Storage Wars: Attack on the Clones

Eric

March 26, 2014

An amended version of this post was originally published at Information Week.

In the same year that production will begin on a new Star Wars movie, a different type of battle will rage in a cloud far, far away. 2014 is set to be a landmark year for the file storage and sharing industry. With Box and Dropbox rumored to go public—both with valuations in the billions—services that help people store and share digital files will be big news over the coming months.deathstar

This kind of frothy market has a Gold Rush feel to it. Everyone with wild ambition is buying pickaxes and heading west. Even battery manufacturers Duracell are staking a claim with Duracell Cloud Storage. An industry analyst recently told me that there are more than 70 different cloud-based file services, though I think this number underestimates the real size of the bandwagon.

Let’s be honest here. The world doesn’t need that many ways to store files, especially when so many services are mere clones with nothing unique to offer users other logos in a different shade of blue. While slapping high fives and popping corks will greet successful public listings, 2014 will also witness the more sobering sound of many of these also-rans going out of existence.

We’ve already seen the first sign that challenging times are ahead with some providers being forced to rethink their freemium model of using a free basic service as a gateway to users paying for premium plans. Almost all of the existing 70+ file storage and sharing services operate a similar model but most don’t have the fast growth rate or existing scale for it to be sustainable. Time is running out.

What a lot of these smaller players really need is money to fund the expensive business of continuous innovation. But in a space where everyone sees dollar signs, the lack of follow-on funding for the smaller players is notable. Investors have obviously decided that if an existing business hasn’t ramped up fast enough by this stage, it’s unlikely to survive the competitive shake up to come. Most of the new money entering the market is either going to the biggest fish or coming from other businesses that fancy a piece of the pie.

The outcome of the battle for file sharing supremacy isn’t just some cloud-based soap opera playing out for our entertainment. We all have skin in the game. If you store and share files online, especially for professional purposes, you need to know that the provider you’ve trusted with your data will be around by the time that new Star Wars movie hits theaters in December 2015.

So, who will come out on top? This isn’t a winner-takes-all market. Users aren’t exclusive to one player and turn to different providers to meet specific needs like ease of use or security. Much like how social networking has room for Facebook, Twitter and LinkedIn, each fulfilling different needs, so the file sharing industry will have multiple winners.

According to a recent IDC competitive analysis, the current market leaders are Dropbox, Box and Hightail. Each business serves massive user bases with distinct needs and has a strong brand and reputation that will enable further growth. Plus, each has recently benefited from large new investments. It’s hard to look beyond these three as the eventual big winners.

Being able to focus exclusively on file services is a real advantage to a company like Hightail, as it provides the commitment and motivation that can ensure a consistently high quality product. Providers like ShareFile and Syncplicity may be backed by large parent companies, but their fates aren’t essential to the existence of Citrix and EMC. As the competition heats up in 2014 and continuing to be relevant calls for more investment, these huge corporations could easily decide to deemphasize these balance sheet rounding errors.

As the smoke clears from the battlefield, the pure play leaders will stand tall alongside a smattering of smaller players, especially those with a niche service. I also expect one or two brands more famous for other services to emerge and be successful, though I’d back companies with some connections to digital services, like hardware manufacturers, over more leftfield entrants (sorry Duracell).

For all the rest of the clones, it will be time to sign off for good. Even after the inevitable consolidation, the survivors will need to keep innovating. Providing more than just a storage repository is the key to continuing success. The first part of the Storage Wars sets the scene but (much like The Empire Strikes Back) the saga only becomes interesting in the sequel, when more valuable features like sharing and search are added to the storage layer. Only those providers that help users do more with the files they store will have the force with them.