Is 2012 the Year File Servers Die?

A new Forrester Consulting study found that most (57 percent) IT managers at small and midsize businesses (SMBs) don’t accurately estimate the full cost of purchasing and maintaining a traditional file server.

Forrester reported that 51 percent of SMBs have a terabyte or more of data in file storage (including file servers); three percent have 100 TB or more. Forrester also reports that 43 percent say their data is growing at 11 percent or more each year (49 percent rate growth at 1 to 10 percent).

When it comes to storage, most SMBs (76 percent) use an on-premise file server. However, 28 percent of respondents say they frequently or occasionally use a software-as-a-service solution for storage, and 22 percent are either planning to use it within a year or are interested in doing so. To support collaboration, 87 percent use an on-premises file server, 40 percent use a hosted file server, and 17 percent use a cloud file server.

When Forrester asked participants for their overall estimate of their annual file server costs (including annualized purchase costs, labor, and maintenance), 51 percent said the costs were under $5,000 per year, and 12 percent said the costs exceeded $20,000 annually.

Forrester then asked respondents to consider

...annualized costs of hardware, software, and personnel time. For hardware, we prompted them to sum the annualized costs of server and storage hardware, redundant power, and networking gear. For software costs, we prompted them to consider the annualized cost of file server OS and software licenses, VPN software, security and firewall software, backup software, and maintenance contracts. For personnel costs, we prompted them to consider the annualized costs for an IT administrator to maintain and expand the file server and manage and support users, plus any use of consultants or systems integrators.

What a difference that made! The “under $5,000” estimate was reported by only 38 percent of participants, and 32 percent said their costs were $20,000 or more. In fact, 47 percent of respondents changed their estimates upward. Clearly, SMB IT managers don’t have accurate figures when they’re comparing costs of file servers to hosted or cloud solutions.

Forrester suggests that “cloud file services offer some or many of the features of an on-premises file server but charge per user per month rather than requiring lots of up front expense -- and often cost less per employee on an annualized basis.”

That’s music to the ears of Vineet Jain, the CEO and co-founder of survey sponsor Egnyte, a hybrid-cloud-storage solution provider. “The writing is on the wall, and we believe within two years, at least two-thirds, if not more, of the file servers that reach the end of their lifespans will go the way of the dinosaur.”

Of course, Jain is hardly impartial, given the solutions his company sells. Still, I believe he’s right about one thing: he expects that tightening budgets will force IT to more closely look at all costs, and that once that’s done, “IT will realize the true value and cost savings of a pure cloud or hybrid cloud approach, and will simply retire the traditional file server.”

In 2008, when Jain’s company launched its first product, traditional servers worked fine when all workers were in the same location, but they weren’t well suited for distributed file sharing. Egnyte’s focus was on hosted solutions, replacing the traditional physical file server while addressing multiple and remote device access.

Jain admits that at the time he didn’t see that “the cloud, by itself, would become such a big category,” but keep in mind that bandwidth was a significant issue.

Then, as now, Jain says he ran into resistance when trying to sell his solution: the perception by SMBs that they would lose control of their data, and compliance issues required local copies of some files. That led the company to develop a second product that worked with a cloud server and network-connected devices; it enabled IT administrative control and handled automatic synching along with file management tasks (preventing simultaneous file writes by two users) and security permissions. Because it used virtual file access, users could go home at night, click on a drive letter on their PC, and gain transparent access to corporate files.

Today the bulk of the SMBs Egnyte sells to buy the product as an alternative to, or to replace, actual physical file servers. In one installation Jain described to me, a company installed the Egnyte solution and a NAS device in a remote office without any IT support and was up and running in a few hours. That’s just not possible with a physical file server. Since this approach makes file sharing easy, it certainly reduces the need to use consumer-oriented (and unapproved) file storage services (such as Dropbox) for corporate files -- something a whopping 41 percent of Forrester survey respondents said occurred at their enterprise.

The cost advantage is dramatic, if what Jain claims is true. He says the company’s own study found that “traditional file servers typically cost five times more than Egnyte HybridCloud,” which is billed as a monthly fee.

That could certainly hasten the last days of on-premise file servers.

-- James E. Powell
Editorial Director, ESJ

Posted by Jim Powell on 11/03/2011