Dot-Com Failures Dampen Storage Service Provider Outlook

A new report, Dataquest Inc., a unit of Gartner Inc. states that the North American storage service provider (SSP) market will grow from $176 million in 2000 to over $6 billion in 2004. The report says the SSP industry was bracing for even stronger growth, but the recent failures of many dot-com companies, among other factors, has lowered expectations.

According to Gartner, the market will also be impacted by SSP saturation. Competitors have quickly jumped into this market. While a raft of new providers should mean more sales, a good number of them are going to fail which could spook potential customers. With the large number of new SSPs, there has been an early commoditization of the market, which has meant lower prices for storage utility services.

Gartner says most early penetration of the storage utility market will take place at Internet data centers, colocation centers, such as Exodus and Level3, and hosting data centers, such as Digex and Interia. In 2000, storage utility penetration of corporate data centers was $32 million, and it is not expected to exceed $1 billion until 2003. By contrast, storage service revenue generated through Internet data centers is expected to climb to more than $800 million by 2002.