May 21, 2010 – I realize that it may seem ludicrous to predict a shakeout in a market that hasn’t even taken off, but I’m afraid that’s what’s in storage for the cloud storage market.
From where I sit (an editor’s desk, or the receiving end of the PR Gatling guns) there seems to be a startup getting into cloud storage every week. And since this has been going on for well over a year, those dozens of cloud storage providers from last year have probably blossomed into hundreds by now.
IDC predicts that cloud storage will grow from 9% of the overall IT cloud services market in 2009 to 14% in 2013. In dollar terms, that means revenues from cloud storage of $1.57 billion in 2009 to $6.2 billion in 2013.
There would appear to be more than enough room for dozens (hundreds?) of players in a market of that size, right? Wrong. There’s only room for a handful of profitable RAID vendors, just to take one example, and the RAID array market is way bigger than the cloud storage market.
What are these legions of cloud storage startups smoking? Or shooting? How can they possibly expect to turn a profit? There are a number of problems:
If I was going to start a storage company (pity the fool), I’d rather be a RAID vendor than a cloud storage provider. In RAID, at least you can undercut EMC and the boys on price. Maybe even technology. You’re not going to be able to that with cloud storage.
Cloud storage vendors already provide storage at pennies (ok, nickels in some cases) per GB per month. What are you going to do – Provide it for drachmas per GB? Not much profit in that business model. A better bet would be to start a disk drive manufacturing business!
There are a number of other obvious impediments for small cloud storage providers (small providers, not clouds).
Look who’s already in the cloud storage business.
Amazon didn’t invent the term ‘cloud storage,’ buy they’re almost synonymous with it.
And earlier this week, Google appeared to put its toes into cloud storage (see “Google Launches Online Data Storage Service for Developers” on Enterprise Storage Forum). After some free initial capacity, pricing appears to be 17 cents/GB/month, plus 10 cents/GB for uploading and 15 cents/GB for downloading.
Sure, Google’s cloud storage service is just for developers now, but if cloud storage truly is a billion dollar market you know that Google will chase Amazon.
And some people think that Microsoft will get into this space (google “windows azure”). Again, mostly for developers, but why stop there?
And then there’s EMC (Mozy, Atmos), the storage vendor that every storage vendor just loves competing with.
And cloud storage consumer kings such as Carbonite, who are moving up the food chain into SMB land.
The list of impediments to succeeding in the cloud storage market goes on and on, just like the list of vendors entering the space.
Don’t get me wrong: Cloud storage is a great thing (no matter how you define it, which can be like trying to nail a blob of mercury to a ceiling of Jell-o), but there just won’t be room for all the vendors clamoring for a piece of the pie.
So, if you’re a cloud storage startup and you still have some capital left . . . Wanna start a RAID company?
Cloud storage news:
ParaScale builds clouds for machine-generated data
InMage targets cloud providers
OpSource launches Cloud Files backup and archive service
Brocade, EMC lay groundwork for private clouds
CTERA offers cloud storage platform for MSPs
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7 comments:
Dave,
You're right, there will likely be a shakeout of cloud vendors sooner than later. There's a few points I'd like to make:
1) The buzz and the hype will boil down to two cloud markets: consumer and enterprise. Google and Amazon are emerging as the big cloud providers for the consumer market, while vendors like Carbonite have geared themselves toward individual consumers (desktop back-up to the cloud.) EMC, Iron Mountain, Nirvanix, etc. - these guys are chasing the enterprise, the corporations looking to offload a ton of data to the cloud.
2) Small start-ups that are resting their hat on the cloud need to proceed cautiously. While the hype is big, we're not seeing customers move from the exploration phase to the purchase phase. If you're a one-trick cloud pony, it could be years before your business is revenue-generating. Do all these companies have enough capital to last that long? It's likely that customers will opt to go with the big cloud providers before experimenting with start-ups.
It's tough to sustain a business on a technology that everyone's too leery to buy.
At Seven10, we've added the cloud as another supported platform for our archiving software. But we've chosen not to put all our eggs in the cloud basket - at least until we see data actually being moved to the cloud.
Tim Pitta,
Seven10 Storage Software
Didn't answer the biggest questions about this or any storage innovation:
1. How do you get there? Most new storage products or offerings are offered as footprint replacement, when customers actually have to migrate, somehow. What is the mechanism for migration? There are lots of questions about what goes and what doesn't.
2. How do you manage it? What about security, access control, certainty of location, persistence, auditability...conformance to HIPAA and SarBox, or whatever applies? Most big shops can't figure this stuff out now.
3. How do you unravel it? It is unrealistic to think that a public cloud will exist alone, data will move from and to, and span the enterprise, private cloud, and public cloud. How do big storage shops, which can't effectively manage data in-house now (it is complicated and tough already), architect a solution that allows movement in, out, across?
Dave, your point is very valid. The large cloud storage providers in market today have achieved economies of scale difficult for start-ups to beat. What the current cloud storage providers lack though is what makes way to a new category: the gateways to cloud storage. No cloud storage provider can offer end-to-end encryption and a performance that feels like local to the end users. Most cloud storage products out there are not readily usable by regular companies with little extra engineering resources. We at Nasuni have identified this gap and strive to make cloud storage (provided by established providers) available and easy to use for all businesses.
If startups or SMBs still try to reinvent the wheel by developing their own technologies and building their own data centers, then I totally agree with you: they will fail. It is too late and the cost is too high. Moreover, as you have pointed out, the competition is too fierce. Competing on the price is no longer a viable business model.
This being said, Startups / SMBs can still jump on the bandwagon by partnering with an established service provider such as DriveHQ; this way, they can launch their own cloud services in just a few hours with almost zero startup cost. (http://www.drivehq.com/Premium/partnership.aspx) In particular, they can focus their businesses on a vertical market or regional market. Cloud storage has just started taking off in US. There are still lots of business opportunities in the rest of the world.
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