Techaisle Analyst Insights

Dropbox, Carbonite and many others have accelerated the use of Cloud storage in the consumer market for backup of music, photo, file sharing and more recently with various social networking needs and media sites. Similarly, Box.net has established its strong presence within the business segment. Techaisle’s SMB and mid-market business MarketView forecast shows that cloud storage will be a US$1.1 Billion market by 2016 growing at a 37 percent CAGR.

It would not be out of place to say that businesses are always very concerned about regulations and business policies requiring them to retain data for longer periods. Add to this the intricacies involving data protection via backups and replication, data scalability requirements and data availability needs across multiple geographies - the complexities and cost with storing massive amounts of data that is generated across the enterprise becomes huge.

Though it has limitations, an object based Cloud storage solution addresses many of the business challenges above – a scalable, easily replicable, pay-as-you go solution that is geographically accessible through public internet solution, thereby meeting businesses’ most demanding requirements with respect to their data storage policies.

Given the cost competitiveness, scalability and security attributes, backed by enterprise grade SLAs, Object Storage in the Cloud is an extremely viable option for the small and medium businesses (SMBs) looking to migrate their datacenters into the Cloud. RAID arrays are mostly used by mid-sized businesses but that is no protection against a disaster or any malware attacks.

What is Object Storage and why it is significant for mid-market businesses?

An object Storage solution breaks storage data into distinct segments, or ‘Objects’, each containing a unique identifier (or metadata) that allows data retrieval.

Valet parking is often cited as an analogy for Object Storage. When parking at a garage, the attendant gives a claim ticket that identifies the car that allows the driver to pick up the car later. The driver is not concerned where the car is parked as long as it is identifiable when it is time for pick up. Object Storage, likewise, stores data (objects) and retrieves when required based on its unique identifier.

Object Storage differs from traditional Storage Area Network (SAN) or Network Attached Storage (NAS) in that the former is ‘Object Based’ and has the following characteristics:

• Each object has its own ID, metadata, data protection policy and is unlike any file system where files often inherit attributes from their parent containers/files/directories.

• There is no limit on volume restriction of size of file systems – unlimited scalability, not limited on infrastructure capacity maximums.

• Data is accessible anywhere over HTTPs - availability of the service can be anywhere on the internet. Hence this is latency sensitive.

• Data is typically retrieved via a RESTful or SOAP based API Web service. Storage vendors have their own proprietary API platforms – e.g. Amazon S3, Nirvanix APIs, OpenStack or EMC Atmos platforms. Any programming language that supports web service-based API calls to remote systems can be used to build applications around the storage solutions.

• Price, which is normally based on usage, is much lower than traditional Block and File storage solutions. Businesses typically pay a per-gigabyte rate for upload and download and a per-gigabyte fee for monthly storage. In addition, some providers charge for each data access request based on reads, writes, etc.

Use Cases

• Data Archiving and backup: Retain data that needs to be easily accessible and always available but is not constantly used in real-time.

• Data Compliance Requirements: Must keep data safely and reliably for audits, reporting, regulatory compliance, discovery, backup and restore, or disaster recovery.

• Data accessibility: Have a library of content and/or media files that employees in many locations must access to download items. Also need employees in many locations to be able to upload or download files.

• Web 2.0 and Social Media: Manage exploding data growth or have fluctuating data storage requirements - Object storage systems have massive scale and provide moderate performance at low cost.

Medical Imaging and medical records applications also have massive use for Object Storage due to sheer volume of data storage requirements. Healthcare Vertical, particularly, have shown high adoption rates for Object based storage.

Competitive Landscape

The market is yet very fragmented though Amazon AWS Simple Storage Service (S3) is considered the leader in this space. Though it has challenges, AWS is a highly innovative service and has created AWS Storage Gateway that enables hybrid storage architectures that span both on and off premise storage options.  Nirvanix, a pure play Cloud Storage provider that offers public, hybrid or on-premise Nirvanix-powered storage services which are priced for various support levels. There are other big names such as Google, Windows Azure Blob, Rackspace CloudFiles, AT&T’s Synaptic Cloud Storage and recently Savvis has also entered the Cloud Object Storage space.

Vendors seek to differentiate themselves on price, quality of services (QoS), SLAs and hybrid architectures. At the same time they tend to gravitate towards some established storage and compute platforms to enable standardization, achieve economies of scale and allow for ecosystem build-up. This allows their business customers to combine their storage solutions with any third party solution that uses a similar platform. For example, AT&T Synaptic and Savvis are aligned with EMC Atmos Storage Platform, whereas providers like HP, Rackspace CloudFiles and SoftLayer are aligned wtih OpenStack platform. This enables any third party solution that is based on the above platforms to be combined with storage solutions offering any custom configurations. AmazonS3 is an exception that is based on its own AWS Storage Gateway.

Techaisle Take

Justifiably, there is a great deal of hype today around Object Storage, especially relating to its Cloud, Social Media and Big Data applications. However, it is important to understand the specific use cases and workloads Object Storage can be useful for, given its limitations such as Latency sensitivity, lack of standardization among object storage interfaces and in some specific uses where the stored data is modified frequently and hence not suitable for an Object Storage solution.

Upcoming report: Techaisle's Cloud Object Storage Competitive Landscape report.
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All predictions below are compiled based on SMB and channel surveys conducted in 2012 covering Cloud, Mobility, Virtualization, Business Intelligence, Marketing Automation, Managed Services, Business Issues, IT Priorities, Channel Challenges across several countries.

SMB focused Predictions

• As SMBs continue to adopt cloud computing aggressively they will continue to move away from capital budgets; Revenue will become the focus rather than tight cost control. The buyer will move toward the department that is responsible for delivering business results and thereby revenue. The CMO becomes increasingly important as this unfolds.  Further, countries are coming out of economic slump which was a major factor in the initial move to the Cloud, as firms were scrambling to reduce capital outlays and reduce OPEX. But SMBs are now priming themselves for growth, and the Cloud is firmly established as an important tool to build the business.
• SMBs’ emphasis on front-office, revenue-generating applications will continue with CRM at the hub and with more marketing automation and business intelligence applications. The base of marketing automation vendors will continue to consolidate as start-ups fail and pure-plays are acquired and big players roll out integrated solutions. Cloud CRM spend will continue to grow at a healthy rate of 21 percent.
• Communications, Collaboration, Content and Context will be the primary computing scenarios of SMB IT departments, driven by Mobility, Cloud-based Applications and Process Optimization. Virtualization, Cloud, Mobility, Managed Services will together form the Four Pillars of IT that will support the transformation of SMB, enabling them to reach their full potential in the shortest period of time. The foundation for these four pillars will be the datacenter, both off-site and on-premise depending upon SMB segmentation. Techaisle forecasts that global SMB Cloud spend will grow by 22 percent in 2013, Mobility by 14 percent, Managed Services by 15 percent, Virtualization by 25 percent and datacenter by 8 percent.
• The adoption of cloud-based productivity suites among SMBs will accelerate which will begin to balance usage of collaborative and individual SaaS applications. Office365 will go main stream along with increased usage of ERP and more sophisticated applications, offering new customer and other value-added opportunities in data and application integration. We expect SMB Cloud productivity suites spend will almost double from relatively slow adoption through 2012.
• There will be a significant increase in emphasis on data integration rather than application integration; data will be combined from several sources to power different application blocks and embedded business intelligence functionality, as we first predicted in 2008.
• The SMB server and network will start becoming less visible as they progressively move offsite physically and from a remote management perspective. Cloud-based server spend will likely grow by 40 percent as compared to on-premise new server spend growth of 5 percent, the benefits of remote management overwhelming the on premise for headcount-constrained firms.
• Although social media will gain importance, SMBs will continue to struggle to determine ROMI from their social media initiatives and its usage will be considered a “productivity drainer” by many lean-staffed and short-skilled SMBs, unless they are in a local business that requires high customer intimacy to grow and build business. Aggressive SMB adopters will realize benefits but many others will be disillusioned unless advised, encouraged and shown a path by early adopters. The market will be inundated by advisors causing more confusion, especially as big data analytics start showing strong results for Enterprise-level companies.
• ISVs will focus their attention on developing client applications that integrate email, context and workflow to build other productivity applications. New business models and solutions from ISVs and Service providers will appear for SMB mobile apps that will deliver content based on context, beginning with a few verticals and then spreading horizontally.
• BYOD will be the new normal; with priority for SMBs on data and applications management rather than managing devices.
• The next generation of business intelligence and Mobile BI will be widely adopted within SMBs; Upper mid-market firms will experiment Big Data using combinations of Hadoop and other technology (e.g. Greenplum) whereas lower-mid-market and small businesses will look for insights from federated big data deliverables provisioned by cloud application vendors.

Channel Partner focused Predictions

• There will be an accelerating trend to vendor direct through development of remote integrated-service interfaces and inbound marketing initiatives. To counter, channel partners will aggressively develop outbound sales capabilities to compete with vendor direct sales and rise of the Independent Consultant to prevent from being cut out of the distribution chain.
• Successful Channels will finally realize and pursue their individual respective competencies and roles as consultants, business process advisors, integrators, aggregators or plain vanilla cloud deliverers.
• Expect that channel partners will be more successful going deep with integrated suites or a few applications that they integrate rather than trying to provide a complete infrastructure, communications, applications and vertical solutions.
• Channel partners will begin to put together a repeatable, profitable SMB solution that will include proprietary integration value-added services or software, accelerated with productivity suites and collaborative combinations, such as Office 365 and SharePoint, or Google Apps, or the new Citrix ApplicationMe@Work or XenDesktop.
• Cloud aggregators will continue to enter the market, however, few will be profitable as aggregators will need to be able manage reseller relationships with structured sales and marketing programs, implementation and post-implementation support for the channel, and tier-2 customer support for end users.
• Mid-market focused channels will look up to their vendor partners to help combine mobility, cloud, virtualization offerings while others will rely on a partner-to-partner network

Tavishi Agrawal
Techaisle

I first met Jag Randhawa at Dell World. It was a meeting organized by Dell Analyst Relations to showcase Dell’s Cloud Business Applications. Unbeknownst to Dell Analyst Relations, we hardly discussed Dell. What struck me immediately was his smiling demeanor and an earnest desire to be a champion of business innovation and his views on what IT could do to spur growth through employee involvement and implementing new technology ideas.

We re-connected, ten months later at his office.

Jag Randhawa is the VP of IT at CAMICO Mutual Insurance Company, an SMB with slightly less than 100 employees. And he is the quintessential CIO who loves his job, his company and his fellow colleagues. He also showers high praise on Dell’s customer intimacy, likes VMware’s virtualization solutions and embraces Open source.

Specifically, he uses Dell for Network, Switches, PCs, Servers, Storage and is purchasing Microsoft Software. From VMWare, he uses their server virtualization technologies and software like VMotion and inventory management software for managing all the VM servers.

Cloud Focus

His is a Dell shop, to the extent that he has replaced all existing storage and security solutions with those from Dell. He and his IT team of twelve do not work with any channel partners. His philosophy – whichever applications that can be pushed to the cloud without compromising security of his customer data, just do it. And he has done it; CAMICO is using 12 cloud applications which are:

1. SalesForce.com – Sales Management

1. SilverPop – Marketing Automation

1. Nexure – Agency Management Solution

1. Acuity – Legal Partners Expense Management

1. DocuSign – Electronic Signature

1. LearnLive – Webinar Broadcasting and Training

1. ADP/HCM – Payroll and Human Capital Management

1. Skype – IM and Video

1. Paypal and Total Biller Solution – Credit Card Payment Gateways

1. Concur - Travel Expense Management

1. RingCentral – Telephony

1. MailRoute – Email Spam Filter

Business Perspective Focus

To increase employee engagement and help grow the business, he created a Bottom-up Innovation Program at CAMICO, in which employees submit ideas to grow the top-line, increase operational efficiencies, improve customer service, enhance business processes, and reduce cost. This program has generated many valuable ideas, and as a result he is embarking on two of his most ambitious business focused IT projects.

1. Using Open Source for eCommerce solutions

1. Developing a Big Data Proof of Concept

Both of the projects are still in infancy stage and they are both being developed using Open Source. To explain further on the eCommerce solution initiative, he says, “We currently host our website and members-only extranet using Oracle Portal, and now we are planning to use Drupal for our website and another open source software for extranet, which is yet to be determined. Our website and extranet also have eCommerce capabilities embedded in it, so we will be porting our eCommerce into this new Open Source portal”.

He is most excited about the big data project which is his initiative to provide actionable insights and perspectives for the business management at CAMICO. When I asked him about the key objective of working on a big data project, he said, “We are experimenting with Big Data using many of the Open Source software to analyze and find correlations among loss trends. The first objective is to find loss causes in our current data and subsequently use these findings to better underwrite future risks.”

Employee Engagement Focus

As mentioned earlier, The Bottom-up Innovation Program was his brain child. The program encourages all employees to submit ideas that could add value to customers or the business. Employees observe their environment, listen to customers, and bring their outside experiences as consumers to generate ideas that could benefit the company or customers. These ideas are validated, refined and prioritized by a committee of fellow employees. For every accepted and implemented idea, employees are recognized for their contributions through intrinsic and extrinsic rewards. This program makes employees more an integral part of the company, thereby increasing employee engagement and retention. The program has become such a success that he is invited to speak at several industry events for the benefit of other organizations. He not only speaks about the concept but also explains the implementation mechanics and expected outcomes of the program.

Overcoming business challenges

Similar to most other CIOs, he and his team have a long list of IT initiatives but the top four initiatives for 2014 and beyond are:

1. Replace Website, Members-Only and eCommerce platform

1. Use Big Data for analyzing current and future risks

1. Move more infrastructure solutions into the cloud

1. Build targeted Mobile solutions

But there are enough challenges that his team (he detests the word “staff”) has to overcome. As per Jag, the biggest challenge for any IT department is money and talent. He elaborates on his statement, “There is never enough money to do everything we want to do. However in my view, if there is a business justification for an expense, money is never an issue. The definition of business justification is, for every dollar spent how much money the new solution is going to make or save? There are times when you cannot find direct or immediate benefits, so you have to find creative ways to show value and sell new ideas. Cloud applications make it easier to try new solutions without heavy upfront commitment”. To qualify, he quickly states that the big data project was unscripted and not budgeted but he was able to create a business value which catapulted it to be among the top four IT initiatives.

Business Focused CIO

He is very clear in his mind that there has never been a better time to be a CIO. And he has a message for other IT leaders, “Technology has become an integral part of the business. IT leaders should always be thinking of how they can leverage technology to create competitive advantage, grow the business and create operational efficiencies.” As if on cue, he recites what he practices:

1. Partner with business peers. Look for ways to help them achieve their goals faster using technology.

1. There is no IT project; every project is a business initiative. If you want funding for any initiative, figure out how it adds value to the business.

1. Find partners who will help you showcase the value of technology.

1. Above all, build credibility with your peers by providing excellent service.

Way to go.

Techaisle’s unique SMB research to understand the current state and implications of distributed IT influence and authority shows that today, the DMU (Decision Making Unit) is much bigger, much more diverse, much more difficult to inform, and can be much slower to take action. Business decision makers (BDMs) are an intrinsic force within DMUs in most SMB organizations, and are the primary decision makers in some high-growth areas. These BDMs have different objectives for technology, different perspectives on adoption drivers and impediments, and tend to be influenced by different information sources. The resulting diffusion in responsibility/authority and information channels has created an environment where buyers and sellers struggle to develop the cohesion needed to promote or embrace new IT/business capabilities within existing IT and business process structures.

The study shows that both ITDMs and BDMs play important roles in the (formal and shadow) acquisition of IT products and services. However, Techaisle’s research has found that the distinctions between these roles are not evenly applicable across all types of IT-enabled solutions: in some areas, the business will look to IT for leadership, and in others, it will take direction from BDMs.

Figure below illustrates the extent to which ITDMs and BDMs are seen as solution leaders within small and medium businesses, and across nine major solution areas. The solutions have been assigned to three groups: those on the left (virtualization, managed services and IaaS) are labeled “IT led,” and represent areas where IT is generally seen as leading corporate initiatives; they are focused on the core infrastructure used by IT to deliver corporate services to users. The ones at the right (collaboration, social media and analytics) are labelled “BDM led,” and are solutions in which BDMs provide most corporate leadership, and IT is cast very much in a supporting role. The solutions in the middle – Big Data, SaaS and mobility – have been labelled “IT/BDM collaborative.” These are solutions that respond to BDM needs, but where IT is important to supporting delivery capacity.

The positioning of these solutions is important to IT vendor sales and marketing strategies. Solutions in the “IT led” category need to have strong IT-focused positioning, with detailed information on product attributes; this material should be supported with a second layer of collateral containing information on the business case for the solutions, and aimed at BDMs.

Solutions in the “BDM led” category require very different positioning: here, vendors need to make a strong case for the business benefits and relevance of the solution and orient these messages towards BDMs, supporting this campaign with accompanying technical information designed to provide clear deployment and integration guidance to ITDMs.

The “IT/BDM collaborative” category is the trickiest to address. It requires deep information on business benefits and the process steps required to capture those benefits targeted at BDMs, and deep information on how to assemble, deploy, integrate and support/optimize these solutions targeted at ITDMs – and an understanding of how to position and convey the messages to each audience.

During the survey, Techaisle explored one other solution issue that is important to understanding the different perspectives of ITDMs and BDMs. Each respondent was asked to categorize the nine solution areas as having one of two primary impacts: driving growth or containing costs/”increasing the bottom line.”

The comparison of small and mid-sized ITDM and BDM perspectives provides an instructive view of the differences between the two communities. Looking first at the small business results the survey finds that in six of eight areas (IaaS and SaaS combined into a single “cloud” category), BDMs are more likely to view a solution as contributing to growth, and ITDMs are more likely to view a solution as helping to control costs; this may reflect a fundamental difference in how each group approaches its business objectives. In the mid-market findings study reveals that the perceptions of value of ITDMs and BDMs are very closely aligned in mobility, virtualization, Big Data and managed services. ITDMs are more likely to believe that cloud will drive growth than their BDM peers, while BDMs are much stronger believers in the growth contributions of the three IT-led solution areas (collaboration, social media and business intelligence/analytics).

About the Study: 360 on SMB & Mid-Market IT Decision Making Authority - BDM vs. ITDM

The study covers:

• Stakeholders and their roles in end-to-end IT solution adoption

• ITDM vs. BDM : Balance of Authority (Needs, Budget, Purchasing)

• ITDM & BDM: Locus of Leadership in driving different types of IT Solution Adoption

• ITDM & BDM: Leadership roles in securing Cloud, Mobility

• ITDM vs. BDM: Success Attributes and Benefits of Cloud & Mobility Solutions

• SMB & Mid-Market Businesses: Shadow IT Spending

• Business Impact of BDM vs. ITDM perspectives and expectations with respect to IT Solutions

• ITDM vs. BDM: Differences in Business Issues, IT Challenges, IT Priorities