As banks pump up the volume of information they keep on customers, the once simple matter of storing data is getting unwieldy.
Forrester Research of Cambridge, Mass., predicts that companies will increase their on-line storage capacities by a factor of 10 in the next five years, on average. As a result, storage and administration will account for 17% of computing system budgets by 2003, up from 4% currently, Forrester says.
To control this information glut, more banks are turning to outside vendors to meet one-time storage needs as well as continuing demands, observers say.
"Financial institutions are using storage outsourcing as a complement to tasks, such as creating a data warehouse or updating once a week," said David G. Hill, research director for storage and storage management at Aberdeen Group in Boston.
"It is easier to just go outside and rent rather than replace your existing system," Mr. Hill said. "You aren't necessarily outsourcing everything, but some requirements."
John Webster, an analyst and information technology adviser at Illuminata Inc., a market research firm in Nashua, N.H., said information management is especially tough for banks with a Web presence.
"The requirement for storage grows once you get your Web site up and particularly if you do commerce over the Internet," Mr. Webster said. "Banks want to save the information they are gathering, and that generates demand for storage very quickly."
A year-and-a-half-old company, StorageNetworks Inc. of Waltham, Mass., is gaining momentum as a provider of "pay-as-you-go" storage services. It just hired Mike Tardif away from Goldman Sachs Group Inc. to be its senior vice president of technology and engineering. Mr. Tardif was Goldman's vice president of information technology infrastructure.
Instead of building their own data centers, financial institutions' "next storage purchase will become a simple expense that can go up or down, instead of a large capital purchase," Mr. Tardif said.
StorageNetworks offers zero data loss, backup and restorability, and data on demand to financial institutions and other clients.
"It's like turning the dial for more heat," said Nicole Gorman, director of marketing communications at StorageNetworks, which charges for every terabyte, or 1,000 gigabytes, used. A terabyte is the equivalent of 60,000 file cabinets filled with paper, Ms. Gorman said.
StorageNetworks has "a good concept, and they execute it well," said Mr. Hill of Aberdeen Group.