Cloud Computing Journal

Tier1 analyst Antonio Piraino quantifies the public cloud service market to be around $300M in 2009 and conservatively estimates 100% growth per year for the next three years. Cloud storage is estimated to be about 40-60% of this market. Although cloud computing has garnered a lot of early attention, the near term opportunity is cloud storage, since customers can adopt it quickly without requiring too many programming tweaks to existing applications. Overall, cloud storage is an easier economic sale for the host, who can offer up his offering as an alternative to CAPEX spends on storage systems in a recession where data growth continues unabated. MSPs certainly risk losing business by not being able to offer up a cloud storage offering and allowing competitive cloud storage providers inroads into their accounts. And storage is a sticky service – once your competition is in your account, it is non-trivial to displace them.

Cloud storage is a big market for a hosting provider because it provides revenue in three ways. The first is inside the data center. Today file storage is typically offered to a host’s customer using a Tier-1 device at a Tier-1 price point. However up to 75% of the data does not require this level of functionality and thus is not a candidate at the price point. Implementing cloud storage as a tier-2 NAS offering within the datacenter opens up a new and large revenue stream. Data can be aligned with the appropriate tier by customer value and the host collects revenue on a larger storage footprint.

The second is dedicated services. Outside the data center there is overwhelming demand for services like remote backup and content management. Non-hosting companies like Mozy (now EMC) have emerged to address this gap at the detriment of the hosting community. Leveraging a cloud storage platform, hosting providers can create dedicated offerings that address their customer’s needs, expanding the revenue base. These services offered on the strength of a strong customer relationship, with top-tier support will prove vastly superior to offers from mass market players like Mozy.

The third is “the Amazon model” of shared multi-tenant storage. While this is the first use most folks associate with cloud storage it is also the most difficult in which to compete. Most customers shop for this based on price and without massive scale it is not possible of service providers to provide this type of offering and create a viable business. ParaScale recommends choosing a solution that addresses all three revenue aspects and enables the provider to create a differentiated offering that will grow with the business.

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