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Howard Marks
Howard Marks
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Nirvanix Killed By Unforgiving Cloud Economics

Cloud storage provider Nirvanix, which is closing its doors, ran afoul of harsh cloud financing models.

In what is just about every public cloud user's worst nightmare, cloud storage pioneer Nirvanix quietly informed its customers and reseller partners that it would close its doors at the end of September. Customers have two weeks to migrate all their data off the Nirvanix platform or risk losing that data forever.

Nirvanix concentrated on large customers with petabytes of storage, so customers face the daunting prospect of migrating all that data into their data centers or to an alternative cloud provider. By comparison, when Iron Mountain shuttered its cloud storage platform in 2011, the company kept the infrastructure up for about nine months.

Cloud storage is a capital-intensive business. Providers like Nirvanix have to pay cash up front to develop software to turn piles of servers into a scale-out object storage platform--and of course buy the servers and disk drives that store their customer's data. They then collect money from their customers--a few cents per gigabyte per month. The more customers you sign up, and the more data they store, the more cash you need to raise to pay for that expensive infrastructure.

At the same time, big competitors regularly push their own prices down, which forces other providers to follow suit.

[Risks abound in cloud services. For more details, see Data Protection In The Cloud Era."]

Nirvanix's expenses were a bit higher than the typical OpenStack Swift implementation because its infrastructure was built on Windows servers, so the company paid Windows licenses for the many servers that acted as storage nodes. While that wasn't as bad as Iron Mountain, which used classic enterprise storage from EMC as the basis of its offering, it was apparently bad enough.

Big boys like Google, Amazon and Microsoft can generate the cash that's the lifeblood of their cloud storage services from their other operations. Independent cloud storage providers and backup vendors such as Carbonite or Backblaze have to entice venture capitalists and other less reliable sources of funding.

More generalized cloud providers such as RackSpace, or even AWS, can leverage more profitable compute and integration services to help carry the cost of their object storage offerings. As a pure cloud storage player, Nirvanix was at the mercy of its VCs.

Nirvanix was able to raise about $70 million over the years from Valhalla Partners and Kkolsa Ventures, but the company apparently ran out of cash and wasn't able to show a clear enough path to profitability to raise more.

As one would expect, competitors are circling trying to steal Nirvanix customers as in the Tweet below from Google:

#Nirvanix customers, sorry to hear the bad news. Have $1,000 in Cloud Storage on us to get started. Coupon: gcpn-in goo.gl/hpn9gA

What I haven't publically seen yet is a competitor offering to transfer data from Nirvanix to its own cloud over a high-bandwidth link. Nirvanix rented space in public data centers run by the likes of Equanix and offered high-speed connections to other Equanix tenants.

If I had several petabytes of data in the Nirvanix cloud I would want to move it over Gigabit, or even 10-Gbit, connections inside the data center rather than suck it down my comparably skinny Internet connection and back up to a new provider. One cloud storage provider told me sotto voce that it is offering this kind of service, but wanted to avoid looking like it was dancing on Nirvanix's grave.

The one ray of hope in all this comes from UK-based Nirvanix partner Aorta Cloud, which is attempting to keep the Nirvanix storage cloud up and running.

According to CEO Steve Ampleford, the plan is to go into a maintenance mode that lets existing customers have enough time to migrate their data in an orderly fashion while they see if they can create a son of Nirvanix successor to run the Nirvanix technology across a smaller number of data centers. Aorta Cloud says it has a seven-figure commitment for funding, which makes the plan a lot more credible.

[Update: Several hours after this blog was posted, Aorta tweeted that IBM was supporting its rescue bid. IBM was reselling Nirvanix services as part of its cloud offerings, so it makes sense to me that IBM would, at the very least, find it unacceptable that its customers would have to scramble to move their data in such a short time.]

Given the huge costs some customers are facing over the abrupt shutdown, I'm pretty sure that given sufficient cooperation with Nirvanix's management and investors, the Aorta folks can make life easier for the poor Nirvanix customers. If you're a Nirvanix customer you can follow their progress at here and/or contact them at nirvanix@aortacloud.com.

While cloud storage makes a lot of sense for many users, these developments are just another reminder that if you outsource functions like storage management, you still have to plan for what you're going to do when things don't turn out the way you planned.

Disclaimer: While I'm friends with several former Nirvanix employees and investors, I have no business relationships with Nirvanix or Aorta.

[ Howard Marks delves into everything you need to know about flash in "SSDs In the Data Center" at Interop New York, from September 30th to October 4th.]

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Ian Moyse
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Ian Moyse,
User Rank: Apprentice
9/20/2013 | 4:43:18 PM
re: Nirvanix Killed By Unforgiving Cloud Economics
Cloud like any market will have winners and losers and customers need to do diligence on their provider which should include off boarding meaning how easy is it to get your data back in a usable format and move elsewhere should you choose or need, Good cloud providers will make this easy and are open and up front about their provision for this,. Cloud is a long term play as a provider , not a quick buck market and unless you differentiate the customer value you deliver you can rapidly become marginalised and commoditised. The issue in this case is the lack of time allowed to their customers to take the required action due to not provisioning contingency into their own business models ahead of time. Cloud in the majority is a highly positive outcome for the customer, their will be exceptions like this along the journey of cloud evolution as there was in the product world.

Ian Moyse

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MarciaNWC
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MarciaNWC,
User Rank: Apprentice
9/19/2013 | 7:38:38 PM
re: Nirvanix Killed By Unforgiving Cloud Economics
What would be your recommendation for companies contracting with cloud storage providers?
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