Online PC Backup Firms Turn Toward Businesses

By Lisa Coleman

According to International Data Corp (IDC), many online PC backup and 'web folder' companies are refocusing their business models away from consumers and toward businesses.

Although the storage service provider (SSP) market is healthy, providers of web-based storage for PCs are not necessarily sharing the good fortune. The SSP market is expected to jump from $89 million in 2000 to $7.5 billion in 2003, according to IDC. Meanwhile, IDC predicts that 60 percent of web folder and on-line backup companies will fail because the cost of acquiring customers is high and the revenues are low. For example, NetDrive.com recently went out of business, and Juston.com became part of Novell.

To be successful in this competitive market, web-based storage companies must have strategic partnerships and a revised business model targeting businesses, according to analysts. One company that has taken this road is SwapDrive, a web storage services provider offering Internet-based file management. Users access their files using a web browser, sign in to a virtual hard drive, and download data. Founded in 1999, SwapDrive initially targeted the consumer market with its services, but now the company is refocused on businesses. "As we evolved, we saw more opportunities for our tool set. We felt it was more appropriate for business users," says SwapDrive CEO and co-founder Marc Wallace.

Wallace is optimistic the market will grow.

"The cost of managing and supporting storage in-house is skyrocketing. This is mainly due to the fact that highly skilled labor continues to be a scarce resource - even though the price of hardware is dropping. As a result, outsourcing storage management, and the interest in file management and collaboration tools, is booming," Wallace claims.

In January, SwapDrive launched a partnership program targeting application service providers, value-added resellers, OEMs, system integrators, distributors and consultants. These companies can build customized, on-line file and storage management systems using SwapDrive's software. The company also has partnered with Exodus Communications, EMC, Veritas, and StorageNetworks.

One company that is using SwapDrive's services is the Construction Management Association of America (CMAA), which decided to outsource data storage to help its members share information and collaborate on-line. Its members frequently need to trade large proposals, bids, and engineering drawings, but the information exchange was not very effective using email, discussion boards, or postal mail.

To provide an easier and more efficient way of sending large files, CMAA initially looked in-house and considered building an extranet. It wasn't long before CMAA realized this would be an impossible task to do in-house after analyzing personnel and IT costs as well as software development issues, says Bruce D'Agostino, CMAA's executive director. "To build and support this in-house would be a lot of work for a relatively small storage requirement," he explains.

CMAA is using about 10GB and plans to scale up to 100GB in a few years. "The software component was really a decision-maker for us. To web-enable storage on our end would have taken tons of effort and a lot of consulting money for development." CMAA then called in SwapDrive to build the extranet.

Another company that has made inroads into the competitive Internet storage and file access market is Xdrive Technologies. In December, the company secured $50 million to bring its total funding to $120 million. The funding will help support Xdrive's new products targeting individuals and enterprise customers. The Xdrive Express provides up to 100MB of online storage space at no charge to users. According to the company, there are more than six million registered users. Xdrive is also targeting service providers, telecommunications carriers, and enterprise companies with its Xdrive Enterprise offering, which enables collaboration across extended networks.

This article was originally published on February 14, 2001