HIPAA Compliance is Target in StorageTek-Deloitte Partnership

Storage Technology Corp. and Deloitte Consulting LLP yesterday announced a joint consulting service aimed at organizations looking to comply with the data storage and archival requirements of regulations such as Sarbanes-Oxley, governing U.S. public companies, and HIPAA (Health Insurance Portability and Accountability Act) for health care organizations.

StorageTek is due to be acquired by
Sun Microsystems Inc. The deal is expected to close Wednesday, assuming the storage company's shareholders vote to approve the move Tuesday.

"We expect to see large deals out of this [Deloitte relationship]," says Scott Shippee, StorageTek director of professional services, North America. "Sun is very interested in it, it's a significant differentiator. It's a good way to start the new Sun/StorageTek."

Lee Dittmar, leader of Deloitte Consulting's enterprise governance practice, added, "Stay tuned. There's a bigger strategy here," once Sun's acquisition of StorageTek is completed.

"It's brilliant for StorageTek and Deloitte all by themselves," wrote Steve Duplessie, founder and senior analyst of
The Enterprise Strategy Group Inc., in an e-mail comment. "It is even better when you toss Sun into the mix. Sun will be able to hook right into their success -- those customers buy lots of servers, storage and services."

StorageTek and Deloitte will offer the compliance consulting service through the storage company's newly unveiled Intelligent Archiving and Compliance Assessment (IACA) service, also officially announced Monday. The service, an expanded version of StorageTek's existing Business Value Assessment service, will be available to customers in the U.S. and Canada in the fourth quarter of this year, according to StorageTek's Shippee.

IACA comes in three modules or levels of service -- discovery, architecture review and optimization -- each level generating recommendations for customers on better managing their storage environments and complying with both privacy and government requirements.

"Deloitte is the market leader in compliance," Shippee says. "We're merging their expertise with our expertise in storage infrastructure." The deal between the two companies is non-exclusive and the initial contract runs for 26 months following the signing of the agreement on Aug. 22. There will be a single integrated consulting team made up of a total of 50 staff drawn from both Deloitte and StorageTek, according to Shippee.

The partnership between Deloitte and StorageTek is the first of its kind in the market, according to Dianne McAdam, senior analyst and partner with the
Data Mobility Group LLC. "I'm not aware of any other vendor agreement," she says. McAdam expects the storage company's competitors to set up similar deals shortly.

"This deal allows StorageTek to get in and talk to people they've not been able to before," McAdam says. She pointed out that many company executives tasked with compliance issues operate outside the data centers where StorageTek typically does business. The storage company may well see some "hardware drag" with the service, since organizations may look to re-architect their archive systems as part of complying with regulations and corporations may well have money earmarked for compliance issues to facilitate such purchases, McAdam added.

"Storage management has been highly reactive," Deloitte's Dittmar said. "We don't have any clients telling us, 'I've got my arms around it.' It's mostly about people building bigger basements and throwing more stuff in them. I couldn't give you one company that's really doing it right. It's going to be a very large business."

There are many issues to deal with in terms of how best to manage the entire process of data creation through to its destruction or permanent retention and how to ensure all the stages comply with regulations, according to Dittmar. "It's a very complicated problem and very pervasive," he said. "One of our clients said their storage strategy was 'Iron Mountain,'" Dittmar said. "I asked, 'How do you decide what to ship there and when?' They answered, 'When we run out of room, we ship it to Iron Mountain.'"

The joint Deloitte/StorageTek service will be modeled in tiers, with several price points -- US$500,000 to $750,000, $1 million to $1.5 million and $1.5 million-plus deals -- according to StorageTek's Shippee.

StorageTek previously worked with smaller boutique consulting partners with expertise in compliance, notably
Contoural Inc. and Kasten Chase Applied Research Ltd., Shippee said. He doesn't believe the tie-up with Deloitte will significantly impact those relationships, since StorageTek will continue to partner with its smaller existing partners for engagements with small to midsize businesses. "There'll be some honest disappointment there, but they'll still get a lot of business," he said.

"There's a huge market in the midrange," said analyst McAdam. Even companies not regulated under U.S. Securities and Exchange Commission (SEC) or HIPAA regulations are having to archive all their e-mails because of the potential threat of litigation, she explained. "They're struggling with what to save and what to throw out, that's what Contoural specializes in and where the fit will be," McAdam added. StorageTek's deal with Deloitte "won't hurt them that much."

In terms of where the cut-off point comes between whether customers partner with StorageTek/Deloitte or StorageTek and the boutique companies, StorageTek's Shippee said, "We'll look at customers on a case-by-case basis."
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