When 'Pay As You Go' Storage Service Pays Off
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The Storage Service Provider (SSP) market may be getting its share of bumps and bruises, but the pay-as-you-go model is a good match for some enterprises -- especially those pursuing new business opportunities and needing to focus on core competencies while limiting capital spending.
A case in point is ChartOne Inc., an 18-year-old company that manages patient charts for hospitals and healthcare facilities. The company has more than 1,900 health information management specialists who work with more than 1,400 customers, handling 5 million patient charts annually. When the San Jose, Calif., firm in April introduced its latest application, a virtual file room called vChart, the company opted to partner with IBM for storage services.
The reasons were simple, says Peter Henderson, ChartOne senior vice president of marketing and strategic planning: "They're storage specialists, we're health care specialists."
Henderson also notes that the pay-as-you-go SSP model matches the subscription model that ChartOne offers its customers. "Our revenue is variable, so we also need our costs to be variable," he says.
Customers of the vChart service pay to have ChartOne digitally capture patient records into the vChart system, where they're stored in a virtual file room. Authorized users have real-time access to fully indexed, on-line patient charts. The automated file-capture system replaces the practice of managing paper-based patient records, which, according to Henderson, is a cumbersome task at most medical facilities.
Yet, despite the burden of manual record management, health care providers aren't about to turn over sensitive patient information to just anyone. ChartOne knew it needed a reputable storage partner and a system that was secure, scalable, and reliable. "I have to tell my customers that the storage of their files isn't under my direct control. That's why I went with a top-name partner," says Henderson.
The company began evaluating its storage needs in July 2000, bringing in several potential partners, including IBM, EMC, Storage Networks and Sun Microsystems. Ultimately, says Henderson, IBM showed it could "blend our applications with storage services to make a seamless match."
Seamlessness A Key
Seamlessness was a key project objective. ChartOne executives wanted a connection to a Storage Area Network (SAN), with use of the SAN functions to be transparent. Other criteria included security, scalability, a 24-by-7 infrastructure, and redundancy. With the help of IBM, the SAN solution, including integration, was fully implemented in April.
IBM manages the storage and deploys its Shark storage system at a facility based in San Jose. ChartOne specifies the service levels. The company also co-locates its vChart products at IBM's facility.
Sharad Patel, executive vice president and CTO at ChartOne, says the company opted to house its servers next to the storage to reduce communications costs and improve access times. The further away the SAN is from the servers, the greater the latency and the higher the bandwidth costs. "Customers want to retrieve patient records quickly," he says.
ChartOne turns to another managed service provider, San Jose-based Euclid Inc., to manage the ChartOne infrastructure, which includes about a dozen Sun servers, Cisco routers, and databases.
Euclid provides ChartOne with a network operating center and software. Patel is responsible for managing the vChart services from a company location about 20 miles away, as well as managing the managed services providers. ChartOne customers can also view the vChart infrastucture via a portal offered by the company.
The option to outsource storage management makes good financial sense to ChartOne. If the company were to assume the costs for the physical infrastructure, network infrastructure, manpower to monitor and manage the storage, as well as maintain the systems, the up-front capital expense would be too high. Henderson estimates a cost savings of about 60 percent as a result of the IBM partnership.
ChartOne signed a long-term, renewable 3-year contract with IBM and has the option of increasing its storage at any time. The company made an initial commitment to two terabytes of storage and expects to add three to four terabytes of storage every quarter.
Both ChartOne and IBM reps meet once a month to discuss storage requirements and any problems, as well as to review plans.
SSP Market Close-up
According to industry analysts, the issue of managing enterprise storage is resonating in corporate data centers as utilization rates increase. However, with many businesses looking for ways to reduce spend rates, expensive storage systems aren't in the cards.
And that's where the SSP market makes sense. "SSPs can help IT shops get more capacity without making additional purchases," says Adam Couture, senior analyst at the Gartner Group.
Regardless of its benefits, the SSP proposition currently is a slow-moving model. In fact, Gartner has been scaling back on its SSP market projections all year. Most recently, the IT market-research firm slashed its forecast by 20 percent, to $6.1 billion by 2004, compared to an earlier forecast of $7.8 billion. Last year revenues were about $176 million.
With SSPs trying to reduce their burn rate, many have pulled back from building infrastructure. Some are also shifting their business models from managing data at the SSP's central site to managing customer's data at the customer's site.
Backup and Retrieval
The shakeout in the market is doing little to boost customer confidence, especially when it comes to primary storage management. The bottom line is that businesses are reluctant to send the corporate jewels to players with short track records.
Where the SSP market is seeing gains is in storage backup and retrieval services. Turning to SSPs for backup and retrieval is attractive for a couple of reasons: the value proposition of using someone else's infrastructure, as well as getting the data off-site.
Doceus Inc., a 6-year-old provider of e-business solutions and software, helps organizations identify ways of moving onto the web using Internet technology. Not only does the Washington, D.C., company help its customers build Web sites, it also hosts, manages, and maintains them. In April, Doceus partnered with WorldStor Inc. for storage backup and retrieval services.
Doceus currently backs up about 400 gigabytes a month, and CTO Harry Schechter says he expects storage requirements to grow 30 percent to 40 percent annually. By turning to WorldStor, he says, "I no longer worry about our data being backed up, and it's done off-site."
The company began outsourcing storage backup and retrieval about 18 months ago with another provider. However, Schechter says its first SSP wasn't a very good fit, and the companies parted ways when the service provider couldn't support Windows 2000.
Prior to using SSPs for storage backup and retrieval, Doceus backed up its data manually, which required someone driving a couple of hours to change tapes twice a week. At a billing rate of $200 per hour, the cost of the six-hour job quickly added up.
Today, the company pays WorldStor a few hundred dollars per month, depending upon the amount of megabytes transferred.
Like many customers of managed services, Schechter says that his top concern is the viability of his provider. "We did our homework," he says, adding that the company checked out the finances of WorldStor, as well as its market position. "We can't risk our clients data."
This story has been reprinted from Datamation, part of the EarthWeb network.