Shoot High To Sell Smart Storage
A managed storage services provider set its sights on enterprise-class clients and proves its formula by earning $3.5 million in its first two years.
Some solutions providers choose the path of least resistance when they launch their companies. They use well-established technology, follow a proven sales model, and aim for a friendly SMB market. That was not the case with Electronic Vaulting Services Corp. (EVS), a Memphis, TN, managed storage solutions provider. Cofounder and CEO Gayle Rose says EVS targeted midtier (150 GB to 1 TB of data to back up) and enterprise clients, particularly those in the highly specialized banking vertical, from the start. That strategy seems to have paid off, with EVS enjoying explosive growth in its first few years, about 337% since 2006. The secret to EVS’ success grew from its clearly articulated value proposition, a willingness to invest in the security demanded by banking decision makers, and solid answers to common online backup storage objections.
Rose’s background is in the private equity space rather than technology, so perhaps it shouldn’t come as a surprise that her business strategy for EVS differed from that envisioned by a technology-focused CEO. “I thought if we put together a business that presented an enterprise solution, then we could cut our teeth on that space,” she explains. “Rather than moving from the mom-and-pop shop up to enterprise clients, we would start at the top and then be able to demonstrate we had enough investment in our solution and procedures to warrant a client like First Tennessee Bank [EVS’ first customer]. If smaller potential clients looked at us, they would think: EVS is good enough for those big companies, they must be good enough for us.” Rose vetted her logic with several peers, who validated her research showing that the drivers were in place to make online data backup a viable business model. “Those drivers included the widespread adoption of high-speed bandwidth by businesses, the falling prices of storage media, and ever-increasing regulatory compliance requirements governing how to adequately protect business data,” explains Rose. With those votes of confidence, Rose was ready for the next step.
Clear Value Proposition Sells Backup Product
With a business development strategy in place, how to reach those coveted midtier and enterprise clients was the next obstacle for EVS. Rose selected staff with enviable resumes (one brought 12 years of experience as an executive from Federal Express) and deep backgrounds in enterprise-class operations and technology. She chose chief storage architect and CTO Gary Aulfinger and CIO John Gossett to help hone the EVS sales pitch. They were aware that EVS would likely have one chance to intrigue an enterprise executive enough to spark a proposal opportunity. In order to have a distinct value proposition, EVS developed its own unique storage backup solution. It offers customers intelligent backup, which means that data is sorted by type so the most critical data can be stored differently from reference (non-mission-critical) data. That distinction allows EVS to present customers with the option of paying less for reference data than for its critical data. “We split data into two tiers and offer two price points so businesses can manage and access data while controlling costs,” explains Gossett. “As the data gets older, its value become less, so while you don’t want to get rid of it, it doesn’t need to be stored on high-performance storage.” Rather, the mission-critical data is stored on infrastructure with high-performance capabilities, the best redundancy, the fastest bandwidth capabilities, and the quickest recovery time. The reference data is stored in a serial advanced technology attachment (SATA) drive environment, a far more cost-effective option than the high-performance storage option. In fact, EVS customers can save up to 70% by moving reference data into more affordable backup storage. “This is a concept that works best in midtier and enterprise environments because those businesses already have the mindset about having appropriate backup,” says Gossett, adding that most enterprise companies have been segmenting data by its importance and value for some time. “We didn’t have to educate these clients about their data assets.”
EVS also touches on its triple redundancy capability as a value proposition. Data is stored at the client’s site and in both the Memphis and Dallas data centers operated by EVS. Lastly, since storage backup is really about data recovery, EVS highlights its strength in that arena as well. Aulfinger explains that with intelligent backup, recovery can be two-tiered, with a company able to restore its mission-critical data in a matter of minutes and then take more time with reference data. For example, if a customer’s Exchange server goes down, restoring that 50 GB to 60 GB of data takes about 15 minutes. If a massive data loss occurs, EVS can download the company’s data in its entirety via the Internet or by shipping a portable storage device overnight.
Rose fine-tuned EVS’ entire value proposition by calling on the CEO of First Tennessee Bank in December 2004. It was that massive client on which Rose set her sights as EVS’ first customer. “I gave them our proposal for intelligent backup, and then I pitched that we take some of their [reference] data and do a pilot,” explains Rose. After presenting its formal proposal in May 2005, EVS quickly assuaged the bank’s technology questions, but it spent months remediating the bank’s security concerns. It was 18 months before the contract was formalized (the three-year, $1 million agreement was signed in August 2006), but Rose considers it a great learning experience. From there, EVS went after another behemoth — a locally based international shipping company. “We took that first effort, turned it into a formula, and struck out to see if First Tennessee was a unique experience or if we could do it again,” says Rose. It took another 18 months, but EVS closed its second deal.
Storage Meets Security In Demanding Banking Vertical
While those first contracts took quite the time investment, more than a year each, EVS now enjoys a shorter sales cycle, about 90 days, and often finds itself in familiar territory — the bank president’s office. With 25% of its business in the banking vertical, EVS seems to have found its sweet spot. Based on its initial interaction with First Tennessee, EVS had a head start on meeting the unique needs of banks. “It wasn’t as hard to get the technology approved as to face the gauntlet of security requirements,” explains Rose. At First Tennessee, EVS had to walk through an exhaustive checklist that included a full security audit of EVS’ network and firewall configurations, third-party penetration tests of the EVS network, and confirmation of EVS’ policies concerning antivirus protection, system access, information security, portable computing device security, data center security, and the company’s emergency response plan. EVS makes it clear that any managed services provider interested in banking customers must be prepared for such scrutiny. “Because banks travel in herds, the smaller community banks have learned quickly what the big banks demand [in terms of security requirements], and now they ask for it as well,” explains Rose.
For example, EVS has seen an increase in demand for the SAS 70 (Statement on Auditing Standards No. 70) Level II certification it recently earned. The SAS 70 is issued by the American Institute of Certified Public Accountants (AICPA) to confirm that internal controls and safeguards are in place at organizations that host or process data for customers. “Community banks and other customers, such as healthcare, have started to ask for this certification, and we believe it’s a differientiator,” says Aulfinger. “Knowing the details of the regulations that pertain to our healthcare and banking clients gives us an advantage by showing we understand their industries.” But knowing the intricacies of a vertical’s regulations doesn’t come easy or cheap. EVS has a legal team on retainer in Memphis that monitors compliance regulations, but the company also invests in self-education to stay updated. EVS invests about $15,000 to $20,000 annually in periodicals, conferences, travel, and research, plus another $45,000 each year for legal counsel. The company also retains auditors to complete the testing required for SAS 70, and maintaining that certification entails a $25,000 to $50,000 annual fee.
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Overcome Trust, Cost Objections To Storage Solutions
When addressing clients in the banking vertical, EVS often hears security/trust objections concerning outsourced data storage vs. internal storage. To address that, EVS presents its SAS 70 as a third-party endorsement and then lets the technology speak for itself. “We let the triple redundancy, encryption, and the technology platform’s reliability speak for us,” says Aulfinger. Tackling the issue of cost is more complex. “We dig deep into what our customers are currently doing [e.g. how they back up their data and how they test and manage that backup process], and then we do a cost comparison of our services with what they are doing,” says Rose. Another way that EVS addresses cost objections is by educating customers about future risk as it relates to IT. Rose recommends businesses complete an audit to determine how — and if — they can survive a huge data loss, since widely accepted figures show that 80% of those companies that do not recover from a disaster within one month are likely to go out of business.
Today, EVS stores and manages 60 TB of data in its two data centers and expects that number to grow exponentially in 2009, beyond 160 TB. Plus, EVS has plans to launch into markets outside Memphis in 2010. “I am curious about how we will have to evolve to sell this enterprise-class solution outside Memphis,” says Rose. While jumping headfirst into midtier and enterprise-class storage solutions may not be right for all technology providers, EVS illustrates what levels of success can be achieved when a solid business strategy is supported with experienced leadership, a distinct value proposition, and a willingness to address the unique needs and objections of a vertical market.