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Putting your data online
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December 14, 2000: 7:01 a.m. ET
Firms may find it better to use an outside service to store company info
By Staff Writer Steve Bills
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NEW YORK (CNNfn) - Chances are, when you signed up with your Internet service provider, you got an e-mail address, or several, access to the World Wide Web and some storage space on the ISP's servers -- a megabyte or 10 -- where you could post your own Web page or store files online.
And chances are you never much took advantage of that network storage, beyond perhaps dabbling with HTML to post your vacation pictures or creating a customer brochure for your company.
But online data storage could become a valuable service in an increasingly networked world, providing individuals and companies a place to both save and share files, everything from MP3 music collections to complex business documents.
It seems ironic in a marketplace where a desktop PC may have gigabytes on the hard drive, where even small office networks are built around a RAID -- a redundant array of inexpensive drives -- that outsourcing your data storage is the next big business opportunity.
Managing your information on the Net
"The difficult part is managing the information," said William Hurley, a senior analyst at the market research firm Yankee Group. Who has access to the files? How many duplicates of that big sales presentation are floating around on the network, and which version is the latest? Can you listen to your music files on your cell phone?
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 SHOULD YOU USE AN SSP?
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Before you sign up with a storage service provider, consider these issues, suggests Richard Juarez of FleetBoston Robertson Stephens:
What does it cost? Juarez foresees a price war coming in storage, perhaps making it cheaper than in-house storage.
Can you find the people you need to maintain a storage system? If not, consider outsourcing.
Is data maintenance your core business? If it's not, hire an expert.
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A few competitors in this emerging marketplace already have gone public -- perhaps most notably StorageNetworks -- but "it is definitely early in the development," Hurley said.
But the space is rapidly becoming crowded, according to e-commerce analyst Richard Juarez of FleetBoston Robertson Stephens. He recently counted 21 storage service providers that have been funded but have not yet gone public. He added: "I've got to believe there are more companies on the drawing board."
To be sure, these SSPs have been caught in the dot.com downdraft. StorageNetworks (STOR: Research, Estimates), for instance, closed Wednesday at $37.88, down $7.88 on the day and far below its 52-week high of $154.25.
Progressing in a 'difficult market'
Still, other competitors are finding traction with investors. Privately held X-Drive Technologies Inc. closed a $50 million "D" round of financing earlier this month, despite what CEO Paul Gigg acknowledged was "a very difficult time in the market."
In its 1-1/2 years in existence, X-Drive has raised $120 million in four financing rounds. In this most recent funding, which Gigg called a "strategic round," the company won financial support from StorageNetworks, hardware maker Network Appliance (NTAP: Research, Estimates) and wireless data company Aether Systems (AETH: Research, Estimates).
"It's not just about money but also business relationships," Gigg said. He said the evolution of the wireless Internet could spur future growth for SSPs. "There's a very complementary fit between wireless devices on one side and online storage on the other."
He compared online data storage to money in the bank. Just as you can access your cash by writing a check, using an ATM card or making a fund transfer from your PC, so he envisions accessing your company data from a desktop computer, cell phone or Palm-type device.
Thus, sitting in a meeting, you could use your wireless phone to share a document or data file with a client on the fly, in real time, he said: "That's a powerful concept."
'Intelligent access to the data'
But that also means his firm must continually develop the client software to support a range of access devices. "It's not just storage," Gigg said. "It's intelligent access to the data and manipulation of the files."
Those added services will be vital to the ultimate winners in the SSP arena, said Juarez of Robertson Stephens. The looming flock of competitors raises the risk that storage itself will become a commodity, just as thousands of early ISPs led to brutal price-cutting for Web access, or the way that long-distance price competition has caused phone companies to seek ways to flee that market.
"People are willing to pay for additional services," Juarez added, and that is where the money will be made. He envisions data storage coming into its own as the fledgling market for electronic signatures evolves. Online contracting, with its associated archive and search, "is going to become the exciting part of the storage space."
In a market where contracts rely on a chain of e-mail messages, "effectively tagging, storing, archiving and ultimately retrieving" those agreements will be the key to untangling the inevitable disputes that will arise, Juarez said: "Contract enforcement and repudiation will ultimately drive the storage market." 
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