In the late 1800s, the new electric utility industry was a free-for-all. Direct current (DC) motors could only supply power to customers within a one-mile radius of the generating plant, so there was opportunity for many players to get in the game. When Samuel Insull took over as President of Edison Chicago, the city had more than 20 electricity suppliers. Rather than join a pricing race to zero, Insull used new alternating current (AC) technology to supply electricity more effectively, giving his company a position of dominance over their many rivals.
The internet service provider industry followed a similar path. At first innovative companies like AOL, TheWorld and Netcom helped get the country online. But technological innovations like the move to broadband allowed larger established companies such as Comcast and AT&T to dominate what quickly became a commoditized market.
The cloud storage market will be the next victim in the race to zero; it’s currently home to more providers than is possible to sustain. There’s a cloud storage or file sharing service for every letter of the alphabet: from Accellion to Zocalo. That last letter is significant, as Zocalo is the recent offering from Amazon, meaning it joins Google, Microsoft and Apple as a leading player in the market. It is unlikely that any cloud storage pure players can compete in a race to zero with these digital titans.
So what’s a mid-sized cloud storage provider to do? At Hightail, we’ve always believed that our value wasn’t just in file storage, but in the actions and insights we enabled. For us the commoditization of storage is not a threat, it’s an opportunity. Like electricity and the internet, the cloud isn’t actually all that interesting in itself. But what you do with it is. Cheaper and more accessible storage allows us to provide innovative new cloud-powered apps to more people.
Which brings us back to the Edison Company. Though Thomas Edison established the first private electricity supply business, his pioneering efforts weren’t aimed at becoming a successful utility. Edison’s interest in bringing commoditized electricity to private homes was prompted by the need to power his killer app: the electric light bulb. He wanted to solve a problem — lighting the dark — using an app — the light bulb—that utilized electricity.
The same parallel can be drawn with the internet but replace the light bulb with good content. Faster internet speeds are pointless unless there is something to do with all those megabits per second. So a company like Netflix stepped in to provide a killer app: instant streaming of thousands of HD movies and TV shows. Netflix has even recognized that video streaming could itself become a race to the bottom and is now producing its own original content as a way of giving customers increased value for their money.
Cloud storage will follow suit. Soon everyone will expect storage to be an unthinking, inexpensive, on-tap service, like the electricity powering their computers and the broadband connecting them to the internet. Users won’t just want their files to sit in a repository but will demand apps that do more with them. The battle among providers will not be about who provides more space for less. The winners will be those who go beyond passive storage to become an active part of a user’s life and work.
What that actually entails will depend on the audience. Someone working on a creative project may need feedback to be an integral part of file sharing (like what we’re doing with our new beta product, Hightail Spaces). A CMO might want a high-level overview of all ongoing creative projects. The key to success might be not trying to be all things to all people, but fulfilling a specific need and then going beyond it.
Edison’s light bulb ultimately became a commodity, but interesting products continue to be developed in the world of lighting, like LED technology and apps that allow you to control the color and brightness of a room using your phone. Storage should just be a starting point for more interesting applications. Providers need to deliver real value not just a cheap commodity. The cloud storage business is dead, which means more exciting times lie ahead.