Keeping It ElsewhereBy Frank Ohlhorst | Posted 2007-11-27 Email Print
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Opinion: Hosted storage brings solution providers flexible revenue opportunities, but they must find the right fit.
The Web 2.0 world has brought many innovations to the market, while eliminating physical barriers between businesses and the Internet, especially when it comes to hosted services.
One thing is certain: The brave new world of Web 2.0 is here to stay, and that has solution providers wondering if that is a good or bad thing. Further complicating matters is the recent expansion of hosted services from industry giants such as Google and Microsoft. Solution providers are starting to see competition from all quarters and are starting to realize that the traditional method of selling boxed software may very well be at an enda situation that affects revenues from margins, services and support.
Before a solution provider decides to cry uncle, bolt the doors and buy a hot dog truck, there is a path to follow to build revenue from hosted services. Storagemore specifically, hosted storageproves to be one of the simplest ways for solution providers to get involved with Web-based services, create recurring revenue and still offer integration and support services.
How is that possible? Hosted storage services are very different from the typical SAAS offering. Most hosted applications need little more than a browser to function, which limits integration and other VAR-centric opportunities.
Because of those limitations, SAAS has been the subject of much debate in the channel as to just how much of an opportunity the model brings to solution providers. A recent report by Forrester Research, for instance, concluded that SAAS puts pressure on solution providers to close more deals because projects involving hosted software will pay less than on-site integration work. As a result, solution providers have to alter their business models if they have any hope of playing in the SAAS market.
Hosted storage, on the other hand, is all about integration, basically starting with bringing remote storage capabilities to an existing network, and then there is integration into applications, backup systems, disaster recovery, file synchronization, security and so on. Simply put, remote storage becomes a foundation for building a solution.
With that in mind, how does a solution provider get started with hosted storage? It's much easier than one would expect. The market is currently flooded with vendors hawking their hosted storage products, and fierce competition has made many of those vendors consider the channel. The storage vendors are quickly realizing that partnering with solution providers brings forth a much larger target audience and helps them get their foot in the door.
That is where solution providers may have to show some restraint. Just because a Web services vendor is looking for partners doesn't mean the vendor could not become a competitor in the future. What solution providers need to look at is the vendor's channel program. The critical questions to ask include: Is there a recurring revenue stream? Who is responsible for billing the customer? How often are commissions paid? Can the service be rebranded? Does the vendor ever directly contact the customer? Who sells upgrades or increased storage? What is the level of service offered? And so on.
Solution providers quickly will find that the channel program will dictate the success of the service, as opposed to the technology. Simply put, the technology often involves little more than remote storage space that for all intents and purposes mimics local storage. The trick here (and the real value-add) becomes how the VAR integrates that storage into the customer's site. That decision may serve to determine what hosted storage vendor to pick as a partner.
The big players in the market include Amazon (yes, that Amazon) with its S3 service, Asigra, AmeriVault, Berkeley Data Systems (now part of EMC), Global Data Vault and Iron Mountain Digital. Add to that some of the other big names that are getting involved, such as Sun Microsystems, IBM, Google and Symantec, and it becomes clear that there is no lack of vendors in the market.
While finding a vendor may be easy, selling a hosted storage solution may be a different story. Many businesses look at hosted solutions with suspicion and ask questions such as, "How safe is my data?" or "What if the company goes out of business?" For customers with doubts, it may be easiest to approach the hosted storage conundrum with solutions built around disaster recovery and business continuity issues.
Recent events such as wildfires and hurricanes demonstrate the importance of keeping a copy of critical data off-site. With hosted storage as part of a hosted backup solution, it becomes clear that the survival of company data in extreme conditions is worth pennies per megabyte per month.
It's a message that solution providers already offering hosted storage and recovery services are finding resonates with an increasing number of customers. While in the past customers may have been willing to take chances, businesses, by and large, have become so dependent on their data that failure to protect the data could have fatal results for the business.
Not only can solution providers sell the basic storage service, but opportunities also exist for add-ons such as backup software, imaging software, tape drives, standby servers, failover equipment and so on. Storage is only the first step in a disaster recovery or business continuity solution.
On the downside, hosted backup can be a bandwidth hog, using large chunks of it to back up data. With traditional backup, speeds are discussed as gigabytes per minute; hosted backup changes that conversation to megabytes per minute. This is a major concern when backing up large data stores or databases. After all, how much time it takes to back up can affect how much time a system is available for use.
Vendors have acknowledged that online backup may very well be the best way for partners to get involved in the market. Most of those vendors have come up with channel schemes that should fit the needs of VARs, but the channel program specifics can be as varied as the solutions offered. For example, AmeriVault, Mozy and Remote Data Backups offer a model through which a customer pays a fee based on gigabytes per month used, while Asigra sells based upon total capacity needed.
Some other vendors take a different approach to the market, either by selling the software to build a hosted solution or a bundle of software and services. Iron Mountain Digital, which is the granddaddy of remote storage (for more than 20 years), offers hosting or the software to build a hosting service.
What's more, the company charges by number of systems and system types to be backed up, eliminating concerns about volume. Leb Shama, with its Ahsay product, focuses on providing customers with the software to build a hosted backup service (that software can be purchased or leased), and avoiding the hosting dilemma altogether.
Those options bring up an interesting quandary for most solution providers: to host or not to host. Vendor-hosted solutions eliminate most of the burdens for solution providers that act as middlemen providing a service.
Hosting software brings a solution provider directly into the hosted market with the ability to set margins and enhance services, yet carrying the burden of equipment and support costs. Neither business model is right or wrong; it is just a matter of what fits best for the solution provider.