This week I had an opportunity to attend Iron Mountain’s Analyst Day focused on its digital services strategies and offerings. The event convinced me that Storage-as-a-Service is well on its way to becoming a mainstream movement on par with Software-as-a-Service (SaaS), if not greater. It also showed me how a company can build a rational hybrid services model to capitalize on a market opportunity.

The Storage-as-a-Service opportunity may seem obvious given the proliferation of data and multiplying number of consumer-oriented online storage services geared toward consumers looking for a convenient place to place their digital photos and other valuable files. But, the consumer-oriented storage services have also helped to encourage the corporate sector to take advantage of the rapidly growing array of inexpensive back-up services, such as Carbonite and Mozy, to protect their computer records and files.

The explosion of data and emergence of new regulations has been a boon for storage vendors and hosting companies. It has also forced many business executives to rethink how they handle the rising tide of corporate records.

In the same way that many organizations are recognizing the economic and ease-of-use benefits of SaaS business applications, they are also being attracted to the business benefits of on-demand storage services to meet their compliance needs.

For instance, Info-Tech Research Group market research has found only 20% of businesses currently have an e-mail archiving solution in place, but predicts adoption will grow almost 70% in two years.

The Storage-as-a-Service market is attracting a plethora of players. Symantec launched its Protection Network SaaS business with a Storage-as-a-Service solution rather than lead with its strong suit in security. EMC made news earlier this month by acquiring Mozy’s parent company, Berkeley Data Systems. Google and Microsoft are offering storage services. I even received an automated voice message last week from Dell promoting its new online storage services.

(The emergence of the Storage-as-a-Service market raises the question: how do we distinguish it from Software-as-a-Service in the acronym lexicon?)

However, what sets Storage-as-a-Service apart from SaaS is that organizations must contend with a combination of physical and digital records. Many have grown accustomed to using off-site storage services for their paper, disk and tape-oriented files. Now, they have to select the right source for their digital storage needs.

Iron Mountain is well-positioned to capitalize on this opportunity.

It has strong brand recognition based on its years of experience, huge installed base of customers of all sizes, and the prominence of its vast fleet of trucks which cart off the physical records. It has also acquired two pioneers in the online storage and archiving services market, Connected and LiveVault respectively.

But most importantly, Iron Mountain is a services company that understands the economics and operational requirements of a services business. Although there are unique technical challenges to a digital services business, the other aspects are basically the same.

This week’s analyst event was a coming out party for the Iron Mountain Digital unit which will lead the company’s on-demand services efforts. Company and Digital unit executives demonstrated a keen understanding of the straightforward business needs they are addressing, and articulated a compelling, albeit no-nonsense strategy to satisfy these needs.

They outlined their initial set of on-demand services and provided a roadmap for the near-term future. They were not interested in blowing away a typically cynical audience of analysts with grandiose visions or bold technology innovations. Instead, they emphasized their long history in the records management business, focused on their deep understanding of the service business fundamentals, and showcased their track record of success by including testimonial presentations by representatives of Lehman Brothers and Intel.

The company’s practical approach has led it to intentionally pass on many ancillary business opportunities in the past, such as analytics and benchmarking services. As it journeys down the digital services path, it will encounter additional opportunities to become a player in the on-demand content, document and knowledge management services markets.

Unlike legacy application vendors who are concerned about product cannibalization by SaaS, Iron Mountain’s executives are hopeful that its new generation of digital services can replace some of their more costly document transport services.

Adding digital services to their portfolio does have its challenges. The company executives I talked with admitted they are still fine-tuning their go-to-market tactics and support processes to ensure Iron Mountain can properly coordinate their sales and service delivery efforts across the traditional and digital business units to ensure customer satisfaction, maximize account penetration; and optimize revenue and profit opportunities.

My guess is that Iron Mountain will figure this out and become an important player in this market, even if it isn’t the sexiest.