Game On: Nirvanix and IBM Disrupt the Storage Industry

The Event

Today, Nirvanix and IBM announced a new strategic relationship for the worldwide delivery of enterprise cloud storage services. The relationship – formalized through a five year OEM agreement – has IBM integrating cloud storage technology from Nirvanix as part of an expanded IBM SmartCloud Enterprise storage services portfolio available to customers worldwide.

Nirvanix has become well known for its class leading enterprise cloud storage services described in this Neovise blog post earlier this year: Getting it Right with Enterprise Cloud Storage

Neovise believes this combination of IBM and Nirvanix is a disruptive event for the traditional enterprise storage industry which is based heavily on selling storage hardware – or boxes – to enterprise IT organizations.

Cloud Computing as a Disruptor

With every major technology disruption there is a chance for established leaders to be replaced by other companies that are quick to deliver innovative solutions using that new technology. Cloud computing in general is currently spawning some of the most important technology disruptors in the IT industry. In fact, cloud computing is also presenting some of the most important business model disruptors by enabling everything from applications to compute cycles to storage capacity to be delivered as a service. With cloud computing, companies of all sizes, budgets and technical competence can now take advantage of IT capabilities that were only available previously to large companies with deep pockets and sophisticated IT organizations.

Every disrupted market has incumbents. In the case of traditional enterprise storage, those incumbents include the likes of EMC, NetApp, Hitachi, Oracle, HP and others. These companies have large numbers of Fortune 500 customers collectively spending billions of dollars per year buying, deploying and managing storage boxes. Of course boxes are not all bad, and these companies have some of the best storage hardware in the world. The problem is that the world is changing quickly and most of these incumbents are not adapting fast enough. IBM and Nirvanix are poised to disrupt them.

Stuck in the Mud

Companies with massive revenue streams based on old technologies have a hard time innovating. They are often worried about cannibalizing themselves. So, to preserve an old technology – sometimes along with an old business model – they resist the change. This comes in many forms. Incumbents may initially claim that the new technology doesn’t work and then, over time, ease back to saying the new technology just isn’t good enough.” Then, when they see firsthand proof in the market (a.k.a. deal loss), they’ll start warming up to the new technology. One common approach is to add new marketing to the same old technology. In cloud computing this is called “cloudwashing.” Here are a few of the key signs that incumbents are cloudwashing their storage offerings:

• Ask for up-front payment
• Require fixed payments, regardless of storage use
• Have little or no pooling of storage resources
• Missing control / governance capabilities for multiple types of users or organizations
• Require maintenance and product refresh fees
• Are lacking an object store and support for REST APIs

Too many incumbents are stuck in the mud with traditional storage hardware and are addicted to the economics of their old business models. Unfortunately, they are not moving quickly enough to deliver enterprise storage services that deliver the scale, elasticity, pricing and flexibility promised by enterprise cloud storage.

The traditional enterprise storage market is ripe for serious disruption. All it needs is a catalyst. That catalyst came today when IBM joined forces with Nirvanix.

Nirvanix has the technology. IBM has the reach.

Nirvanix has delivered enterprise-class technology that IBM deems worthy to integrate with its SmartCloud Enterprise services. The joint press release by these partners said it well: “With the integration of Nirvanix cloud storage technology, IBM's SmartCloud Enterprise storage services will provide customers with a solution designed to support millions of users, billions of objects and exabytes of data to complement IBM's existing security-rich, virtual server environments in the cloud.”

Further, there is no doubt that IBM will integrate and leverage this service across business units, product lines, vertical markets and global geographies. This is where IBM shines. Leverage, leverage, leverage. When IBM acquires a company or forms a strategic partnership like this one, it isn’t just about incremental revenue for a single product or service. It is about leveraging IBM Global Technology Services, which had $37B in revenue during 2010; and IBM Global Business Services, which generated $18B in revenue; and IBM Software with $22B; and IBM Systems and Technology with another $18B. Each of these organizations will contribute to the success of this strategic partnership.

IBM expects $7B in cloud revenue by 2015 – including $3B incremental – and Neovise expects a meaningful portion of that growth to come from this partnership, both directly and indirectly.

There is one IBM organization that is likely to have little or no impact: IBM Global Financing. With cloud storage services, IT organizations – large or small, rich or poor – simply do not need financing. Cloud storage is all about pay-as-you-go and pay-per-use. No capital investments. No large upfront payments. Businesses that consume cloud storage from Nirvanix and IBM simply pay highly competitive rates for enterprise cloud storage that delivers premium capabilities like:

• Proven, petabyte-scale, enterprise-class cloud storage
• Immediate data consistency across multiple datacenters throughout the world
• A global namespace that provides continuous access to data at multiple, redundant locations for optimal performance and business continuity
• Self-healing for continuous data integrity and automatic repairs
• Unlimited File Sizes so that any file can be uploaded anywhere

Nirvanix got it right with enterprise cloud storage and these features had a lot to do with it. While Nirvanix already had a who’s who list of Fortune 500 businesses as customers, the partnership with IBM will broaden that penetration and drive it far deeper. By endorsing Nirvanix, after an in-depth vetting process, IBM has just pre-approved enterprise cloud storage for the rest of the world’s largest companies.

There are quite a few other differentiators and outstanding features enabled by Nirvanix technology (e.g. end-to-end visibility and management, bundled bandwidth costs, military grade security, etc.). Check out the Nirvanix and IBM sites for more information on specific service attributes.

Consumer Cloud Storage is not Enough for the Enterprise

There are a number of exciting and successful cloud storage companies out there today, like Box.net and Dropbox. Yet, a quick perusal of the enterprise level features just listed suggests why many of these companies are not going after enterprise cloud storage. It is hard, hard work and takes tremendous intellectual property to deliver services with these capabilities. Sharing files between laptops, desktops and smartphones is exciting and valuable. But that is not enough for the enterprise.

Amazon, with Amazon Web Services (AWS), is another company that may come to mind. Consider the Amazon Simple Storage Service (S3) offering. Amazon has shown interest in the enterprise cloud storage market by offering a six figure per year support model around S3 for $180,000 per year or $15K per month. Yet they are all about serving developers. The worst thing the incumbent storage vendors could do would be to look at S3 as the company to beat in the enterprise cloud storage market. Sure, all of these vendors have seen some data moving to S3 that would otherwise have landed on their hardware. But don’t mistake Amazon, with S3, as an enterprise-class cloud storage provider.

Next Steps for the Incumbents

Unfortunately for the incumbents, history suggests – and current progress has thus far shown – that most of these incumbents will move too slowly to become leaders in the enterprise cloud storage market. That certainly doesn’t mean that they are all about to go out of business either. What it suggests is that they will face increasing margin pressure as IBM and Nirvanix team to disrupt traditional enterprise storage. The old hardware guard will increasingly realize that strategies and roadmaps for responding to the threat of cloud technologies and business models must be accelerated.

More importantly, the incumbents will also continue to face the dilemma of how to adapt to the increasing threat (and opportunity) of cloud computing, while maintaining their current technologies and economic models. These are not necessarily mutually exclusive. However, trying to do both together rather than separately may result in slowly failing at both.

Game on!