Opportunities abound in storage market

Storage continues to be a bright light in an otherwise dull Canadian IT market. With the enterprise segment approaching saturation, there is a significant opportunity for the channel to serve the growing SMB storage market.

Data is estimated to double every two to three years. This has had

the effect of keeping storage top of mind for all IT users. Recent changes to U.S.legislation around legal compliance and Canadian privacy laws have alsoincreased the importance of storage and storage management.

Storage management has been a well-developed discipline at the enterprise level since the mainframe age. However, users in distributed systems have not been as attentive to this issue. The changing legal climate has changed this, such that now storage is of critical importance for organizations of all sizes.

The storage market has been impacted by technological changes as well. In 2001, less than 40 per cent of new storage was networked (SAN or NAS). This proportion increased to 60 per cent for 2004, and is forecast to increase to more than 70 per cent by 2006. Networked storage has allowed for other technologies, such as Information Lifecycle Management (ILM) to be implemented.

Virtually all of the growth in the storage market has been in from enterprise users. ERC research indicates that more than 90 per cent of enterprise users had implemented storage networking technologies, while only 52 per cent of SMB users had implemented this technology. Future growth will come from the SMB segment. The channel is particularly well suited to serve this market.

SMB customers have different requirements than enterprise users. Besides much smaller budgets, SMB customers have very limited IT departments. As such,storage products must be simple to install and operate. SMB clients need seamless integration with existing products, as they lack in-house expertise to address these concerns. SMB clients may have small budgets, but they need products that will grow with them as their business grows. They may need tospread storage investments over several years, and will need technologies thatwill protect prior investments.

Fortunately, storage vendors have been developing products for the SMB market. Virtually all major hardware and software vendors have fielded offerings targeted to the SMB market. These offerings are typically lower-cost, stripped-down versions of flagship products. These offerings are usually scalable togrow as the business grows.

The channel is well positioned to serve the SMB market. First, the channel has been dealing with these customers for many years, and will have well-established relationships. These prior relationships have been identified as a key factor in vendor selection. The channel can offer pre-tested “”best of breed”” solutions using components from a variety of vendors to suit the needs of particular customers. SMB users in particular appreciate the one-stop shopping opportunity of dealing with a local VAR.

The limited IT support available to SMB clients presents a revenue source for the channel. SMB clients will require service to install and test their configurations. In addition, many management tools can be accessed remotely,allowing VARs to offer on-going maintenance and support contracts.

While the channel has an edge in serving this market, they will be competing with vendors. Vendors are not unaware that the SMB market is the key growth area, and they themselves are targeting this segment. Besides the newer entrants into this market, Dell has become highly successful in the storage market. This is likely the key vendor that VARs will have to contend with. Dell Canada is increased its storage business and improved customer perception of service offerings. VARs still have an advantage in the storage market as storage installations are more complex than PC or server purchases.

In spite of these challenges, the channel has an outstanding opportunity to grow in the storage market.

Jennifer Ewen is the senior market analyst for storage products at Evans Research Corporation. She can be reached at [email protected]

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