Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
Data storage is a strategy, not a technology. Here’s how retailers can think about the strategy without getting bogged down in the technology.
It seems like a dry area-data storage. But it’s crucial to retailers’ operations, and lacking a well thought-through strategy it’s an area where costs can spiral out of control without anyone even noticing what’s happening. “Utilization of storage systems is often 50% or less,” says Phil Goodwin, senior program director and specialist in storage technology for research and analysis firm Meta Group. “In a lot of cases, storage efficiency is so low, clients don’t have tools to determine what their storage growth requirements are. So to avoid problems, they buy far more than they need.”
Because not all stored data are the same, data storage is not just a technology, it’s a strategy, particularly in a data- and time-sensitive industry like retail. But determining which data to store where in the most cost-efficient manner continues to elude companies. Some retailers stick with a single-tier storage system for all types of data, an option that often results in wasteful use of storage infrastructure. Even worse, such an approach makes critical data that retailers could use to make split-second decisions inaccessible. “Because today’s retail environment is highly competitive, there are greater response-time issues for access to information and the time to react to demand has been reduced,” says Gene Alvarez, retail industry analyst and vice president of technology research services at Meta Group.
But even as many companies have not determined the best ways to use data storage systems, demand for data storage is surging. “Demand is growing at a 50-55% compound annual rate,” Goodwin says, adding: “Average storage expenses today consume 12-15% of information technology budgets, but we expect that to increase to 15-18% by 2006 or ‘07.”
Aberdeen Group estimates that the data storage market, covering total investments in data storage systems, will grow more than 40% in three years to more than $100 billion in 2005 from less than $70 billion in 2002.
Some retailers with sufficient awareness of data storage issues maintain separate sets of storage systems for different data categories-maintaining a faster storage-and-retrieval system for POS data, for instance, than for information on customer loyalty programs. As competition in the retail industry forces merchants to be more responsive with data-for example, to check a customer’s purchasing activity to recommend additional sales-they’ve come to rely more on multi-tiered storage systems that cache the most critical customer-serving data close at hand for speedy storage and retrieval. “It’s become more crucial to cache your most critical data on your higher-end storage servers,” Goodwin says.
The results of an effective data storage strategy can significantly reduce operating costs while improving a retailer’s ability to compete with information that enhances the customer’s buying experience, experts say.
At German grocer Edeka, direct queries to its data warehouse are 50% faster under a new configuration that includes multiple levels of storage from IBM Corp. “That allows us to forecast demand growth and suggest corrective measures in the event of a sudden surge in returned goods, for example,” says Sven Hohmann, Edeka’s manager of data warehouse solutions. Edeka uses IBM’s iSeries data back-up system with IBM’s TotalStorage Enterprise Storage Server for high-end POS and inventory data. “Retailers need to know when something has happened to demand, either up or down the supply chain, and they need to pass that information to their supply chains,” Alvarez says.
And the first retailer to access and process that kind of information is most likely to win out with increased sales and improved customer service. “If business is ratcheting up, for instance, merchants need to quickly buy more goods,” Alvarez says.
The Internet plays an important role in making data storage systems more effective by providing broad-based access to stored data via web browsers, experts say. “I see more and more web-based systems,” Goodwin says. “It’s becoming a de facto standard to have a web-based storage system, because if a storage system is geographically dispersed, it can be controlled from a central point with web browsers. The web improves accessibility for users. Even though storage may be dispersed over an enterprise, it can be controlled from a central point.”
One of the biggest changes in data storage has been the realization that the strategy that works for one retailer will not necessarily work for all others-even any others. “In the past, most major retailers took a one-size-fits-all strategy to storage,” says Ken Steinhardt, director of technology analysis for data storage systems provider EMC Corp. And to assure that all data had sufficient storage capacity and server performance and reliability, companies would often over-invest in high-level storage technology, he adds. “Almost everything was stored on the highest class of storage, offering the highest performance, availability and functionality-but also the highest price,” he says.
Matching tech and data
Retailers today need to better match their data-storing needs with technology, adds Goodwin. “They don’t have a systematic methodology for matching service level requirements with storage infrastructure,” he says. “So in many cases there is room for improvement. A lot of organizations on a one-tier system could be spending more on storage infrastructure than they really need to.”
For example, he says, data that don’t need to be accessed quickly can be stored in lower-priced systems with the same level of data integrity as more expensive versions. “You can get similar reliability in lower-end systems, not the same performance in terms of speed, but the same reliability in terms of redundancy of data,” Goodwin says.
Furthermore, better understanding of data storage needs can result in such compelling cost savings that a retailer would be well served to invest the effort in breaking down its storage needs and deciding the time-sensitivity and importance of all its data elements. “I don’t see any reason for retailers to hold off at this point,” Goodwin adds. “Going to a 2-tier data storage model can save 75% on hardware and software costs, and going to a 3-tier model can save 21%.”
The three categories