Analysis: Public cloud storage proves a tough market

Iron Mountain, EMC succumb to intense pressure from commodity players.

Iron Mountain has become the latest in a string of vendors to exit the public cloud storage market as service providers struggle with intense price competition.

The document management service provider cited a lack of adopters as it announced the impending termination of its Virtual File Store (VFS) and Archive Service Platform (ASP) cloud storage services.

Iron Mountain stopped accepting new customers for the services on April 1 and will bring the curtain down on both services early next year.

The move follows a similar decision by storage vendor EMC to shut its Atmos Offline cloud storage service in July 2010. More recently, EMC announced that it would pass on the assets of its cloud storage service Mozy to VMware.

Ovum IT analyst Tim Stammers believed Iron Mountain's decision to be indicative of the fierce competition that exists in the public cloud storage market.

"Iron Mountain admitted that it couldn’t compete in raw storage services, although it will continue to offer higher value electronic archiving and other services,” he said.

“Raw storage is a commodity, where price is the major criterion. The more customers you win, the more economy of scale you realize.

"Amazon’s S3 storage service is the most popular, and has dropped in price over the last few years. Amazon also now also offer a cheaper version of S3 with a lower service level. Making life even tougher for Iron Mountain, Microsoft’s Azure Storage Services are becoming popular."

That same fierce competition contributed to EMC’s Atmos Online closure, Stammers said, although EMC gave a plausible alternative explanation.

The vendor claimed it no longer wished to compete with service provider customers white-labelling the Atmos system for their own cloud storage services - the biggest of those being AT&T, whose Synaptic service is based on Atmos.

Stammers said offloading Mozy to VMware was even more complicated.

"Mozy was one of the pioneers of low-end online backup services – which is not quite the same as raw storage,” he said.

“Unlike Iron Mountain, Mozy did not enter a market that other players were already dominating. Mozy now claims over a million home users and 70,000 business customers. Looking at its monthly charges, that make it a very respectable size for the cloud market.

“It is possible that Mozy’s growth is slowing, but that can only be speculation, because EMC does not reveal Mozy revenue.”

Stammers said many IT managers are understandably nervous about using cloud storage, because of security and availability, but he expected this will change over time.

"Security is already easy to address, by encrypting data at source, and making sure the encryption keys cannot be stolen. Worries about availability are the reason why many businesses are currently only using public clouds to get backup copies of data offsite, for disaster recovery.

"As those customers develop more trust in the cloud, they’ll start using it to store working or primary data. The best data for the public clouds will be mostly be data that is not frequently accessed or sensitive to long-distance network latency."

He advised IT managers to compare cloud service level agreements with the uptime they achieve in their own data centres.

Amazon’s decision to launch a version of S3 with a lower SLA than the standard service is interesting, he said, as it shows that Amazon thinks that the standard service is actually better than some customers need and that there’s now enough trust in the cloud to make people want to try something cheaper.

Can smaller players compete? Find out on page two.