Cloud storage is due for a shakeout

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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posted by: Dave Simpson

Dave Simpson, Editor-in-Chief
by Dave Simpson
Editor-in-Chief

Dave Simpson has been the Editor-in-Chief of InfoStor since its inception in 1997. He previously held editorial positions at publications such as Datamation, Systems Integration, and Digital News and Review. He can be contacted at dsimpson@quinstreet.com

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