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VARs see managed backup for SMBs as the best storage market opportunity

As SMBs cry for data management services, VARs are discovering that managed backup fits their customers' needs better and adds a whole new line of business.

Many value-added resellers (VARs) that provide storage systems are expanding their business by offering managed services to small and midsized companies (SMBs) where customers are having difficulty storing, protecting and managing data that has become unmanageable.

In fact, if storage VARs feel the managed service provider (MSP) model presents a fresh opportunity to grow their business, their view corresponds with a recent report published by CompTIA, an IT certification association, which indicates that storage is high on the list as one of the most popular MSP offerings.

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According to the report, "It comes as no surprise that security of an organization's technology infrastructure, along with storage, backup and disaster recovery are leading services that are being offered or will emerge in the near future," the report concludes.

One VAR that has jumped into providing managed services in backup and recovery tasks for its clients is Simi Valley, Calif.- based AllConnected Inc. Eight months ago, AllConnected established another company, XiloCore, which is exclusively dedicated to providing automatic off-site backup and data vaulting at two locations, providing customers with remote access to their information if a disaster causes loss of critical information at their main site. The company also provides deduplication and compression of data for its customers.

"We replace a customer's tape backup solution with our onsite dedicated appliance that replicates all the data offsite, and in the event of a disaster we can take a customer's environment and push it into an emergency silo to give customers access back to that data," said Alan McDonald, president of AllConnected and XiloCore's chief operating officer.

XiloCore's customers range from doctors' offices, hospitality distribution firms and education departments with between 15 and 50 employees well into the midmarket of companies with headcounts of between 100 and 1,000.

Many of McDonald's customers store data on tape because it's cheaper, but tape backup is cumbersome and at times not the most efficient technology to store data. Because of this, McDonald said, he drives home the point that an MSP model is a cheaper, more effective way to store data and offers a complete, managed business continuity service to a small business starting at $450 a month.

According to McDonald, the costs associated with tape includes the tapes to support a GFS rotation, tape library maintenance, backup software maintenance, the labor required to troubleshoot mechanical tape errors and event logs, testing the readability of tapes on a regular basis, and the impact of being unable to restore an untested, damaged tape when you need it most. "When the amount of storage justifies it, we lead with a storage assessment recommending an archival plan," McDonald said.

According to Enterprise Strategy Group analyst Paul Myerson, storage backup is one of the hottest markets for MSP services and gives storage managers at SMBs, branch office and remote offices the opportunity to let people who constantly perform backup the chance to do a good job for them.

"If you're resource constrained you get the benefit of the resources, if you don't have the expertise, you get the benefit of the expertise and you get to pay as you grow; you don't have to build up an IT infrastructure," Myerson said.

Eran Farajun, executive vice president for Toronto, Canada-based Asigra, which develops agentless, secure online backup and restoration software, said VARs should consider the revenue structure.

"For VARs, the MSP model solves a classic problem. Instead of selling once and collecting once, the VAR is able to sell once and collect every month. The benefits are a consistent, growing, recurring revenue stream," Farajun said.

Another new entrant into the MSP market is Aberdeen, S.D.-based VAR TelServ Communications Inc., which opened a managed service division in March. The new MSP division is focused on providing backup using Asigra's backup and restore software to SMBs. While TelServ is developing its own data center, Eric Hanson, TelServ's vice president and co-owner, said the company uses the facilities of another VAR/storage system developer and MSP, Houston, Texas-based Terian Solutions LLC, which has a data center in Houston and one in Dallas. Hanson also said TeleServ charges customers $10 per gigabyte, and said at that price point there is great potential among SMB customers.

"When it comes to managed services, smaller customers are the niche; 10 to 20 PCs, one to two servers are the sweet spot. The reason why they are a managed services candidate is that they are not large enough to require or have a need for their own IT staff, therefore those businesses rely on companies like mine to provide IT staff and services to them," Hanson said.

So far, TelServ has seven customers using its managed services, but Hanson estimates that by the end of the year its MSP business will grow to 30 clients and will piggyback on the 300 current VAR customers as an entry point convincing them that MSP is the way to go. Why does TelServ think it will be successful with its current customers?

"I see a shift in the marketplace where traditionally these small companies had something they needed to fix, they'd call us and we'd fix it. Now these SMB have a demand for increased uptime, reliability, and the increase in disaster recovery planning and business continuity planning. Data backups, monitoring the data and managed security play into that, and we offer all three of these under one solution," Hanson said.

Michael Maddox, president of Mason, Mich.-based Application Specialist Kompany, hopes to open a managed service division within a year, and said by doing so he'll align his company's goals more closely with that of his SMB customers.

"It's in our best interest to minimize the infrastructure problems for our customer. The fewer infrastructure and IT related problems they have, the better it is for our model, and that resonates with the customer base," Maddox said.

For storage VARs who have not yet taken the plunge, Myerson advises that they work with vendors in the MSP market, both those that provide the technology and those that have established MSP facilities. Myerson also observed that convincing a company's IT department to allow somebody to manage their data in a remote location is a very different sale than selling additional capacity and data management software, and storage VARs should be mindful of that fact.

"It's a different approach, it's a longer sales cycle, it involves different business units within a company versus just dealing with IT and selling them an upgrade or a new storage system," Myerson said. "One of the ways for the VAR community to expand is by taking baby steps and working with vendors in the MSP space that provide them flexibility to do everything when they resell the service." Myerson added.

Let us know what you think about this story; email: Nicole Lewis, Senior News Writer.

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