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Once the next big thing, storage service providers fell hard when it turned out that few businesses wanted to buy storage capacity as a service. But some are surviving by offering automated backup-and-recovery services, which have proven more popular with business-technology managers.

George Ho, technology manager at ClaringtonFunds Inc., a mutual fund company, turned to EVault Inc. to shorten a lengthy backup-and-recovery process and eliminate stacks of tapes and tape drives. "The process was taking up too many resources," he says. ClaringtonFunds pays EVault $40 per compressed gigabyte of backed-up data.

Dave Hersom, chief technology officer at eReinsure.com Inc., which provides technology systems to insurance companies, handed over its Veritas NetBackup system to Arsenal Digital Solutions Worldwide Inc. four months ago. Arsenal backs up eReinsure's data and makes it available online when files need to be recovered and restored. "So far, Arsenal is solid as a rock," Hersom says.

Backup-and-recovery service providers are appealing to businesses because "their facilities are cheap, they're wringing human cost out of service delivery, they've established repeatable services and automated processes, and they provide a portal and branding for customers to order more and to monitor service levels," Gartner analyst Adam Couture says.

They also provide better services than many businesses can afford to provide on their own. "We get real-time backup of the data down to the minute, versus last night," says Kevin Milroy, president at BayRisk Insurance Brokers Inc., which uses a service from LiveVault Corp. Using an online backup service eliminates the need to save tapes in an off-site location. BayRisk is paying $2,000 for one server for a year.

A fourth backup-and-recovery provider, Managed Storage International Inc., specializes in tape storage. MSI was spun off from Storage Technology Corp. three years ago and works with voice and data carriers to provide backup-and-recovery services as part of a larger deal. "We automate the backup-and-recovery operation and spend 30% to 50% less than the customer would," CTO Walt Hinton says.

Analysts say the market for automated backup-and-recovery services is young and growing, but they can't provide market size figures. Vendors say business is good. EVault's business has tripled in the past year, says Phil Gilmour, president and chief operating officer. Customers love the simplicity of the service, he says. EVault stores backed-up data in one of five storage vaults it has around the country. "At recovery, an administrator clicks on a file and sends it where it's needed," he says.

Arsenal, EVault, LiveVault, and MSI are all doing well, Gartner's Couture says. In contrast, many storage service providers such as Storage Networking, Storage Way, and SANRise got out of the business after they used up all of their cash to buy tons of storage hardware and didn't find customers.

New laws and regulations that require companies and government agencies to archive more records for longer periods of time should help backup-and-recovery service providers, but they're unlikely to grow into giant companies, Couture says. "These are survivors, and they have a strategy to stay in business," he says. "But they're not on the road to the Fortune 500."