Memo to MSPs: Prepare for Cloud Storage Segmentation, Shakeout

Cloud storage: Those two words have generated a vendor and service provider stampede. Dozens of vendors — often backed by venture capitalists and angel investors — now promote cloud storage and cloud backup into the MSP market. But take a closer look and you’ll find new segments (beyond traditional backup and recovery) emerging. The latest examples include Axcient launching a cloud continuity service, and Doyenz connecting the dots between on-premise virtualization and cloud-based virtualization services.

Although the cloud storage market is growing fast, I think there will be cases where too many vendors chase too few MSPs. Translation: A shakeout is coming. Some venture-backed companies, such as Intronis, say they are doubling down on their existing business models. CEO Kent Plunkett says Intronis is striving to be the de facto standard for file-based cloud backup, working closely with MSPs. But over at Axcient and Doyenz, which potentially compete with Intronis on some fronts, you can see some clear business evolutions coming into focus.

New Moves: Axcient

Axcient, for one, has pushed beyond its hybrid cloud storage model to launch Axcient Cloud Continuity. Axcient claims businesses — including service providers — can launch all their servers in Axcient’s cloud “with just a couple of clicks” of a mouse.

Axcient CEO Justin Moore says Cloud Continuity does not replace Axcient’s existing hybrid cloud offering, which includes on-premise appliances. But if a small business experiences complete on-premise server destruction, the Cloud Continuity service ensures customers can continue operating even without a physical office, Moore asserts.

The Axcient Cloud Continuity service is built atop HP hardware — part of an ongoing relationship between Axcient and Hewlett-Packard that now involves scores of HP channel partners flocking to Axcient’s cloud services and recurring revenue model.

It’s always difficult for me to pinpoint the cost of building a new cloud service. But I suspect Axcient has been able to move quickly because of its venture backing. As of October 2011, Axcient had raised $33.5 million in venture capital. According to Moore, most of Axcient’s venture capital dollars remain in the bank — but the company is planning to spend aggressively “to pursue market leadership.” Also, Axcient has grown from 30 employees in 2010 to 80 employees today, with an additional 30 positions set to be filled later this year.

Bottom line: Axcient is on track to grow its recurring revenues more than 400 percent in 2011 vs. 2010, though MSPmentor doesn’t have access to exact revenue figures.

Next Moves: Doyenz

Meanwhile, I get the feeling that Doyenz — the cloud-based backup and recovery specialist — is planning some strategic moves that will unfold incrementally over the next few months. The company has quietly raised $10 million from angel investors but has not gone the venture capital route.

Most recently, Doyenz launched rCloud, a disaster recovery solution for SMBs that “offers recovery for virtual environments in minutes instead of days.” Doyenz claims the solution is easy to use and accessible from virtually any location via a Web browser. And the effort allows

rCloud also signals an interesting market expansion for Doyenz. When the company debuted, Doyenz spoke with me about virtualizing Microsoft Small Business Server in the cloud, helping MSPs to protect customers if their on-premise Small Business Server deployments failed or required upgrades. Fast forward to the present, and the new Doyenz rCloud focuses heavily on VMware partners and virtualized SMB customer environments. Translation: Doyenz believes VMware has successfully moved beyond enterprise data centers and infiltrated the SMB market. And now it’s time for MSPs to protect those SMB customers with a virtual, VMware-compatible approach out in the cloud, Doyenz believes.

Look Beyond the Obvious

I’ll end by repeating my usual advice: Cloud storage and managed storage are real opportunities. But here’s the challenge: More than 70 percent of top MSPs already offer some form of cloud storage and managed storage, according to our fourth-annual MSPmentor 100 survey results (the fifth-annual survey runs through Dec. 23, 2011).

Backing up and protecting PCs to the cloud is becoming a commodity service. MSPs need to shift the conversation in multiple ways, focusing on:

• Total data protection, offering managed and cloud services that safeguard every piece of company data, regardless of where it resides — including tablets, smartphones and beyond.
• Total company compliance, offering managed and cloud services that recognize corporate compliance and e-discovery policies.
• Speed to recovery, promoting the fastest approach possible to bring a business back online when physical devices are knocked offline or completely destroyed.
• Anywhere, anytime virtual support, promoting the ability to protect data as it leaps between virtualized on-premise systems and virtualized cloud-based systems.

Yes,  cloud storage is a growing market. But I think there are too many cloud storage vendors chasing the channel. A shakeout is coming. For MSPs, it’s time to differentiate — with your back-end service provider — now.