Business models date notoriously quickly in IT. Just six months after pulling off a $115m funding coup in a difficult market, California-based Sanrise faces a tough challenge repaying its investors' faith and convincing analysts its long-term prospects.

Since being founded in May 2000, the dotcom implosion has forced the company to jettison its original business model of storage service provider (SSP), focusing on remotely-hosted storage management.

Its latest throw of the die, targeting in-house storage management services at corporations, is a long shot amid the deepening economic downturn, say pundits. The company now bills itself as a storage solutions provider, reflecting a shift in emphasis to what Doug Murray, vice president of marketing, calls "in-house out-tasking".

The repositioning is aimed at capitalising on nascent demand for storage area networks (SANs). SANs, dedicated networks of storage devices touted as offering superior data availability, easier back-up and reduced cost compared to rival storage architectures, are tipped by market researcher IDC to win mass adoption within two years. However, they are difficult to implement, entailing integration of devices from multiple vendors for which there is a shortfall of qualified vendors.

Enter Sanrise. "Companies trying to a build SAN environment in-house [face] six to eight months and millions of dollars trying to put it together," says Mr Murray. "They are realising that perhaps they need to bring in a third party."

Sanrise offers a menu of storage management software, consulting services and hardware configurations that it says allow companies to wring greater returns from their SAN investment.

Sanrise claims cost savings of more than 50 per cent for companies using its services for a 100 gigabyte file system or database. "We afford customers the opportunity to better utilise their SAN environment and reduce their IT workforce," says Mr Murray.

However, such boutique-style in-house services are a far cry from the company's original storage-as-utility sales pitch. Hatched from an incubation scheme run by Crosspoint Ventures, the Silicon Valley venture capitalist, near the height of the dotcom boom, Sanrise staked out demand for remotely hosted storage on demand from frantically growing data-intensive start-ups without existing IT infrastructures. To this end, it bought up storage capacity within web hosting company Exodus Communications' datacentre network.

"Then the world started to change, the Nasdaq went south, and customers were no longer outsourcing to the datacentre at the same clip," recalls Mr Murray.

Seeing the writing on the wall with dotcoms, Sanrise shifted tack, trying to woo traditional companies with its outsourced service. But the company has been unable to land lucrative contracts amid corporate unwillingness to let competitive data leave the building, say analysts.

"The problem is if storage houses a company's crown jewels," explains Dan Tanner of the Aberdeen Group. "Company decision makers are very conservative about outsourcing production storage," adds Doug Chandler, an analyst at IDC.

Such corporate reticence has relegated Sanrise to slim pickings from poorer-paying data backup contracts, the bulk of which remain with captive customers bought aboard with its acquisition of DataVault, Exodus's data backup arm, in January.

Nevertheless, Sanrise says managing storage on-site overcomes companies' qualms about entrusting production data to an unfamiliar external party. The company also eyes additional demand for backup services from small to mid-sized companies, for which the September 11 terrorist attacks brought home the importance of disaster recovery.

The cash injection in May this year, bringing Sanrise's total funding to $203m, will bankroll it into expected profitability at the end of 2002, say executives.

However, the company remains saddled with largely redundant and expensive-to-maintain real estate from its datacentre spending spree, and must boost sales to offset high overheads. It shed a substantial number of its 250 staff, believed to be less than 50 per cent, in August to reduce its cash burn rate.

Sanrise's salvation may lie in getting into bed with telecoms companies or generalised IT service companies eager to tap the high-growth storage market. "We don't perceive [telcos] as competitors but as customers - our offerings are products they can sell," says Mr Murray.

Sanrise's backers may ultimately be looking to a buyout by a carrier or services company as the best chance of recouping their investment. For its part, Sanrise suggests that it may be open to offers. "If things proceed then we wouldn't rule out that things could change even further," says Mr Murray in response to rumors of suitors lining up Bids.