Is anyone out there just a plain old I-S-P anymore? Doubt it. There are so many permutations and combinations ending in SP, it's getting hard to pigeonhole Internet companies. Drat.

by Gerry Blackwell [April 13, 2001]

And now here comes the latest hot SP thing, Storage Service Providers. SSPs are analogous to ASPs—they provide customers an alternative to buying their own computing infrastructure and managing it themselves.

Most SSPs offer capacity in huge Redundant Array of Independent Disks (RAID) farms and primarily target enterprises with big, mainly Internet-related, storage needs. Using an SSP saves customers capital and management costs.

IDC believes that if SSPs play their cards right they'll see spending on storage services explode at a compound annual growth rate of 139 per cent between now and 2005—to just under $11 billion per annum.

Is there an angle here for traditional ISPs?

Perhaps not in the mainstream, but 1Vision Software Inc. of Loveland CO, which has a rather unique take on the SSP model, believes there is a niche play.

Distributive business
In fact, the firm's 1Disk product/service was designed with the idea that ISPs would be its primary distributors. "What we're offering is a full storage management solution that will enable an ISP to be a storage service provider for its customers," explains 1Vision president and CEO Dave Howard.

The company plans to initially go after the estimated 1,500 North American ISPs that have 500 or more business customers and 10-megabit-or-faster Internet connections.

Prime target end customers are small-medium enterprises with distributed work groups that need to be able to share files in real time and work on them collaboratively.

Customers will pay anywhere from $10 to $30 per 100MB of Internet storage per month, depending on the ancillary services they require, such as backup and mirroring—and the margins ISP distributors take.

With the 1Vision client software loaded on their Windows PCs, the 1Disk online capacity will show up as a password-protected network drive in Windows Explorer. It can also be accessed using a browser from any computer with access to the Net.

1Disk provides standard Windows-style file integrity safeguards. The capacity can be segmented, with each part separately password protected, and data can optionally be encrypted end-to-end.

1Vision sees the service as an easier alternative to FTP for non-techies and a more flexible alternative to simplified online FTP-for-dummies services from xDrive Technologies and Driveway Corp. With FTP you can only download files, not work on them collaboratively in real time, notes 1Vision consultant Bruce Huibregtse.

1Disk is also a cheaper alternative to setting up a virtual private network (VPN). "We're bringing that VPN class of capability—true server-style computing—to the masses via the Internet," Huibregtse says.

On the other hand, at the simplest level, customers could just use the 1Disk capacity for reliable off-site backups.

"You can do this in lieu of tape backups," says Howard. "Just by using the drive-letter access—shoot a copy of the file to [the 1Disk drive] and you have another secure copy. It's off site, which you want, and there's no backup or restore process to go through. It's just there, instantly, when you need it."

ISPs are the linchpin in 1Vision's business plan. "They already have the customer relationships, the customers have the high-speed connections with them," Huibregtse says. "And ISPs are highly motivated to try and grow revenues. ISPs have told us this is what they want to do."

Plan A
Under one business model the company is trying out now with two beta ISP distributors, 1Vision installs server, RAID and software and gives the ISP 40 per cent of service revenues.

But 1Vision says it believes when it begins marketing the service in earnest in a few months, ISPs will balk at this arrangement.

"Once we've demonstrated it works," says vice president of sales and marketing Kelsey Kennedy, "the typical reaction is going to be, 'No, no, get out of my pocket. Just tell me what it costs and I'll do it myself.'"

Plan B
Under a second model that 1Vision expects to become the dominant one, the ISP will buy server, RAID—or some other storage subsystem—and a 1Disk software license. 1Vision will provide installation and support services.

The company estimates the amortized cost of this infrastructure will eat up only about 20 percent of annual service revenues.

1Vision has yet to set a price for the software license, but it will probably be a sliding scale based on the number of users, the amount of storage online and possibly traffic.

But the notion that ISPs will actually prefer to sink capital into an unproved new service may be wishful thinking on 1Vision's part. At a time when funding is tight, we're guessing few ISPs will want to bear the capital costs.

In fact, one of the company's beta partners, Front Range Internet Inc., a northern Colorado ISP, makes it clear it will only participate if it's on a revenue sharing basis.

"They wouldn't get my business if that was the only way they wanted to do it," says Front Range director of business operations Barry Eastman.

"This [the 1Disk service] is not part of our primary business model. I will not be as active in pursuing clients for it as I am for methods of access. We've got to be able to [make] something like this [profitable] in a few months."

1Vision hastens to add that it's willing to go with revenue share if that's what ISPs want.

"If it turned out the revenue-sharing model were best, that's the one we'd stay with," says Kennedy.

Subsequent pro's and con's
Huibregtse maintains that ISPs generally find revenue sharing "a pain in the ass" because it involves additional accounting overhead and layers of complexity. Also it would involve ISPs writing checks to 1Vision for its share of monthly service revenues "which, they won't like," he says.

For its part, 1Vision claims to be "agnostic" about the revenue model. There are pros and cons to revenue sharing from its point of view too, Huibregtse notes—on the one hand additional accounting, on the other regular monthly income like an annuity.

He somewhat ingenuously fails to mention the drain on 1Vision's capital budget on the con side.

Eastman, while noting he doesn't expect "a flood" of customers for the 1Disk service, does see signing up 30 to 40 a month initially from the company's base of 4,000 or so business customers.

Under the current revenue sharing plan, each would generate $4 to $40 in revenue a month. "That's not too bad," he concedes.

1Vision meanwhile is hoping to attract four to six more beta ISP partners over the next couple of months to give it broader experience and exposure. Then it will launch the product commercially.

Could 1Vision turn you into a profit-making SSP? Maybe. But we're betting your willingness to bet on it will depend very much on how willing—and able—1Vision is to cover initial capital costs.

— End