Storage Software Red Hot In 2002
Storage software presents a profitable opportunity for service-oriented VARs and integrators.
For months we have been hearing that the hottest market in the storage arena is storage software. To discover the hottest trends in storage software, we spoke with executives from Computer Associates, Legato, OTG Software, and VERITAS. According to these experts, applications that should be on your radar screen include storage asset management, e-mail management, backup and recovery, and virtualization.
Open Doors With SRM
Mark Milford, senior VP and general manager of the storage business unit at Islandia, NY-based Computer Associates, said, "The predominant force in the storage software market is to give customers management tools that more effectively manage their storage." The management software Milford referred to is known as storage resource management, or SRM. SRM software gives companies the ability to recognize the storage assets they have in place and then understand the current utilization of those assets.
"Customers use about 35% of their total storage capacity," said George Symons, VP of project management and development at Mountain View, CA-based Legato Systems. "That is what will drive the need for SRM. Customers are not giving up direct attached storage for NAS [network attached storage] and SANs [storage area networks]. They are using NAS and SAN to complement the storage they already have in place, and they need storage management across all of their storage resources."
Profit From E-Mail, Disaster Recovery, And Virtualization
When it comes to e-mail storage and management, Bill Caple, executive VP for Bethesda, MD-based OTG Software, does not believe we have even begun to see the explosive growth that will occur. "We believe e-mail will be one of the biggest growth areas in 2002," he said. "Storage, management, and retrieval of e-mail are problems every company will have to solve." If you need proof, research firm IDC predicts the daily volume of e-mail messages will grow from 9.7 billion in 2000 to over 35 billion by 2005. Need more convincing? Gartner Group has predicted that by the end of 2002, 60% of enterprises will augment their messaging applications with a system or mechanism to manage e-mail.
As far as disaster recovery and business continuance, Camberley Bates, VP of field, channel, and alliance marketing at Mountain View, CA-based VERITAS, thinks the events of Sept. 11 have opened the eyes of many executives to the need for good planning. "A lot of companies are pulling out their plans and realizing they are not worth the paper they are written on," she said. "Next to people, data is the most important asset a company has."
There was some disagreement on the topic of storage virtualization. While most felt it would be a growing market, the technology still needs additional development. Virtualization software allows users to manage all their data from one console, and makes all of the storage capacity appear to be one large pool. "Today most virtualization software works with only one vendor," said Milford. "It is very proprietary and gives a user benefits only if they have a homogeneous storage architecture."
The cost of managing data is an issue that comes into play with virtualization software. Everyone agrees that the cost of managing storage is many times the acquisition cost. Companies are looking for software solutions that enable them to manage storage resources with less human labor.
Cash In On Software Sales And Services
Everyone we spoke with believes that storage management software will be a growing and very lucrative business for VARs and integrators. "Storage management software crosses all verticals," said Bates. "Everybody has to do backup and disaster recovery, and everybody has storage and e-mail. Any software that helps users to manage storage will cross over all platforms and play in all vertical markets." Symons agreed. "This type of software is for any business, especially those with regulatory requirements, such as finance, medical, and telecommunications." Caple added that e-mail has now permeated every business environment from hospitals to universities.
According to Caple, margins for VARs selling storage software can be in the 30% to 35% range. In addition to margins made on the sale of the software itself, the selling of services with the software will yield great returns for VARs. "Sell the software and then sell services that can be billed regularly," said Bates. Symons also stressed the importance of selling a complete solution, including service agreements. "By going in and doing the evaluation, you are going to sell the software," he said. "The customer will be happy to know that their storage resources are only at 35% capacity. Then you sell them on the importance of monitoring their storage for them on a weekly basis. Do this for a few companies and it equates to a nice paycheck."
Milford believes the biggest boon for VARs will be in the enterprise accounts. "It's one thing to go into a company and sell them a backup and recovery product," he said. But it is much different to help them do a storage assessment, discover what assets they have, and help them design a storage architecture for the future. Having the capability to do assessments will get VARs and integrators into those large enterprise accounts. "Do the assessment and show them how much storage exists that they did not know they had," he said. "That provides immediate value for the customer. Then go into the consultative selling mode and add the services portion."
Analyst firm IDC recently estimated the storage software market would hit $10 billion in sales by 2005. Storage software revenue will grow at a compounded annual rate of 14.4%, from $5.47 billion in 2000 to $10.7 billion in 2005, a revenue increase of 96% over the forecast period.
"The quick acceptance and adoption rate of storage software solutions during 2000 can be expected to continue at an accelerated pace over the next five years," said Bill North, research director of IDC's storage software service. He believes a lot of that growth will be in the enterprise space, where companies will demand more sophisticated software tools to assist in efficient data management. As customers continue to seek advice on how to manage their storage, the opportunities look promising for VARs and integrators with expertise in the storage software arena.