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).
Sekar: I too was contacted by Joe Kovar. I believe HP Upline was sunk by technical difficulties. It is very hard to scale online backup. Carbonite backs up over 100 million new files every day. We have restored over 2 billion files that would have been lost. At some points during the day, there may be anywhere from 100,000 to more than 500,000 PCs all sending us data at the same time. We have over 60 man-years of development into our back-end infrastructure, so I know from personal experience that it’s not easy to design a large-scale online backup that runs 24/7 and never loses even one byte of data. HP’s service went down almost as soon as they launched it, and it was plagued with technical difficulties. And my guess is that their back end architecture was expensive, would not scale, required a lot of baby-sitting, and was prone to failure. I think they just said, "this is too hard," and threw in the towell. I don’t know what they were thinking getting into this business in the first place. They don’t develop their own antivirus software, firewalls, or operating systems. Why should online backup be any different?
With regard to Carbonite, we’re in very different games. We are doing for online backup what Norton did for anti-virus — we’re going after the average consumer and small business that doesn’t need Vembu’s level of complexity (and cost). Skype, in fact, is a product that we greatly admire and strive to emulate in its simplicity, low cost, and reliability. We do believe that backup can be as simple as Skype.
From what I have heard, Vembu is an excellent product for IT people who want a high degree of control. Carbonite, on the other hand, is extremely simple and appeals to people who just want their data to be safe and aren’t interested in learning about IT-style backup. We designed Carbonite so that literally all you have to do is put in an email address and password, and Carbonite just backs you up. I doubt that most of our users could use a product like Vembu, and we’re not trying to appeal to the same customers that buy Vembu.
David Friend, CEO
Carbonite, Inc.
@ David Friend:
In your comment above, you write: “We have over 60 man-years of development into our back-end infrastructure, so I know from personal experience that it’s not easy to design a large-scale online backup that runs 24/7 and never loses even one byte of data.”
Are you saying that, in spite of all the development man-years, you’ve still have data losses, so you know how challenging it is? Or are you saying that Carbonite has never lost “even one byte of data”?
The phrasing is a little confusing.
David,
Thank you very much for taking the time to post here. I agree that the back end infrastructure is extremely complex especially for the scale you are talking about. Given that, I am not sure if I agree that HP threw in the towel because of the challenges involved in building and maintaining such a back end infrastructure. I strongly feel it is the business model that is the problem for a HP. Building such a complex infrastructure and then being able to charge only for the raw storage (which is viewed as a commodity) and then having to handle the volume of technical support etc. make me seriously question the business model. That is the reason I said it is not a sustainable business.
I commend you for trying to make backup as easy as Skype. In a different level we are also trying for the same. In spite of all our efforts there are always new situations to deal with and that is what introduces the complexity.
Vembu works exclusively through the channel (MSPs and VARs) who are all experts in IT – managing IT is what they do for a living. In spite of that the amount of support we have to deal with is an indication of the complexity in customer environments. This is what led me to the thesis that commodity services like Carbonite will also have to deal with such volumes of support directly from consumers. And if you are not pricing your service appropriately then the business model becomes fundamentally unsustainable. I am willing to concede that I may be completely wrong here. If it is really working for you, hats of to you and your team!
Thanks for your complement about Vembu’s Software. I know we are really not competing at all and we deal with different market segments altogether. I am sure there is enough room for both of us to succeed in a big way. I wish the best for your business!.
Sekar.
If you had 100,000 computers sending you data at the same time then you’d have a lot more data than your current traffic data shows. Your current traffic data shows you probably have 100-250 computers sending you data at the same time.
I was at a talk in Georgia where Ken Partlow the CTO of the online backup company http://www.myotherdrive.com was talking and he was predicting that many of the companies that are currently in the online storage busines were going to fail because they couldn’t handle the technical requirements. Most websites only handle GET type traffic and not PUT type traffic where data is being sent in, and the bandwidth requirements for 100 computers that are connected all the time is much different than the regular web traffic where concurrency isn’t as guaranteed.
We saw this same type of thing at McKesson when writing files out to multiple servers. Even having 100 computers sending traffic all at once can take 20MBits of bandwidth which is where the carbonite traffic seems to hang. That’s a big difference than 1000 times that amoutn of traffic.
It’ll be interesting to see how Carbonites architecture handles 500,000 pcs actually connected at once. Good Luck!
Sekar, I came across this and thought of commenting your earlier post. Looks like I was late in reading this news.
Somehow I do have a belief that backup can be as simple as skype :) Lets see what time has to reveal.
– J
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