A New Perspective on the Archiving Market
I joined Sonian in July of 2010. While I have been working in the technology industry for nearly ten years, I am a relative newbie in the archiving world, so I have spent the past month ramping up on the space. With the hope of helping other newbies get their footing, I summarize some of my initial observations below.
These notes are written from a vendor's perspective and are based on my research and conversations with coworkers, analysts, litigators, compliance personnel, and, most importantly, Sonian's customers and partners. Just as I benefited from each of their perspectives, I hope you benefit from mine, and I would love to hear yours.
In terms of revenue, industry analysts seem to be honing in on a total email archiving market size between $1B and $2.5B for 2010, expanding to be as large as $5B by 2014. For reference, this is about 25% larger than the much-hyped managed security services market and nearly twice the size of the identity management market. Conservatively, we estimate that there are at least twenty million archiving users today, and that there will be more than one hundred million by 2014. Incredibly, one hundred million archiving users would still represent a mere ten percent of the one billion corporate mailboxes projected to be in existence in 2014.
Growth in the email archiving market is fueled by a number of drivers, including regulatory compliance (FINRA, HIPAA, FRCP, SOX, etc.), litigation support (where organizations turn to digital archives to make the discovery process more efficient), and storage management (where we use archives as a way to offload seldom-accessed data to inexpensive storage). These are all becoming more significant over time--more regulations, more litigation, and more data. Accordingly, customers looking for archiving solutions will have no shortage of options. In fact, a Google search for "Email Archiving" returns over 800,000 results, including listings from global technology providers such as IBM and HP, hosting providers such as Rackspace and BlueTie, and, of course, archiving service providers such as Sonian.
Evolving Delivery Models
While other models exist (including hybrid, appliance-based, etc.), most popular archiving offerings fall in one of the following categories:
Legacy "On Premise" Archiving
Under the legacy archiving model, customers physically install, configure, and operate archiving systems within their corporate data centers. This model provides customers with physical control of their archived data. Many of these offerings are also very mature and boast the vast feature sets that are required to meet the stringent demands and internal policies of the world's largest enterprises. The up-front costs for on-premise archiving are high, requiring investments in hardware, software, and storage as well as ongoing operations and support.
In the hosted model, archiving systems are physically located within vendor data centers and accessed by customers via the web. Customers are not required to install or operate hardware, software, or storage directly, so this model is generally less costly and complex for customers than legacy on-premise systems. Unfortunately, the burden of managing complex infrastructure is shifted from customers to archiving vendors. While the vendors benefit from some economies of scale (by managing hundreds or thousands of customers at a time), they have to price high enough to offset capital-intensive operating models, and infrastructure management complexity can impede focus, innovation, and flexibility. The lack of physical control over the archiving systems is an area of concern for some customers. Leading hosted offerings boast rich feature sets and security controls to comply with key regulatory requirements.
Cloud-powered archiving services represent a dramatic departure from traditional hosted models in that they were built from the ground-up to take advantage of the unique capabilities enabled by cloud computing technologies such as Amazon EC2 and S3. Under this model, as with the hosted model, archiving is delivered as a service. Customers typically pay a low per-user fee per month and are not required to install or operate on-premise archiving infrastructure. Unlike first-generation archiving vendors, however, cloud-powered archiving vendors are not constrained by physical infrastructure--opting instead to tap into networking, storage, and compute power on-demand from external cloud computing providers. This enables archiving vendors (and their customers) to benefit from the scale and elasticity of the cloud--most often in the form of improved performance, dramatically lower prices, and fewer restrictions (i.e. unlimited storage). Vendors of cloud-powered archiving services also argue that offloading the burden of managing physical infrastructure enables them to focus their efforts on high-value innovations.
Two roads diverged in a wood...
Most analysts and archiving providers seem to believe that the archive of the future will be integrated--but there are different perspectives on the type of integration that will occur. One perspective is that archiving will be absorbed into the email ecosystem (alongside hosting, security, ant-spam, etc.) for customers to purchase as part of a bundle of "email management" services from vendors that specialize in this area. We can see the parallels between this line of thinking, Google’s acquisition of Postini in 2007 and, more recently, Microsoft's decision to launch Exchange 2010 "native" archiving.
Conversely, those with a data-centric view of the world tend to believe that customers will look to best-of-breed archiving providers to integrate various data types, including email, files, instant messages, and social media to form a single information archive. Gartner refers to this model as "Enterprise Information Archiving" (EIA) and went so far as to retire email archiving as a distinct segment earlier this year.
Delivery models, integration, and the future
This is not a one-size-fits-all market, and we expect that various archiving models will coexist for the foreseeable future. Legacy on-premise providers control the lion's share of the installed base today and are deeply entrenched in large enterprise accounts. However, analysts and anecdotal evidence suggest that the popularity of this model is waning--particularly as SaaS offerings gain broad acceptance and feature parity. Accordingly, the traditional "hosted" model is gaining momentum today, but vendors in this space will be challenged to achieve the massive scale and innovation required to compete against low-cost entrants that leverage cloud computing infrastructure to deliver improved performance at a lower cost. Finally, upstart cloud-powered providers have an inherent advantage along the cost and focus dimensions but face the challenge of getting noticed in a very crowded room.
From an integration perspective, it is far from certain that either the "email management" or the "integrated information archive" model will dominate in the end. Many customers see value in procuring their email services from a single vendor, and will continue to do so provided that the archiving and discovery conversation continues to revolve around email. On the other hand, the growing popularity of social media and instant messaging for business communications (and the compliance implications of the same) tends to support the notion that these data types need to be put on equal footing with email for archiving, retention, and retrieval. The integrated archive would be a logical way to achieve this, and it also aligns more directly with trends in enterprise search, eDiscovery, analytics, and reporting based on user-generated data.
Well, that’s my take after 30 days on the job. The only thing that is clear to me thus far is that the future is far from certain in the space, and that Sonian and its partners have a great opportunity to shape that future. I would certainly welcome your thoughts and feedback—let’s compare notes!
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