Advisory Report Cloud Storage Comes of Age

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Cloud Storage Comes of Age

January 5, 2011

Issue

In this prolonged period of economic stagnation, data storage stands out as a bright spot in the technol-ogy sector. Th e exponential growth in the volume of digital information is resulting in almost unbridled growth in demand for storage capacity. Nor is there any sign of a slowdown anytime in the near future, with some industry estimates that individual storage volumes could continue to grow 90 to 100 percent year over year for the forseeable future. Companies – particularly mid-sized businesses with between 100 and 1000 employees that of late have become more comfortable with third-party hosted options - are looking for cost-eff ective OpEx-based managed storage solutions that allow them to avoid the upfront capital costs and many of the ongoing maintenance expenses that can make reliable storage expensive.

Enter cloud storage – a fl exible, effi cient managed service model that takes advantage of a virtualized infrastructure that is inexpensive relative to traditional on-premise or managed options, letting orga-nizations pay for just the capacity they actually need. Cloud storage services also make it possible for businesses to expand storage as needed.

Managed IT service providers of all stripes – from system integrators and hosting providers to carriers and specialized storage vendors -- are racing into the cloud with new cloud storage services. Seeing the current demand and the future revenue potential, venture capital fi rms are pouring investment dollars into the segment. Th e result is a crowded and complicated market with a host of newcomers like Cloud Leverage jockeying for position against much longer-established rivals.

Th is advisory assesses the current landscape, with a particular focus on companies supplying cloud storage solutions to mid-tier companies. Th is report addresses the interconnected ecosystem of technol-ogy providers, paying particular attention to the role channel partners play and how innovative business models are changing what is still very much an evolving sector.

Current Perspective

Cloud storage is all the rage today, but it is not an entirely new model. For years, providers have been off ering businesses and consumers online backup and other storage services. However, as was the case with other areas of outsourcing, organizations balked at moving a signifi cant portion of their data online. Concerns about stability, security, and data integrity kept storage largely in-house. High profi le incidents like the 2008 failure of the online storage service Th e Linkup (known earlier as MediaMax), which left nearly half of the company’s 20,000 users permanently without access to their data, didn’t exactly inspire confi dence either.

However, over time maturing technology and business models, and pressures on IT budgets, have

  Amy Larsen DeCarlo Current Analysis Principal Analyst, Security and Data Center Services

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helped organizations become more comfortable with the idea of using a cloud service, at least in theory. Storage is a natural fi t for this kind of delivery model, because as precious as much of the information is, storage as a discipline is more tactical than strategic.

At the same time, the combination of an increasing reliance on digital communications and regula-tions and legal mandates requiring data be archived for an extended period of time are driving a pro-liferation of new data. Add the increased budget pressure that went hand in hand with the recession, and businesses are scrutinizing every aspect of their spending, applying a new rigor to questioning what IT functions should remain in house.

On Demand, In Demand

Expectations are that data volumes will only continue to grow at a rapid rate, and that cost cutting will continue to drive companies to look for outside stable and reliable solutions. Given these pres-sures, especially on the mid-tier market, more providers began looking for ways to deploy infrastruc-ture to deliver online storage services that could meet their customers’ reliability requirements and budget constraints. In cloud storage, customer data is stored in a virtual server environment in the provider’s data center, accessed either via a virtual private network (VPN) connection or through the public Internet using a password and other security measures. Th is is an appealing model for provid-ers, which can deliver managed storage services at low costs by sharing their deployed infrastructure across many customers. Server virtualization consolidates multiple servers into one virtual machine, improving utilization effi ciency and lowering costs. Th at greater effi ciency makes cloud storage an aff ordable alternative for either do it yourself (DIY) or traditional dedicated hosted models. Online storage appeals to businesses that want to take out the cost associated with acquiring hardware they may never fully use, and that want to eliminate IT expenses associated with supporting that data. In many cases, providers simply use excess storage and server capacity to deliver on-demand stor-age and sister on-demand compute services. In some cases, providers are able to apply abundant, previously unused data center resources to support new cloud services. In the case of Amazon Web Services, for example, data center resources were left over from the provider’s ecommerce business. Th e result can be a highly effi cient way to support customers’ variable storage requirements. Over time, storage providers can extend their services to include a host of complementary services. For Amazon, this bet has turned into a nice $500 million ‘side business.’

Amazon’s success has not gone unnoticed, and other IT providers have jumped onto the bandwagon. Typically, providers will enlist partners that can fi ll in their capability gaps to build out an infrastruc-ture to support effi cient management of customer storage. Th is has led to multi-layered partnering. For example, storage vendor Symantec supplied the underlying backup and archiving software that cloud storage provider Nirvanix used in its Storage Delivery Network (SDN), which Verizon in turn used to expedite the launch of its own branded Cloud Storage solution in summer 2010, with the intention of later supporting service delivery from its own data centers.

Verizon rival AT&T took a similar tack when it introduced its own Synaptic Storage as Service solution a year earlier, using EMC’s Atmos technology as the platform for the off er. Both Verizon and AT&T were able to save on development and deployment time while still leveraging their own networks to deliver services to early cloud adopter enterprise clients that were already experimenting with on-demand compute services for testing and development. Verizon now off ers a comparable cloud storage service targeted toward mid-market clients.

As is the case with infrastructure as a service (IaaS) off ers in other areas such as on-demand comput-ing, providers focus their eff orts around technology delivery and business models. Cloud storage providers often charge customers on a subscription basis and just for the capacity they use. Plans vary by provider in terms of minimum contract time, as well as whether the provider charges band-width fees to access and store data in their data center. Customers can manage their cloud storage services through the provider’s online portal. Th ese self-service dashboards allow the customer to

Report:

Cloud Storage Comes of Age

Business Network and IT Services

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order and provision storage resources, as well as to access stored fi les.

When a provider resells another company’s service, it not only provides the interface to the service and the fi rst line support, but it can often capitalize on its own resources to provide attractive package pricing. For example, a telecommunications provider like AT&T or Verizon can draw on its network to off er attractive bandwidth pricing plans for customers backing up and retrieving their data.

Th us far, there has been little diff erentiation around service level agreements (SLAs), with 99.9% availability in a given billing cycle serving as the industry standard. Providers will exceed that with 100% data availability guarantees if customers opt to store their fi les in multiple locations.

Making their Mark(et)

Th ough the market is crowded, there is still room for providers that can tailor solutions to meet the requirements of various segments of the market. Th ere is a place for providers that can meet the cost and support requirements of small and medium enterprise (SME) customers, which are often missed as providers choose to focus either on smaller or larger customers.

Th at said, it helps to have a playbook to understand what providers are off ering what types of cloud storage solutions in today’s competitive landscape. Th e table on the next page is a sample of some of the larger and/or more interesting providers in storage services today.

Th e cloud storage services from the providers listed in the table support an array of use cases, from data backup of structured and unstructured data and archiving for compliance and other purposes, to more specialized content storage and distribution of rich media (e.g. video). Providers of cloud storage services also target constituencies such as web applications and cloud developers (e.g. Amazon Web Services S3, Google Storage for Developers, Microsoft Azure Storage). Others cloud storage applications are created more specifi cally for enterprise system administrators to augment existing storage (e.g. Iron Mountain Live Vault). Providers like Iron Mountain also often provide industry-specifi c cloud solutions to address particular vertical challenges (e.g. cloud-based records management for healthcare).

Providers diff erentiate their services in a number of ways, from the underlying storage technology they apply and the methodology they use to protect the integrity of the data (e.g. redundant storage across multiple facilities). Providers also distinguish their services on the basis of the data center and, in the case of telecom providers, the network infrastructure they use to support storage service delivery. Th e providers included in the table have facilities located in multiple regions, which not only can help speed transfer and access times for customers, but also provides built-in geographic diversity options for redundancy.

Security is another factor that helps cloud storage services stand out from their rivals. Traditional telecom providers can often supply layers of protection associated with safeguarding data both in motion and at rest as a value-add. Th is is clearly a sensitive point for many organizations, particularly those in industries ruled by compliance mandates.

Many providers off er cloud storage in conjunction with, or as a complement to, other cloud services used to support both platform as a service (PaaS) and software as a service (SaaS) applications. In some cases, providers with extensive managed service portfolios can tie together their cloud storage services with much larger packages that include other hosted and managed services such as managed application services.

Ultimately what sets apart one service from another can come down to pricing. Almost all cloud storage services apply a consumption-based model that charge users based on the amount stored. But many off er tiered pricing, in which the cost per GigaByte decreases as a customer stores higher volumes of data. Some providers also make retention time a factor (e.g. the customer commits to storing the data for a period of time; the longer that period is, the lower the price). Pricing on factors

Report:

Cloud Storage Comes of Age

Business Network and IT Services

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Cloud Provider

Solution

Solution Description

Data Center Infrastructure

Sales Model Pricing Model Strengths W e aknesses Amazon Web Services S3 T

argeted toward the

developer communi- ty S3 provides online storage service acces- sible through a REST or SOAP

interface.

Purposefully built using a limited feature set to keep cost down. Uses same infrastructure as Amazon e-commerce site and relies on a BitT

orrent interface to

support low-cost, high- scale distribution Doesn’t disclose data center locations but reportedly delivers S3 from at least 15 fa- cilities in U.S., Europe, and Asia-Pac;

Public

and private cloud op- tions Sells direct, online, and through channel part- ners. White labelling available. Resellers include Jungle Disk, Zmanda

First 50

TB / Month

of Storage Used for 99.99% availability - 0.100 per GB; Next 50

TB $.093 per GB;

First 50

TB / Month of

Storage Used -$0.150 per GB; 1

1

- 9s

avail-ability; Next 50

TB /

Month of Storage Used $0.140 per GB Scale, Redundant in- frastructure, Market- making innovation, Aggressive Pricing Model

Perception issues around security and reliability; seen as too low-end and more PC than server-oriented, minimal feature set; limited support and very developer-ori- ented

Cloud Leverage

Cloud Storage

Windows-focused but supports other OSes as well. Positions as enterprise class stor- age accessible in real time via a number of interfaces and devices including its own W

eb

Services API,

Windows

Desktop Application, Windows Sync Client, W

ebDA

V for

Windows, Mac & Linux, Blackberry and iPhone; hierachial and tag- based

fi le organization for easy fi le search and retrieval.

Delivered from 9 data centers in North America, Europe, Asia (Dallas,

TX;

Fremont, CA; Seattle, W

A ; New Y ork, NY ; T o ronto, Canada;

London, U.K.; Mumbai, India; Singapore City

,

Singapore). Public and private cloud Sells direct and through partners. White labelling avail- able

$.09 per GB per month for 1st data center (1 - 10

TB); $08 per GB

per month (10 - 40

TB);

$.08 per GB for second data center (1 - 10

TB);

$.06 per GB for second data center (10-40

TB)

Scale and geographic reach; disruptive pric- ing model; up to 100 percent availability SLA if copies are stored in 3 or more data centers Scale and geographic reach; disruptive pric- ing model; up to 100 percent availability SLA if copies are stored in 3 or more data centers

EMC

Atmos

Policy-based enter- prise online storage service accessible via REST

and SOAP

and

fi

le access via CIFS/

NFS/Installable File System Hosted exclusively by third party partners such as PEER-1 and AT

&

T

Ended direct sales ear- lier this year - third- party partner sales only; Channel partners include

A T&T , Peer 1, Hosted Solutions V a ries by provider Flexibility , enterprise

focus, strong channel with major enterprise customers EMC no longer hosts which opens up ques- tions about stability and future of the solu- tion; branding confu- sion

Nine Cloud Storage Providers to Watch

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Cloud Provider

Solution

Solution Description

Data Center Infrastructure

Sales Model Pricing Model Strengths W eaknesses EMC MozyPro

Multi-user online backup and recovery program which is de- signed to be relatively easy to use, cost-ef

fec-tive and stable

Supported through several Mozy facilities including a facility in Salt Lake City but no locations given Direct sales and sales through partners such as

Apptix, Cox

Business Services, Comcast $6.95 license fee +$.50 per GB

Competitively priced; delivers enterprise- class backup support for a low price; claims 50,000 business cus- tomers Seen as primarily con- sumer-focused; Some branding confusion

Google

Google Cloud Storage for Developers Secure online storage access via SSL

aimed

at developers; allows for access to metadata; Google doesn’t dis- close location or other speci

fi

cs about data

center faciliites but apears to have a sub- stantial infrastruc- ture; Data replicated in multiple data centers across the U.S. and within the same data center

Sold directly

Storage—$0.17/GB/ month; Network - Upload data to Google $0.10/GB, Download Data - 0.15/GB for Americas and EMEA $0.30/GB for

Asia-Paci fi c; Requests: PUT , POST , LIST—

$0.01 per 1,000 re- quests GET

, HEAD—$0.01

per 10,000 requests

Solid feature set. Good brand, potential for bundling Novice in the storage space; seen as too lightweight - too con- sumer-oriented

IBM

Smart Business Storage Cloud

Smart Business Storage Cloud is a an online with public and private cloud options that provides a unique scale-out clustered model Support for mul- tiple petabytes of ca- pacity

.

Delivered from seven cloud facilities in North America, Europe, and Australia Sold directly and through IBM business partners Priced per GB stored with no fee for access or transfers Fully redundant infra- structure; Respected leader in enterprise storage; full comple- ment of cloud and managed IT

solutions;

Extensive consulting capabilities Lack of pricing trans- parency; Perceived as too expensive for all but the largest enter- prise customers;

Iron Mountain

Storage as a Service Solutions (Live V

ault

Cloud Data Protection and Cloud for Microsoft DPM) and vertically- speci

fi c

solu-tions

Fully automated of

fsite

data vault solution for backup and recovery (Live V

ault) and online

data protection solution for Microsoft servers Data is mirrored and stored in an under- ground facility located in a former limestone mine 22 stories under- ground in P

A. Cloud

storage services are delivered from

fi ve

fa-cilities.

Sold directly and through partners that include Dell, HP

,

Microsoft, and NetApp

Based on amount of data stored and reten- tion period. First 100 GB - $1.00/GB (90 day retention period); $1.50/GB (1 year), $2.00 per GB (seven year retention); next 150 GB -$.50 GB (90 day retention); $1.40 per GB (1 year) Established reputa- tion for enterprise- class data protection services; Unique de- livery facility reassures client about stability and security of data; Continuous backup protection with fast re- covery options Unclear SLAs; Good overall record marred by some high-pro

fi le

outages and data loss issues; limited pres- ence outside the U.S.

Nine Cloud Storage Providers to Watch

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Nine Cloud Storage Providers to Watch

(Continued)

Cloud Provider

Solution

Solution Description

Data Center Infrastructure

Sales Model Pricing Model Strengths W e aknesses Microsoft

Azure Storage Services Persistent, durable storage aimed primarily at cloud application de- velopers using Of

fers

a REST

API and

man-aged

API for

adminis-tratorsI;

Locations not disclosed but believed to have fa- cilities in San

Antonio,

TX as well as Dublin, and Amsterdam Sold directly and Microsoft business partners Storage = $0.15 / GB stored / month; Storage transactions = $0.01 / 10K; Storage transactions = $0.01 / 10Kilobytes Scale, Brand recogni- tion. Flexibility

, cost,

complementary PaaS solutions; Claims 10,000 customers Limited experience and lack of signi

fi cant

scale; Lack of trans- parency around data center locations, pro- tections

Nirvanix

Storage Delivery Network (SDN) Fully managed intel- ligent storage service that stores delivers and processes requests at the best location Facilities in New Jersey

, California,

T

exas, Germany

, and

Japan

Sold directly and through partners that include V

erizon

Business

Flat rate $0.25 GB/ month $0.48 GB/month $0.71 GB/month data stored

Early mover advan- tage in the cloud stor- age space means the company is considered a leader - Intel has a stake in the company; Broad base of partners - both resale and de- velopers; Claims much faster transfer rates than rival

Amazon

More expensive than some options; Not as well known as some other

Rackspace

Cloud Files

Online

fi

le and

me-dia storage to sup- port functions such as backup/recovery

,

me-dia server

, secondary/

tertiary storage; and general variable stor- age requirements Nine (9) Data Centers: San Antonio,

TX (2); Dallas, TX; Herndon, V A; Chicago, IL; Ashburn, V A; London,

UK; Slough, UK; Hong Kong Sold directly and through reseller part- ners

Storage: $0.15/GB per month Transfer: Data

T ransfer in - $0.08/GB Data T ransfer out: 0.22/GB

Sizable infrastruc- ture and increas- ing scale; Broad brand recognition and large customer base; Complementary cloud and managed hosting services

Signi

fi

cant past

outag-es cast the company’

s

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such as data transfer also varies, While the cost-eff ective nature of cloud storage is what attracts organizations to the model, the provider with the lowest price is not always the winner. Customers need to have confi dence in the security, reliability, data integrity, and accessibility before they will make the leap to any cloud-based service.

Forward Advance

Cloud storage has come a long way in a short period of time, and more organizations have become willing at least to experiment with the medium. However, there are still incidents and outages that rightly give prospective clients pause. While demand is on the rise, growth in this space will only continue if providers are able to assure customers of the quality of their solutions.

Cloud storage providers also will need to continue to prove to clients that their solutions are superior to other models in other ways besides price. For providers that are able to assure customers not only that cloud is the right choice for them but that the customer gets secure, better performing, more reliable service than in-house solutions in the bargain, the sky is the limit.

Recommended Actions

Recommended Vendor Actions

• Cloud storage providers need to develop a channel that will eff ectively augment whatever direct sales force they have to reach a broader set of their target prospects. However, in this case quality is more important than quantity. Providers should cultivate reseller relationships with companies that can provide key value adds in terms of consulting and pre- and post-implementation support. Providers should also have the right mix of complementary services that will make the Cloud Storage a compelling value add.

• Telecommunications providers that are lacking a cloud storage solution are missing a prime opportunity to get into a potentially lucrative business and increase stickiness with existing clients. Carriers should weigh their options, looking for cloud storage specialists with solutions that are already proven in the market. Carriers also need to be able to dedicate the appropriate resources to marketing these services as another element in a portfolio of managed services that will help custom-ers improve their own effi ciency.

• Providers should look to develop more vertically-oriented cloud storage solutions to meet the particular compliance and industry needs of sectors like fi nancial services and healthcare. While there are many established solutions in areas such as electronic records management for healthcare, if a provider is able to package the solution with other complementary design, deployment, and post-implementation capabilities (e.g. meaningful use consulting for healthcare), they have a real opportunity to win contracts they might have otherwise missed.

• Cloud storage providers should look at ways to improve the stability and reliability of their current service off erings, and thus be able to better diff erentiate their services around SLAs. While some promise 100 percent availability today, they typically charge the customer extra because they require customers to pay for redundant storage in multiple data centers.

Recommended User Actions

• Businesses that in the past have been reticent about moving to the cloud should take another look at whether, and for what applications, cloud storage might be a good fi t. Many managed storage services have matured nicely, and the economics are too compelling to ignore. However, cloud stor-age may not make sense in all cases for all types of data, so prospective customers need to educate themselves on their options as they begin their investigation.

• Organizations that are already using an on-demand computing service to support development

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and testing activities should inquire about deals to include storage in the mix. Most providers off er incentives and discounts that encourage customers to bundle together multiple cloud services. • Companies looking for a more cost-eff ective way to distribute rich media inside their organization should consider cloud storage as an option. In certain situations, this can be a more cost-eff ective alternative to CDN services. Report: Cloud Storage Comes of Age Business Network and IT Services

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