Online backup is the Trojan Horse of the cloud

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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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  1. As a player in the cloud storage space whose technology platform is built to support world-class online backup but easily extend to overflow storage, de-duplication, secure sharing, and more, we couldn’t agree with you more.

    Backup is the perfect way to get people into the cloud, and – if you’ve architected an extensible, service-oriented solution – it is the first step towards getting regular people comfortable with virtualized data. While the companies you’ve referenced offer very credible backup programs, they don’t appear to have the capability of supporting these other features.

    Sounds like you’ve thought a lot about the space. We’d love to talk more.

  2. I currently am using Amazons S3 service for online backup. I have my documents and photos on there, and am only paying about $5 a month for 30+ GB and transferring (done bi-weekly) using a programs called jungle disk. I agree that some services could be useful, but Amazon will probably dominate the space on price alone.

  3. Hi John,
    Yes it certainly seems like a good trojan horse. However scale really matters here, because of cost and trust. So I wonder how room there is for startups when you already have eg Amazon S3 (as the other commenter noted).

  4. I use my own backup software ( white labeled with ) for my clients. The primary issue I see with building more value with the data is the encryption and trust. With my product, I manage backups of over 100GBs of data online on Amazon S3, but this data is encrypted. So even if I wanted to offer enterprise wide data sharing OR social networking, it would be hard to do.

    But I completely agree with the deduplication and VM comments. In fact, the tool I use has been used successfully for enterprise wide deduplication (less revenue for me but that is OK since my revenue is tied to storage at S3).


  5. I use Amazon S3 – pretty cost efficient if you backup under 10TB. if you compare annual cost of storing 10TB of data on Amazon S3 with the cost of external hard drive of the same size, i think you might want to consider the latter. I am building my own backup product for Amazon S3 if you want to check it Still have to find out the niche and how successful we will be in the future…

  6. You are correct – with data storage as a commodity (Mozy, Carbonite, Amazon) you have to look at opportunities to provides services that build upon just storing data for backup/recovery. Especially when dealing with the average, non-techie consumer.

    My partners and I started working on the concept of creating a service charging data owners for the ability to both allow their set of pre-approved, trusted agents the ability to access specific data under their control and/or have the data owner move data between trusted agents, instead of the agents (e.g., banks, utilities, hospitals, etc.) controling the data.

    We’re interested in talking to anyone who sees the value of letting the consumer own and control who has access to their data – pjsellsatlanta @

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