Two New Telecom Giants

Research Storage Area Networks

In the Internet age, managers are discovering how to best reach and serve their customers while growing their business through the use of storage area networks. These networks have many advantages but are being adopted slowly because of a lack of standards. The pace of adoption is likely to increase rapidly in the next one to two years, however, and investment opportunities could be ripe.

By John Del Vecchio (TMF Fuz)
July 20, 2000

The rapid proliferation of the Internet has caused companies of all sizes, in all industries, to become more Web-centric in order to remain viable competitors in the marketplace. The Internet has raised the ante to retain customers, develop strategic initiatives, and keep pace with the rapidly evolving business environment by tearing down barriers to entry and shifting more power to customers. Leading companies in the Internet economy realize that information is a key asset. Thus they are increasingly looking to harness their vast stores of information about customers, sales trends, pricing environments, competitors' positions, and other factors to create and sustain a competitive advantage. The Web-centric business environment has created strong demand for better enterprise storage systems to leverage these important assets.

Enterprise storage systems aid in making sense -- and the best possible use -- of the considerable volume of information being collected by businesses all over the world. Globalization and the growth of the Internet and e-commerce have created unprecedented demand for storage hardware and software. Each time an online sales order is processed, a home page is accessed, or an email is transmitted, valuable customer information is created. To better understand their customers and target products and services that will best suit their needs, companies need reliable, accessible, and rapid dissemination of this critical information.

For example, an e-commerce company may store information about customers on a variety of databases. One database may keep records on past orders, a separate database may be used to track how customers move around the website, and a third may compare one customer's interests with others' so that the e-tailer can provide product suggestions. Storage area networks (SANs) can be implemented to make the best possible use of this information.

SANs Offer Many Benefits

SANs allow e-commerce businesses to easily access, consolidate, and analyze data so that they can customize the shopping experience for each visitor to their site. While it may look simple on the front-end, there are many complexities in the SAN background that are transparent to the user.

SANs are high-speed, dedicated networks that connect storage systems and network servers through something called Fibre Channel. Fibre Channel is an important storage connectivity technology. Fibre Channel has several advantages when used for a stand-alone storage network. First, Fibre Channel can quickly move large chunks of data among storage devices due to great bandwidth. Another advantage of Fibre Channel is that it supports increased physical distance, meaning that storage devices can be located throughout an enterprise. The servers may be in one room and the storage devices in another room, on a different floor, or in a separate building. Fibre Channel can also send and receive data concurrently.<

Here are some of the main benefits of SANs:

Speed and reliability: SANs provide a fast and reliable way to store, share, and utilize data. This is key because of the increasing amounts of data being collected by enterprises and the increasing demands on businesses to use information to create competitive advantage.

Centralization: SANs allow data to be centralized and shared among various servers throughout an enterprise. Mission-critical information available to all users facilitates better decision-making and quicker responses to business problems.

Data protection: Data protection is crucial since information is becoming a company's most valuable asset. The loss of critical data can cripple a company's ability to operate effectively. Fortunately, SANs can create real-time mirroring, or multiple data copies, to protect information.

Possible Disadvantages of SANs

The implementation of SANs is no slam-dunk, however. There can be disadvantages to using them. While benefits such as speed and data protection make SANs attractive, a lack of standards and other issues have slowed SAN adoption.

Lack of standards: Companies have been slow to adopt SAN technology, although the pace is likely to accelerate in the next 12 to 24 months. The primary reason SANs have not become more widespread is a lack of standards. This lack reduces the interoperability of the storage devices among different operating systems, databases, and technologies. Storage firms are currently developing standards through the Storage Networking Industry Association. However, the adoption of acceptable standards may be a couple of years away.

Complexity: The management of a SAN is a complex task. A SAN can be difficult to implement within a company's existing information systems architecture and usually requires specialized staffing needs. In addition, without powerful software to manage the storage devices, systems management is complicated. Some of these complexity issues are being addressed as standards are developed and systems management software is rolled out.

Cost considerations: A final consideration for a company that wants to implement a SAN is cost. The implementation of a SAN can run into millions of dollars and is certainly not practical for many small and medium-size businesses, which may seek alternative methods -- such as renting space from a company that outsources storage -- to meet their storage needs. However, while cost is a concern for responsible managers within large multinational corporations, the managers appear more concerned about scalability, reliability, and customer service issues than they are about cost.

Leaders Emerge in the Storage Space

As many of the issues slowing SAN adoption are addressed over the next 12 to 24 months, the pace of adoption will increase rapidly. The stock market has taken notice of the need for storage, and investors have rewarded leaders in the storage space with large market capitalizations. EMC (NYSE: EMC) is a leader in high-end storage systems, with $6.7 billion in sales and a $168 billion market cap. IBM (NYSE: IBM) has made waves with its Shark storage system, and companies such as Sun Microsystems (Nasdaq: SUNW), Hitachi (NYSE: HIT), and Compaq (NYSE: CPQ) are all vying for a piece of this lucrative pie. Brocade Communications (Nasdaq: BRCD), with 80% market share and revenue growth exceeding 400%, has emerged as a dominant player in Fibre Channel switches. On the software solutions side, Veritas Software (Nasdaq: VRTS) is staking a lead.

Despite a significant stock price run-up for many of these companies in the last 12 months, the storage market will remain explosive, and market demand for SANs will likely outstrip forecasted growth. This could create tremendous upside for savvy Fools over the next couple of years.

Related Links:

  • Motley Fool Research Report on EMC
  • EMC Discussion Board
  • Veritas Software Discussion Board
  • Compaq Discussion Board
  • Brocade Communications Discussion Board
  • Sun Microsystems Discussion Board
  • Hitachi Discussion Board
  • IBM Discussion Board