"What’s ahead in 2008: Fixed fee model will shift to incorporate varying types of data."
Eran Farajun, Asigra
I believe 2008 will see the pricing models of managed service providers (MSPs) change to incorporate new demands for costs to reflect data classification.

Following recent estimates of the demand for storage capacity at a record high for organizations of all sizes, companies are beginning to express concern about the increasing costs of the growing mountain of data they are required to back up and store. They are beginning to realize that the majority of the data they keep in storage will never have to be recovered again. However, businesses are now aware of the legal ramifications of deleting data and the need to retain certain types of data over certain periods of time. So, they resolve to save the data but need to find a way of reducing the costs. One way in which cost cuts can be made is to assign different values to different types of data and different ages of data kept in storage. Data that is over one year old, for instance, could be automatically reduced in price after it has been in storage for twelve months. Therefore, rather than the customer panicking about the mounting costs and deleting the data from storage, risking financial penalties if the data needs to be retrieved for legal reasons at some point in time, the data is kept in storage but the cost decreases over time as the likelihood of the need to retrieve the data reduces.

After listening to customer demands, I believe software vendors will start to develop the technology to allow MSPs and resellers to charge different amounts of money for different types of data, which looks set to shake up the prevalent fixed fee model. Customers want to pay less for less important data and less for older data in order to curb the mounting costs of their data storage requirements. One way is for the service providers to separate the critical data from the less critical data and charge different prices for the different types of data. Transaction data, for example, could be priced highly, as it is critical data, whereas files that haven’t been changed for a while could be automatically re-classified after a month or so to be ‘less critical’ data and therefore priced in a lower bracket. Customer database, client file data and email data could follow this re-classification process and decrease in value over time. As personal file data has the lowest critical status, its value could start relatively low and quickly decrease over time.

So, inevitably, the value of the data would decline over time and evolve from being “critical” (information that is essential for a company’s day to day operations) to “important” (data that still needs protecting, but is now historical data that would be needed more for reference than as part of the current business operations). For instance, a business would be less likely to need to retrieve an email generated a year ago than they would to retrieve an email that was created in the last week, which they could have deleted by accident but which they now need. Therefore, the MSP is able to reduce the cost of storing data they know they are rarely going to need to retrieve with some confidence, and can pass on these cost savings to the client.



However, the one caveat emptor is that if in the event of a legal discovery a company’s IT manager has to find and obtain a file, even after many years, then its relative value immediately increases, because if the data cannot be found, there may be legal implications, which would make that one piece of data suddenly very valuable to the customer. By law, for instance, some companies are obliged to store email data for up to seven years, so this data must be kept in storage otherwise they will face prosecution.

This is a situation that an MSP would need to consider when deciding whether to differentiate its pricing model, but I believe it is one that should be taken meet customer requirements, to ensure they comply with the data compliance regulations and save the data, rather than delete it from storage after a year because they don’t want to pay the high costs. In this way, even after several years, the data can still be recovered, having been stored at a lower cost for a number of years before being needed again. Furthermore, if the price remains high in storage and the customer decides to delete from storage all data that is over two years old for instance, the MSP loses income from all of the data that has been deleted. However, by conceding a little and reducing the cost of certain data types and generations, the MSP still profits from the stored data, which alludes to a ‘something is better than nothing’ argument.

All in all, 2008 looks to be a year when MSPs may be forced to change their fixed fee models in order to prevent a mass deletion of stored data by customers. I would advise MSPs to differentiate their pricing by application type - from email data to personal file data – and by age, in order to keep up with customer demand for the pricing to reflect the critical or non-critical status of their data.