June 12, 2000
IT Outsourcing Services North America
Dataquest Alert
Adam Couture

Compaq Launches Storage Utility Services for Corporate Data Centers

Today Compaq Computer entered the storage utility market with a selection of pay-as-you-go storage capacity and storage management services targeted for corporate data centers called the Compaq Private Storage Utility. The new service is comprised of Compaq StorageWorks hardware, Compaq SANworks software, and Compaq Services offerings — from consulting to remote management — and financing arrangements.

"The unprecedented growth of business today is dramatically increasing the need for storage capacity. This, coupled with the shortage of skilled IT professionals, is creating serious storage and system management problems for growing businesses," said Howard Elias, vice president and general manager, Compaq Storage Products Global Business Unit. "Our customers want storage solutions that will ease the burden of storage management and that have enough agility to allow for the growth of their business. We've designed the Compaq Private Storage Utility to enable organizations to respond to growth with predictable costs so their business can thrive in the new economy."

The Compaq Private Storage Utility consists of a range of services, including professional consulting to help customers assess and design their storage utility, as well as installation, configuration, start-up, capacity, utilization and capacity reporting, storage management, and warranty support. Options include backup/restore management service, enhanced response service, guaranteeing a two-hour service response time, data migration service, availability review service, customer service that provides an in-depth analysis of the customer's entire IT environment, and a guaranteed uptime service.

Storage capacity services range from $35 to $55 per gigabyte per month, depending upon the particular customer service level agreement. Minimum capacity requirements are 576GB, with 1.7TB required after the first six months. Storage assessment services are included in the per-gigabyte capacity fees under the terms of a three-year commitment.

Compaq Private Storage Utility customers may also access storage capacity for peak period utilization or special projects through Compaq's partnership with StorageNetworks.

Compaq's storage utility services are being rolled out first in North America, followed by a planned European rollout in September. Although the company intends to offer the services in its Asia/Pacific regions, no announcement dates have been set.

Dataquest Perspective

Up until recently, storage utility service providers have either focused entirely on Internet data centers or a combination of Internet data centers and corporate data centers. Compaq's announcement today is the second pay-as-you-go storage capacity services exclusively for corporate data centers to be announced in the past two weeks. Although Storability may have been first to market with these services, Dataquest believes that Compaq's announcement has the potential to impact the entire storage utility market including all of the competitors jockeying for position within it.

The storage utility market is just celebrating its first birthday and to date a small number of competitors have announced storage utility services targeting Internet data centers, corporate data centers or both. Until recently, these competitors have consisted of pre-IPO visionaries like StorageNetworks, Centripetal and a handful of others. Even though Dataquest believes such companies have made enormous contributions in evangelizing the storage utility and making it a reality, their youth and small size have often worked against them. Many potential customers have yet to be convinced that outsourcing storage capacity and management is a viable alternative to in-house solutions. In fact, multiple Dataquest research perspectives point out that one of the major impediments to the acceptance of the storage utility concept has been that the market needed to be "validated" via the entrance of established, big-name competitors. Last month, that validation began with EDS's announcement that it will be offering storage utility services to customers at their 12 Internet data centers. By announcing storage utility services, Compaq similarly adds credence to the storage utility concept and, in the process, buoys the credibility of all competitors large and small.

Dataquest also believes that it is particularly notable that Compaq has chosen to eschew the lure of e-businesses taking root at Internet data centers around the world (although these are being addressed through a partnership with StorageNetworks). Instead, Compaq is focusing its efforts on corporate data centers that have thus far been slow to warm up to the storage utility model and which Dataquest predicts will lag e-businesses in adopting storage utility strategies.

Dataquest studies repeatedly show that CIOs and IT management are reluctant to store their critical corporate data at a remote location like an Internet data center where it could potentially reside on the same Redundant Arrays of Independent Disks (RAIDs) as their competitors' data. Compaq's business model of provisioning on-site storage capacity should alleviate most of the security concerns surrounding the storage utility including the pervasive concern that Internet data centers are vulnerable to malicious hacking or denial of services.

Compaq's "private utility" strategy should eliminate many of the hurdles inhibiting acceptance of the storage utility model at corporate data centers. Moreover, the company's brand image and awareness adds a great deal of marketing capital to the storage utility concept overall — especially within the company's extremely large base of storage hardware customers. Nonetheless, Compaq will not be exempt from its own set of unique challenges. For example, many potential customers may balk at the three-year commitment required to access Compaq's storage capacity services. Potentially even more challenging is the fact that successful implementation of Compaq's storage utility services requires coordination and cooperation of no less than five internal organizations including those responsible for hardware, software and professional and financial services as well as the storage utility team itself. This is almost certainly a consideration that Compaq's smaller competitors will exploit — at least until Compaq proves them wrong.

By Adam Couture

Copyright Gartner Group Inc.

Product Code: PFOT-NA-DA-0023

Posted on June 16, 2000.

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