Analysis: Public cloud storage proves a tough market

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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.

Competing with giants

Stammers said that while Amazon, Microsoft and Google are dominating the cloud storage market, there is still hope for the smaller players, with the likes of Box, SOS Online Backup, Dropbox, Nirvanix and Zetta picking up significant market share.

This week, Dropbox announced that it had achieved a dramatic increase in users, up from four million a year ago to around 25 million today, although the company has yet to disclose revenue or profitability figures.

By most estimates though, Amazon is well in front; and that, according to Stammers, certainly makes it challenging for new market entrants.

"Other providers will be able to offer value-add services, but future raw storage and compute services are very likely to be dominated by a handful of giant suppliers, because of the economies of scale,” he said.

“We’re not in that situation yet. Amazon is not the only option, and it does not have a lock on the market.

"For customers, moving virtual servers or storage between clouds is a chore, but isn’t impossible. A raft of storage start-ups are providing gateways and services that make public cloud storage easier to use. They have all chosen to support S3, but they are also supporting alternatives such as Azure, Rackspace and Nirvanix. They are also offering services to move data between public clouds. There’s still competition out there.”

Nirvanix and Zetta were quick to capitalise on the announcement by Iron Mountain, with each offering to migrate Iron Mountain customers' data to their services for 30 days free of charge, with the option of then implementing one of their offerings at the end of the trial period.

At home, Sydney-based cloud computing provider Ninefold launched a cloud storage offering on March 23. Managing director Peter James said there have been "record numbers of sign-ups" to the company's core services since storage became available as a service. 

James said service providers struggling with cloud storage were too focused on archive and back-up. "While that is a use-case, we approach the market with a different philosophy. We offer storage as an integrated offering with compute, and we target content rich web apps and internet accessible storage for content distribution.

"The research we had done shows that this part of the market – a mix of social media and rich web apps - is growing at 80 percent in storage terms while pure IaaS [infrastructure as a service] is growing at 50 percent."

Room for new services?

In its report on storage trends for 2011, Ovum noted that there are some serious limits to how an enterprise customer might use commodity compute cloud services.

These services store customer data alongside the applications that customers have uploaded to those clouds. Often the cloud data storage system has been configured for copies of data, rather than working with primary data.

As such, these storage services aren’t always “enterprise friendly” – only available for use by applications using the cloud provider’s web protocols or APIs, failing to support existing file structure and not able to make ‘point-in-time’ snapshots as an in-house storage array can.

“This might not be a problem for applications written from scratch to run in public clouds, but it is an obstacle for other application,” Stammers reported.

Ovum expects that a new market may emerge for enterprise-class cloud storage services – increasingly becoming available in the U.S. – which present the same interfaces to the user as what has been used for enterprise applications deployed on-premise (e.g CIFS or NFS). The only difference being that the cloud offering would be based on object-orientated storage to provide scale and lower cost.

“Taking the economy-of-scale one step further, many start-up providers are not operating that back-end storage themselves, but are simply providing CIFS and NFS interfaces to giant third-party clouds, such as those from Amazon,” the firm reported.

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