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IDC Cautions Storage Service Providers

The storage service provider (SSP) market has developed from a small, obscure niche into one of the most analyzed segments in the storage industry. According to IDC, worldwide spending in this market will increase at a staggering compound annual growth rate (CAGR) of 134 percent, from $153 million in 2000 to $10.7 billion in 2005. Despite this growth, IDC warns players in this space must use caution to avoid pitfalls.

"The storage service provider market has entered a critical phase in its development," said Doug Chandler, manager for IDC's Storage and Data Management Services program. "With the start-up stage over, SSPs must demonstrate their viability to potential and current investors and concentrate on market validation. Over the next 6 to 12 months, it will be critical to this market that the SSP model becomes more widely accepted by paying customers, regardless of which SSPs become market leaders."

Much like the entire IT industry, IDC believes the SSP market is in a state of flux, buffeted by shifts in customer wants and needs, investor tendencies, technology supplier strategies, new and untested technologies, and the continuing primacy of the Internet in driving industry development. "The success of the SSP market will be closely tied to the success of the Internet datacenter, Web hosting, and other firms that, as partners, will drive much of the storage-on-demand business in the next 12 to 24 months," Chandler said.

Aside from economic issues, IDC believes other pitfalls confront SSP players. Data sensitivity is one of them. "Customers want to outsource many of the mundane details of storage strategy, implementation, and management, yet they don't want to turn over their data. This paradoxical behavior could hamper many SSPs," Chandler said. To this extent, IDC believes SSPs must offer undeniably clear advantage regarding efficiency, performance, availability, security, cost savings and time to market.