Will your public cloud provider still be in business 5 years from now?

One of the scariest aspects of moving to the public cloud is the chance that your cloud provider could shut down the services you leverage and leave your data or compute infrastructure on the virtual streets.  This would remove the value that public cloud computing brings, forcing enterprise IT to quickly move data and/or applications to another public cloud service, or, more likely, back in-house.

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Of course, the cloud providers would tell you that there is a low probability this would occur.  For the most part, that’s correct.  However, we’ve been seeing a few cloud providers pull back public cloud services, typically around changing business objectives or the business going under.  In the future, we’ll see more services removed around consolidation activities, even political battles within the cloud provider executive teams.

Just a few years ago, EMC shut down Atmos online cloud storage service, with many of their customers left out in the cold.  That was due more to EMC not wishing to conflict with their own channels than with the business not being viable.  However, many of their existing cloud storage customers had to rush around and quickly find other storage solutions.

There will be more examples of cloud companies that remove services from their network for any number of reasons.  We just saw Google shut down Google Reader, as well as many other services that they deem to be lacking in popularity.  However, those who used these services daily and had to scramble to find alternatives were not happy campers.

These days we seem to be moving from issues around the sun-setting of cloud computing services to outright business failures.  As reported by Barb Darrow, “Nirvanix, the cloud storage provider based in San Diego, is about to shut down, according to reports in CRN and  InformationAge report which says customers have been given two weeks to migrate their data elsewhere.”

These are instances where the company was just not viable, and the VC (Venture Capitalists) pulled the plug.  Of course, existing Nirvanix customers are left on their own to find other storage solutions.  Fast.  I suspect that any value they were able to gain by using the public cloud quickly went away once their provider went under.

Although cloud computing continues to grow by leaps and bounds, the price pressure from the larger players such as AWS, Microsoft, Rackspace, Google, and others will make it more difficult for venture-based cloud providers to remain alive.  VC firms are quick to pull their support if they feel like good money is chasing a bad business, typically without regard for existing customers.

This practice is nothing new.  Software companies have deleted products for years, removing support over time.  However, within the world of cloud computing, it’s a lot more abrupt, considering that it’s a service that is just turned off.

This will get worse if more of the smaller players go under.  Most enterprises won’t want to take the risk with small cloud providers, and will opt for larger and more established players.  Thus, the market gets worse for the smaller providers, and a death spiral for many of them could likely begin.

Judging from the cash burn and the market horizon, many of the smaller cloud computing providers will be in or out by the end of 2014 or early 2015.  However, most customers won’t see the end coming.  I’m sure, in some instances, the service could shut down overnight, leaving data locked in cloud servers that are perhaps sold at auction at some point.  Mind you, this is an unlikely worse-case scenario.

So, how should enterprises approach this problem?  You need to consider the issue of viability as a risk, which should be factored into the other risks of moving to the public cloud.  Keep in mind that, even if you leverage a larger cloud provider, they may pull the plug on a specific service that you leverage.  The impact to your business will be about the same as if the entire cloud provider went under, like Nirvanix.  So, there are no sure paths here.

The best approach is to make sure you build in a contingency plan when you migrate data or applications to a public cloud provider.  Understand exactly what you’ll do if, for some reason, the cloud services are removed.  This includes migration to another public cloud provider, or, perhaps, bringing the application or data back in-house.  Pre-planning will remove most of the initial panic, and remove some of the cost of risk.

Other ways to protect yourself include writing language into the SLAs or other agreements, which requires the cloud provider to notify you well in advance of a service being removed or changed.  While this may not help when funding is suddenly pulled from smaller public cloud providers, it will provide some degree of protection and predictability with cloud providers that simply change their minds.

So, will your cloud provider be around in 5 years?  Most of the larger players will still be here, with a few exceptions.  However, the smaller players may find themselves part of a larger player, or, they will still battle on alone, or perhaps be out-of-business.  We just need to make sure to build these outcomes into our cloud computing plans, which is perhaps no different than how we dealt with other emerging technologies in the past.  However, the as-a-service aspect of cloud computing services raises the stakes on the risks and the costs.

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David S. Linthicum

SVP Cloud Technology Partners

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