-com companies, the dot-com phenomenon has already damaged the credibility of Internet services.

Damaged credibility is the one thing SSPs cannot accommodate.

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