Storage has never been cheap. Today, the price is increasing, not because of the cost of hardware or software, but because of the people factor. "It's going up because of the third-party vendors providing support," says Steve Varin, a business analyst in the office of the CIO at Bell Canada Enterprise. Companies get locked into long-term agreements with storage-management vendors, then realize in a few years that they could be paying less, Varin says.

Only 20% of storage costs come from the hardware purchase itself, according to IT advisory firm Gartner. Most of the rest is swallowed up by backup and recovery (30%), downtime (20%), and administration (13%). The price of a storage disk has dropped to bargain-basement levels of a few cents per megabyte, but other costs remain unchanged or are rising.

In Bell Canada's case, that's meant a new focus on bringing the cost of administration tools under control. The Montreal company was running a 43-server, 17-terabyte system that was regularly hitting full capacity and going down. Using Precise-WQuinn's Storage Central SRM, the company sifted out garbage data, including users' personal files containing MP3s and videos, and reclaimed 3 terabytes of space. That's an estimated savings of more than $100,000.

The storage resource-management software also sets and enforces storage policies, reserving space for business data. Bell Canada is required by law to store contracts and phone-calling records for seven years, but it almost never accesses the documents. The management software makes sure they're written onto less-expensive tape that can be stored off-site.

People also are the most expensive part of the storage equation for Alloy Inc., a New York company that sells clothes and accessories to the teen-age market, director of IT Akhbar Tajudeen says. When Alloy used conventional storage systems, it had to turn to external sources for management. "They have more complicated tools, which meant I'd have to outsource every single component," Tajudeen says.

Alloy switched to FalconStor Software Inc.'s IPStor last year to manage storage itself. IPStor lets Alloy virtualize its storage servers and manage them from a single location. Tajudeen estimates that his company is spending 30% to 40% less than if it had bought an equivalent product from EMC Corp.

Overall storage costs will continue to fall as storage space and networks get cheaper, says Anne Skamarock, an analyst with Enterprise Management Associates. Vendors and service companies will drop prices in an effort to broaden the market. There will also be pressure from IT folks looking to cut costs, something they haven't done much of in the past, Skamarock says. "They're beginning to insist on that."