A Small Company Of 40 Employees Is Waging War On Amazon's Biggest Business
Companies like Amazon (AMZN) - Get Report , Microsoft (MSFT) - Get Report and Alphabet's (GOOG) - Get Report (GOOGL) - Get Report Google have enjoyed success and strong profits for years with various cloud computing services. A company known as Backblaze plans to edge in on that territory.
Backblaze has operated a consumer data backup service for nearly a decade, attracting hundreds of thousands of paying customers. It's now entering the enterprise ring, offering cloud storage to businesses seeking their own extra storage space. The new service is called B2, currently operating in private beta with 13,000 customer signups ready to start using it on day one. Businesses can use it for "anything at all, as long as it's legal," said CEO and co-founder Gleb Budman.
B2 poses a threat to its much-larger opponents by being more affordable and easier to use than what some of the larger corporations charge. It charges a flat rate of half a penny per gigabyte stored per month, with outbound data billed at five cents per gigabyte. This enables all order of backups, data recovery, and data-storage-in-the-sky without breaking the bank.
"Cloud pricing can often be complicated, because different providers charge for different aspects of storage: uploads, downloads, API calls, snapshots, etc.," said Brian Gracely, Senior Analyst for Wikibon. Backblaze turns this paradigm on its ear.
Its products are built in-house on proprietary technology; it can set its own prices without kowtowing to anyone. Just as Dropbox uses Amazon's S3 cloud service as its foundation, the next Dropbox might be built on top of B2 for about one quarter of the cost. "If we can save a penny here and save a penny there, it adds up at scale," said Budman. "When we started, we used consumer drives and built redundancy into the software. They work at half the price of enterprise drives."
It's a method that has come under fire in the past -- Budman cited "various pundits and drive companies" who rail against using consumer drives in a data center.
In order to publicly demonstrate that it works anyway, Backblaze started publishing its drive failure rates. They fail at roughly 5% per year, which is "perfectly reasonable and acceptable," he said. The company stores 150 million gigabytes of data on hard drives you might buy off the shelf at Best Buy. It doesn't yet require enough hard drives to establish a direct relationship with manufacturers, so perhaps ironically, it has at times filled out its data center with large hard drive orders from Amazon.
One analyst encourages companies seeking a cloud solution to look beyond low cost. Arun Chandrasekaran, Research Vice President at Gartner, said "[Costs] are an important consideration, [but] other factors-such as availability of compute environments, automation tools, the breadth of storage services, a vibrant marketplace of software-as-a-service providers, and support, as well as integration with on-premises infrastructure-are important considerations for enterprise IT leaders and developers."
Vineet Jain, CEO and co-founder of enterprise filesharing company Egnyte, raises a flag in another department: "They currently only have one data center, which can be a concern from a durability standpoint... I can see them as an affordable option for storing secondary copies [of data], but then they would run into stiff competition with Nearline or Glacier in that scenario."
Amazon Web Services is the business to beat in this space, but its operations are quite shrouded and its financials were only just recently detailed to investors. Backblaze, on the other hand, regularly tells all on its blog. The technology that powers its data center, the Storage Pod, is open source; anyone with the desire and ability to do so can build their own at home. The company today published details on its fifth-generation Storage Pod, which will enable B2.
"Amazon's storage business is believed to be between $1 billion and $2 billion annually, making it the fastest-growing storage company in the world," said Wikibon analyst Gracely. "While Backblaze has been growing over the last four or five years, their growth does not seem to have any impact on Amazon Web Services' growth during that same period of time."
Backblaze is undeterred, having already succeeded where others have failed in the cloud. Microsoft decided that unlimited backup was unsustainable, and pulled the plug on that element of its cloud business. HP got out of the business entirely. Meanwhile, Backblaze maintains a robust cloud storage business-customers only need pay per gigabyte they use.
Budman confirms that Amazon is aware of his company. One of the questions asked during the B2 signup process was a joke: "Are you an Amazon employee?" Budman said two answered yes sincerely, that they were keeping tabs on competitors."
B2 is on track to launch later this year.