Online backup (think Carbonite, Mozy, etc) is generally considered a terribly unsexy, commodity business. You’re basically reselling cheap (and continually declining in price) storage and compute power and then tying it together with an application to shuttle bits back and forth. Those kind of dynamics give rise to highly competitive markets with numerous players and low profit margins. Because of these traits, I had always told myself that I would never want to invest in an online backup business.
It’s true that the constituent parts of an online backup service are commodities. However, I think what a company does with the data once its backed up in the cloud is what will create enormous value.
Once all of a customer’s data is in the cloud, it becomes possible to do a number of things that you can’t do as easily when it is sitting on someone’s desktop or server hard drive:
- share an individual’s data across the organization (content management and collaboration)
- reduce overall data storage needs by eliminating duplicate records (enterprise wide deduplication)
- discover patterns and identify relationships between information workers (social networking)
- run a backed up application as a thin application running in the cloud (convert to VM)
It’s almost as if a cloud computing provider could use online backup as a loss leader to get data into the cloud, and then upsell a variety of new, ostensibly more profitable services (like those listed above).
So, online backup could be the Trojan Horse that accelerates adoption of cloud services.
Maybe I will invest in an online backup business after all… ;)
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