I was contacted by ChannelWeb to comment on HP’s decision to shutter their Upline online data backup business. The gist of what I commented was carried in the article “HP To Shutter Upline Online Storage Backup Service” by ChannelWeb’s Senior Editor Joseph F. Kovar. I felt it’s a good idea to post here my full comments along with my view about commodity online backup services like Carbonite and EMC’s Mozy.
Hope these are not perceived as just wishful thinking on my part. My comments are based on our experience supporting more than 1000 partners offering backup services to tens of thousands of SMB customers. Below is my unedited comment I sent to ChannelWeb.
On HP’s decisions to kill its Upline online storage service we are not very surprised by the decision. The reason is that we always believed that backup is not like Skype where you install it and it works. Backups by its very nature require monitoring, management and administration to ensure everything goes smoothly. So any large vendor who gets into online backup services thinking that you just sign up large number of customers and then everything can be put on auto-pilot is completely mistaken. That is the reason we never offered online backup services directly to end customers. Our business model is to partner with MSPs and VARs who already provide IT services to their SMB customers. These local MSPs and VARs, because of their proximity to their customers, are in the best position to offer backup services. Since they act as “Virtual CIOs” to their SMB clients they are in the best position to monitor and manage the backups along with everything related to IT in these SMB organizations.
With regard to consumers who backup to a brand name mega online backup service providers, we do not think that is a very profitable business because consumers view storage as a commodity. They do not appreciate the additional value delivered by good backup software and treat everything as just raw storage. Since backup requires monitoring and management the more consumers you sign up the more support you will have to deal with. This just cannot be sustained as consumers are willing to pay for only raw storage and not for the value the software brings. This is one reason HP would have felt it’s not worth their while to go after consumers nor after SMBs where it just cannot be put on auto-pilot. No wonder AOL shut down their XDrive business a few months ago.
Considering the above I strongly believe Carbonite may be under pressure notwithstanding the twenty plus million venture capital they have raised. With the meager amount they charge their customers for storage it is just not sustainable as the cost of offering good customer support can never be recovered. Needless to say, in spite of Mozy’s brand recognition and EMC’s backing, Mozy may also struggle to scale their business profitably. It may be relevant to point out the blog post, “May be I am not so impressed with EMC”, which I wrote on EMC’s decision to spin off Mozy (Decho).
