Storage Follows the Money

They say money talks, so it's not surprising to hear that banks, insurance carriers, and brokerages that spend billions yearly on storage networking are the major drivers of storage technologies -- according to one of the market's biggest suppliers.

"Because of the competitive nature of their industry, [financial firms] tend to go out on the leading edge, says Ken Steinhardt, director of technology analysis at EMC Corp. (NYSE: EMC).

Steinhardt says Symmetrix storage systems were developed because of the performance financial firms needed; and Centera’s Content-Addressed Storage (CAS) gear was conceived for long-term archiving necessary for compliance (see Centera Hits 300 Partners, 10 PBytes and EMC Centera Passes Regulatory Muster).

In all, EMC claims its SAN gear is installed in 95 percent of the Fortune 500 financial services institutions, as well as 24 of the top 25 banks and 45 of top 50 insurance companies in the world.

Steinhardt isn't alone in his views on the importance of the financial services market. Consider the following:

Smaller companies also are chasing the financial services market. Many startups have gotten their businesses off the ground with security appliances, backup and recovery devices and services, and email retention and archiving hardware and software aimed at the segment. Examples include Decru Inc., NeoScale Systems Inc., and Vormetric Inc., which have banked on financial institutions needing them to back up sensitive data (see Startups Focus on Secret SANs, Decru Ships NAS Security Box, NetApp, Decru Secure IBM Records, and Vormetric Expands Support).

EMC's Steinhardt says the reliance on financial services firms is nothing new: The history of SAN marketing can be traced through the demands of big money organizations. "In the early days, they were after performance," he says. "If they could access market data seconds ahead of the competition, that could be worth millions of dollars. Then it became availability they wanted, and that ultimately moved into business continuity. And the hot button du jour now is compliance."

Compliance has emerged as a billion-dollar industry, and much of that is generated by financial companies that need to meet recently enacted federal regulations. AMR Research Inc. estimates Fortune 1000 companies spent $2.5 billion to comply only with Sarbanes-Oxley last year. Others place the total compliance market at up to $5 billion for this year. EMC, IBM, Network Appliance, and Veritas are among the storage companies with major compliance initiatives, but smaller guys have gotten into the act (see IBM's Compliance in a Cabinet and In 2004, It's Comply or Die).

And it’s not only Fortune 1000 firms that have to fork over for compliance. Startup IntraDyn Inc. recently came out with an email archiving appliance called ComplianceVault aimed primarily at small brokerages with around 100 or so employees (see Startups Look for SMB Feast and B&S Insider Tackles Compliance). CEO Gary Doan says he thought it was a niche market until he started exploring his potential customer base. Then he discovered it wasn’t so niche. “I couldn’t believe how many of these companies are out there, a lot more than you think,” he says.

Software startups such as KVS have jumped into email archiving as well. KVS Inc. forged a partnership to put its software on an appliance from Network Engines Inc. as well as teaming with EMC and AT&T Corp. (NYSE: T) on an email archiving service (see KVS Plans Email Archiving Appliance and EMC Helps AT&T Archive Email. KVS also has a compliance partnership with IBM, as does its email archiving rival Zantaz Inc. IBM Gang-Tackles Compliance).Bottom line? It's worth it to keep an eye on financial services buying trends. As they go, so goes the market.

— Dave Raffo, Senior Editor, Byte and Switch