Although they don't have the flash associated with some client-facing technologies, storage technologies are just as important as their snazzy front-office counterparts.
Consider this: In late 2000, the University of California at Berkeley completed a study on the growth of digital information. There will be more information generated in the next 18 months than has been produced since the beginning of time, according to the study.
Obviously, the insurance industry will only be responsible for a portion of the data growth (although insurance company storage managers may feel differently as the terabytes pile up). But data storage managers across the industry are struggling to keep up with the exploding growth of all things digital, including e-mail, digital images and documents, Web traffic logs and more. To further complicate things, they have to manage this data with today's severe spending restrictions-meaning that finding solutions that are affordable and quickly deliver results is paramount.
"All companies, not just insurance companies, are exponentially increasing demands for storage," says Ken Steinhardt, director of technology analysis at EMC (Hopkinton, MA), one of the largest providers of storage hardware and software solutions.
Specifically in insurance, there is a large drive to remove paper from all parts of the insurance process. The move to a paperless policy, although the goal has not quite been reached, has all areas of an insurance company increasing their use of digital media. "People are using a lot of digital images of documents, photographs and X-rays," says Allen F. Yuhas, president and CEO at StoneFly Networks (San Diego), an IP storage area network (SAN) appliance provider. A SAN is a network of storage disks that connects multiple servers to a centralized pool of disk storage. "In many cases there are now digital images that are attached to electronic claims files," Yuhas says.
For instance, according to The Enterprise Storage Group, Inc. (ESG, Milford, MA), an independent storage analyst firm, a digital picture is worth about 18,000 words, given that the average digital picture at 750Kb consumes as much storage space as about 30 pages of text.
According to Peter Gerr, senior research analyst, ESG, the storage requirements for "reference information," such as digital images of documents and pictures, will far outpace the storage requirements for traditional data, such as database information, over the next few years. "Reference information is becoming an integral part of applications" such as CRM tools, business intelligence, supply-chain management and e-learning applications, he says.
In many cases, some of the customer-facing applications are slowed because of bad storage solutions on the back end, reports Richard Jhang, senior manager, network and infrastructure solutions, Cap Gemini Ernst & Young (New York). "We handle a lot of CRM and ERP projects," he says. "Many of these projects will fail without the necessary storage requirements."
At Los Angeles-based Farmers Insurance Group ($12 billion in assets) storage needs are growing rapidly. "We are growing at 15 to 20 percent a year in terms of data storage needs," reports Markus Nordlin, vice president of strategic projects. "We have to support our mission-critical applications, such as the auto and home processing systems, reporting systems and the newer Customer Restoration Network."
The CRN is Farmers' new claims management system, which centers around an integrated call center that links customers, agents and third-party vendors such as auto glass dealers and towing companies. "The Customer Restoration Network is completely paperless," Nordlin says. "Our imaging center stores everything electronically."
Farmers uses EMC storage technology for some of its storage needs, Nordlin says. "We like EMC because the technology has a unique hardware configuration," according to Nordlin. "We can pull data storage drives out of a frame in one data center, place the disks on a plane, and send them to another data center. That is a key feature for us."
But, unfortunately, as storage needs grow, IT budgets are shrinking. And although most insurance companies are allocating a larger percentage of their IT budget to storage needs, the growth in storage demand is far outpacing the growth of IT budgets, according to Richard Cox, chief analyst, storage, at Gartner (Stamford, CT). "Many companies are sacrificing some functionality because of cost," Cox says.
Luckily, storage costs are dropping sharply. One reason is increased competition. Also, newer and cheaper storage solutions that deliver functionality almost as good as the traditional fibre-channel, high-speed storage arrays are hitting the market , says ESG's Gerr.
"The cost per megabyte is dropping sharply and it appears that will continue," says Gerald Longoria, manager, storage, at Dell Corp. (Round Rock, TX).
Industry observers estimate that the cost can be as low as four to 12 cents per megabyte for high-end storage solutions, or fibre-channel solutions that provide high speed, high availability and increased performance. Fibre channel has been primarily used for transporting SCSI (pronounced scuzzy, short for Small Computer Systems Interface) traffic from servers to disk arrays.
Another reason why storage costs are dropping sharply is because of maturing lower-cost storage solutions, such as ATA hard disks, and storage over IP, or iSCSI (i-scuzzy). "We are seeing ATA storage options from vendors and although it doesn't offer the high performance, it is good for certain backups, and information that does not require high speeds," says CGE&Y's Jhang. "ATA storage can cost a half cent per megabyte."
However, there are concerns about ATA drive performance. "You are not going to use ATA drives where you need high performance, such as for a trading floor," says Gartner's Cox. "But for data that you need more available than on a tape, ATA will work."
Although there may be some slight performance drawbacks to ATA, not all applications need the high-cost storage devices. "Not everything requires high-speed devices," says StoneFly's Yuhas. The system that tracks FedEx packages gets probably three million hits a day, but most business is not like that."
According to ESG's Gerr, "the ATA drives have reached the point where they are almost as good as the higher-cost drives. The cost savings are so compelling that 2003 is definitely the year that ATA makes an impact," he says.
Also, iSCSIcommonly used along with ATA storagecan lower costs, as well. "Storage over IP has come out of the gate quickly because it can be deployed with confidence, people are familiar with IP," Gerr says. "Fibre channel SANs are also popular, but they require that the IT team learn a whole new technology. IP pipes have plenty of bandwidth for most storage needs."
Deciding between IP or fibre basically depends on the company's needs. "Some applications are good for IP and some are good for fibre channel," says EMC's Steinhardt. EMC offers Celerra Highroad, an application that can switch between fibre channel or IP "depending on the nature of the request," he says. "For a large request, it should probably be delivered over fibre."
Because of its affordability, iSCSI may grow faster in smaller companies. "iCSCI may hold a lot of promise for the small and mid-sized market," says Ron Lovell, storage practice leader, Greenwich Technology Partners (GTP, Greenwich, CT). "Many times fibre channel SANs are too expensive."
Cost and scalability are two reasons that Atlanta-based Southern Insurance Underwriters, Inc. (SIU), parent company of Century Casualty Co., a commercial line property and casualty company, decided to look for a lower-cost alternative to expensive fibre channel storage solutions. "We needed help with our imaging," says Robert Filipovich, information technology manager. SIU was reaching the limits of its CD jukebox and had 350 gigabytes of active images and 400 gigabytes of archived images. "We looked at fibre channel SANs, but they were way outside of our price range."
Filipovich contacted StoneFly and purchased StoneFly's Storage Concentrator, a product that helps SIU make efficient use of storage assets and simplify administration and network complexity, Filipovich says. "StoneFly connects directly to our network and manages the volume automatically," he says. "With iSCSI, StoneFly works with our current network. We didn't need to implement another network for traffic."
Also, as SIU grows, scaling up should not be a problem. "Because of the low cost point, we can add to the network as we need to," Filipovich says. "The only cost is the gigabit ports, which are much cheaper than fibre channel ports."
But for companies that already have massive amounts of storage, there is a trend to reduce costs and maximize usage by consolidating storage. "There was a storage buying frenzy two years ago," says ESG's Gerr. "Now they are trying to use all of the capacity that they have."
To date, according to most industry estimates, most companies have not managed their storage assets effectively. According to StoneFly's Yuhas, storage utilization averages about 22 percent of total capacity at many companies, yet many firms also face a perceived storage shortage. While some storage devices may be at 99 percent of capacity, other, sometimes forgotten about, servers run at one percent of capacity.
One of the first steps that many carriers are taking to make better use of their disparate storage capacities is to consolidate. "The industry average is about 40 to 50 percent of overall uses of storage," GTP's Lovell says. "Some large companies are at 20 percent."
In some cases, adds Lovell's colleague Stuart Tomlin, national practice director for systems and storage, "companies have to optimize their storage structure. In some cases they have appliances that they have not used for years," he says. "Since many budgets are frozen, they can manage costs with better utilization of their current assets."
Gartner's Cox adds, "A firm that has many storage assets may want to reduce it to one central storage asset that will offer reduced costs."
But simply consolidating storage assets does not automatically increase storage utilization. Luckily, there are new tools that are helping storage executives better manage their assets.
For starters, it's about management. A report from Forrester Research (Cambridge, MA), says that storage managers' biggest storage concern is not capacity, but rather management of storage.
"The market is shifting from hardware, such as the physical disks, to software that can help manage the information," says ESG's Gerr. "Now the market has shifted and the R&D dollars are going into software to manage storage."
The large hardware vendors, such as EMC, Hitachi (San Bruno, Ca) and IBM (Armonk, NY), are now offering many software solutions to assist in storage management. And, many software players, such as Storability (Southborough, MA), CreekPath (Longmont, CO) and InterSan Corp. (Scotts Valley, CA), are also offering storage management solutions, also known as automated resource management (ARM), adds Gerr.
"ARM solutions will allow companies to take action based on a user-defined event," according to Gerr. For instance, if a company's Oracle database hits 60 percent of storage capacity, it will automatically archive some of the older records."
Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio