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The Business Case for Storage Networks

  • Sample Chapter is provided courtesy of Cisco Press.
  • Date: Nov 18, 2004.

Chapter Description

This chapter covers the copious non-technical reasons for preferring storage networks, from the legal implications of Sarbanes-Oxley to the economy of scale created by their usage. Discover the other advantages storage networks could provide to your business within.

The Impact of Legislation on IT

Several new regulations and acts of legislation will likely increase the corporate data growth rate and will most assuredly change the way companies manage storage resources.

As the following examples indicate, the standard operating procedures of business are changing, and the impact of these changes on financial services and healthcare business systems will be significant, particularly on downstream functions of the storage value chain (offsite data storage, storage-related professional services, and so on).

Regulation Fair Disclosure

When the bull market of the late 1990s was capped off with the NASDAQ crash and the deflation of the Internet bubble, a sobering and humbling string of corporate scandals surfaced just in time to keep the bad news flowing. With the passage of Regulation Fair Disclosure in 2000, the SEC instituted, at least on paper, the first in a long series of efforts designed to limit the ability of the firm and its management to run amok.

In this particular case, "Reg. FD," as it came to be known, outlined a process for limiting publicly traded companies' exposure to the likelihood of insider training. Although Reg. FD forced companies to make the same quality of data available to both analysts and the public simultaneously, authorities did not seek to actively prosecute violators until mid-2001 when cease-and-desist actions were levied against several companies for both intentional and unintentional violations of the regulation. Of course, these actions were obscured a short time later by the activities surrounding the MCI-WorldCom and Enron scandals.


To provide stringent guidelines for corporate governance and in direct response to the debacles at MCI-WorldCom and Enron, the United States Congress passed the Sarbanes-Oxley Act in the summer of 2002. In addition to requiring senior corporate officers to certify financial reports (section 302), blocking personal loans to executive personnel (section 402), and forcing the documentation of internal processes and controls (section 404), the Sarbanes-Oxley Act has potentially far-reaching ramifications to the way companies manage data.

One section of the law—section 409—has the potential to cause significant disruption in current data management policies. In particular, section 409 requires enabling real-time disclosure of pertinent financial data. The impact of this legislation on businesses is such that requirements for storage capacity are likely to increase. Interest in content-addressed storage (CAS) has already increased primarily because of its capability to provide easy access to archived data based on key words and content-specific retention requirements. Compliance with Sarbanes-Oxley will increase sales of networked storage and CAS devices in the near-term.

Health Insurance Portability and Accountability Act of 1996

In addition to Sarbanes-Oxley, the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which serves to make available to every patient in the United States his or her own medical records ("Protected Health Information"), creates a standard interface for the transfer of medical data to ensure privacy and security. HIPAA also establishes measures of accountability in the healthcare industry. Not only does HIPAA complicate backup and retention procedures, however, but it also increases storage consumption rates. As the compliance dates approach, and even the smallest healthcare offices are required to demonstrate some disaster contingency capabilities, storage sales will increase.


It is difficult to imagine the amount of data comprising the "Protected Health Information" of every prescription, dental, and medical record of every U.S. citizen. HIPAA requires healthcare providers to keep multiple copies of and lengthen the retention periods for every billing and medical record for every person receiving healthcare services in the United States. That's a lot of data!

Numerous other updated regulations, as well as the aggressive enforcement of laws already on the books, will cause even more headaches for storage consumers while serving to buffer disk manufacturers from a more precipitous drop in revenues.

Title 21

The Title 21 Code of Federal Regulations (21 CFR Part 11), which was issued by the U.S. Food and Drug Administration and announced in August, 2002, promises to streamline the current process for the manufacturing of pharmaceutical products. At the same time, however, Title 21 mandates extension of periods for record-retention. In all likelihood, Title 21 will cause wrinkles in data management programs in most pharmaceutical companies and potentially increase sales of disk devices over time.

Securities and Exchange Commission

Also in August, 2002, the Securities Exchange Commission, together with the Board of Governors of the U.S. Federal Reserve and the Office of the Comptroller of the Currency, issued a request for comments on a draft of a white paper outlining "sound practices" designed to strengthen the infrastructure of the U.S. financial markets.

As a review of lessons learned from the September 11 attacks, the document outlines the lack of controls and processes required to increase business continuance capabilities. The document highlights the need for "rapid recovery and timely resumption" of "critical operations" in the event of catastrophic loss of local or regional disruption, particularly with regard to "core clearing and settlement" organizations whose outages present a "systemic risk" to the stability of the market as a whole.22

The "sound practices" outlined in the document specify the need for identification of critical services and the testing of recovery systems in as timely and as cost-effectively a manner as possible. Most significant in the document is the recommendation that companies providing core financial services implement backup strategies so that time-to-recover and distance functions extend well beyond the capabilities provided by current solutions. The draft of the white paper suggests distances of 200–300 miles for "out-of-region" backup facilities and recovery time objectives of typically same-day at a minimum, if not within a few hours.23

In April, 2003, the interagency group published the white paper and a summary of comments received. Although it is obvious that there is rigorous debate about what constitutes achievable recovery objectives and realistic distance requirements, based on cost-benefit analyses and the technical capabilities of solutions currently available on the market, one thing is clear: The writing is on the wall. The SEC suggests that organizations that perform "core clearing and settlement functions" continue to work toward having these "sound practices" implemented as soon as the end of 2004, and companies that "play significant roles" (those companies who settle or clear five percent or more of the market) should have similar guidelines implemented within three years of the release of the paper.24

In December, 2002, the New York Stock Exchange (NYSE), the National Association of Securities Dealers (NASD), and the SEC, in a joint legal action, levied a total of $8,250,000 in fines against five broker-dealers (Salomon Smith Barney Inc., U.S. Bancorp Piper Jaffray Inc., Goldman, Sachs and Company, Morgan Stanley & Co. Inc, and Deutsche Bank Securities Inc.) for failure to keep communications, in this case electronic mail, in an "accessible place" for the two years stipulated by SEC Rule 17a-4 of the 1934 Securities Exchange Act. 25

Without a doubt, governmental and corporate IT centers find that living with disaster recovery policies and becoming or remaining compliant with current and updated legislation requires a cohesive storage vision to avoid runaway costs and a management nightmare comprised of expensive and poorly utilized storage. Current and future legislation is also in a position to further decrease storage utilization, thereby increasing the storage TCO for many consumers. The following section explains the impact of poor utilization.

6. Utilization and Yield | Next Section Previous Section

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