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Technology The Industry

The Race to Zero

Zero

This is my 500th blog entry, which means I have written several books worth of words. When I started the blog I feared I might run out of ideas in a few months, but our industry has become so dynamic that I am regularly handed more topics than there are days in the week.  

The cloud industry is often characterized by what is being called the race to zero. This is the phenomenon of ever-dropping prices for data storage. The race towards cheaper prices has always been driven by Amazon through repeatedly reducing their cloud storage prices. Every time they reduce the price of their AWS storage services, the other big cloud companies like Microsoft and Google always go along.

There are numerous reasons for the price drops, all having to do with improved computer technology. Memory storage devices have dropped in price regularly, while at the same time a number of new storage technologies are being used. The large cloud companies have moved to more efficient large data centers to gain economy of scale. And lately the large companies are all designing their own servers to be faster and more energy efficient, since energy prices for cooling are one of the largest costs of running a data center.

I remember in the late 90s looking to back up my company LAN offsite for the peace of mind of having a backup of our company records. At that time our data consisted of Word, Excel, PowerPoint, and Outlook files for around twenty people, and I’m sure that wasn’t more than a a dozen gigabytes of total data. I got a quote for $2,000 per month, which consisted of setting up a shadow server that would mimic everything done on my server, backed up once per day. At the time I found that was too expensive, so we stayed with using daily cassette back-up.

Let’s compare that number to today. There are now numerous web services that give away a free terabyte of storage. I can get a free terabyte from Flickr to back up photos. I can get the same thing from Oosah that allows me to store any kind of media and not just pictures. I can get a huge amount of free storage from companies like Dropbox to store and transmit almost anything. And the Chinese company Tencent is offering up to 10 terabytes of storage for free.

It’s hard for somebody who doesn’t work in a data center to understand all of the cost components for storage. I’ve seen estimates on tech sites that say that storage costs for a gigabyte’s worth of data have dropped from $9,000 in 1993 to around 3 cents in 2013. Regardless of how accurate those specific numbers are, they demonstrate the huge decrease in storage cost over the last few decades.

But consumers and businesses don’t necessarily see all of these savings, because the industry has gotten smarter and now mostly charges for value-added services rather than the actual storage. Take the backup service Carbonite as an example. Their service will give you unlimited cloud storage for whatever data you have on your computer. Their software then activates each night and backs up whatever changes you made on your computer during the day. This is all done by software and there are no people involved in the process.

Carbonite charges $59.99 per year to back up any one computer. For $99.99 per year you can add in one external hard drive to any one computer. And for $149.99 per year you can back up videos (not included in the other packages) plus they will courier you a copy of your data if you have a crash.

The value of Carbonite is that their software automatically backs you up once a day (and we all know we forget to do that). But that is not a complicated process and there have been external hard drives available for years with the same feature. But Carbonite is selling the peace-of-mind of not losing your data by putting it in the cloud. It must be a very profitable business since the cost of the actual data storage is incredibly cheap. Consider how much extra profit they make when somebody pays them $40 extra to back up an external hard drive.

In the business world, the fees paid for the cloud are all about software and storage cost isn’t an issue other than for someone who wants to store massive amounts of data. One might think the companies in the cloud business are selling offsite storage, but their real revenue comes from selling value-added software that helps you operate your business and manage your data. The storage costs are almost an afterthought these days.

The race to zero is not even close to over. In one of my blogs last week I talked about how using magnetized graphene might increase the storage capacity of devices by a million-fold. That upgrade is still in the labs, but it demonstrates that progress to ever-cheaper storage is far from done. We’ve come a long way from the 720 kb that I used to squeeze onto a floppy diskl!

Categories
Improving Your Business What Customers Want

Data Back-up

There is a tremendous amount of free on-line storage available today. Just last week Flickr began offering their customers a free terabyte of storage. There is also a thriving new industry of data centers that are offering deals for businesses to back up their data on-line for affordable prices. So you might suppose that there is not much of an opportunity to provide off-sight storage for your customers. As attractive as some of the on-line storage prices are they don’t shut you out of this business. I have a number of customers who are making money by providing storage for customers. So let’s look at how they are doing it.

First, you have to recognize that there is an ever-increasing need to back-up data, including from many businesses that would surprise you. There are a number of businesses that are now creating mountains of data. And with the impending creation of the Internet of Things the need for storage is going to continue to grow.

Storage is getting cheap and customers will certainly keep a copy of their data on site. But no storage device is foolproof and there is always the risk of storage device failure, fire, flood or other damage to local storage. So the smart business will also store their data somewhere off-site.

While there are many web-based companies that will store data, you will find that many customers would prefer to store their data with somebody they know and trust. When they send their data out into the cloud they really don’t know where it is going and what is being done with it. And there is always the chance that the company that stores their data will fold and the data will be lost someday.

So the number one sales pitch to make with data back-up is that your customer already knows and trusts you. You can show them your central office or headend if they want to see it. Data centers spend a lot of effort showing customer that their data is very secure, but the chances are that your existing central office is already secure enough for most customers. There is also less of a chance of data being hacked in your central office, simply because hackers aren’t looking at you as a target.

Another advantage of storing data locally is that the data is on-net between you and your customer. This means that you are going to be able to stream their data quickly to them in case of a recovery much faster than is going to happen over the open web. You have a direct connection to your customer, which is something nobody else can claim, and if large amounts of data are going to be exchanged this is a significant advantage. If the worst happens and they lose all of their local data, you can have them up and running again very quickly if you back up both their content and operating software.

There are a number of options on how to store data for your customers. First, you can just host a second version of the same servers they have at their business. This allows them to always have a mirror back-up of everything they are doing. Customers who want to do this are the best candidates for local storage because they are going to want to be able to occasionally visit the servers in your office. In this scenario it is typical for the customer to pay for the server.

But you can also get more efficient and put multiple customers into one large server or series of servers to save money on hardware and software at your end. In this case you can provide a mirror image of their own server, but to do so on a server that you share among multiple customers.

The last option is to store just their data and not their operating systems. Companies that generate a lot of data will often do this and will even store data at more than one location.

And you don’t necessarily have to do all of the sales for this business line, you can partner with local IT firms to jointly offer this product and let them do the sales for you.

One new way to sell local storage is to combine it with a security service. More and more homes and businesses are installing cameras. These cameras now can be reviewed remotely and a customer can check in back home on their cellphone. You can enhance this product by recording and storing the video images from the cameras which lets customers get a physical image of intruders or other anomalies at their home or business.