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Summary:

Last week in my analysis of online storage sector, How to standout in the sea of storage startups, I pointed out that many startups were having a tough time convincing folks to upgrade from free to paying services. That post got many reactions, including a comment […]

Last week in my analysis of online storage sector, How to standout in the sea of storage startups, I pointed out that many startups were having a tough time convincing folks to upgrade from free to paying services. That post got many reactions, including a comment from Raghu Kulkarni, founder and CEO of Pro Softnet, a Woodland Hills Calif.-based company.

His company runs two online storage services, IDrive and IBackup. While IDrive is a more consumer-focused backup service, while IBackup caters to the enterprise crowd, because of its additional capabilities. Think of them as Mozy and Mozy pro, says Kulkarni, who claims that his self-funded (bootstrapped) outfit is growing almost 50 percent every year.

Revenues for 2008 are projected to be $12 million, up from $8.3 million in 2007 and $5.4 million in 2006. The company has been profitable for three years now, but Kulkarni declined to share profits data. At present, the revenues are split 70/30 in favor of IBackup, but he is betting this is going to change soon. “The conversion rate for free to paid for IDrive is about 15%,” he wrote to me in a subsequent email exchange. “Early 2007, we had to create a version of IBackup to compete in the low priced segment, hence the IDrive product offering.” The company has about 250,000 users and stores many petabytes of data, Kulkarni says.

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  1. Om-For companies like iDrive and iBackup to get more revenue, they will need to invest in Go to Market and Distriution. For cracking the SMB and in some cases Enteprise market , leveraging Service providers and VAR for fulfillment and sales will be the most important factor in increasing adoption of Storage as a service offers.

    Classic SaaS approach of Direct sales to end user model won’t scale

  2. Hi Om –

    Thanks for showing the other side of the story. There are most definitely exciting businesses to built providing online data services like backup, storage, and access.

    The large market opportunity has certainly drawn a great deal of interest and many new entrants, but the fact remains that this is a challenging software service to deliver. It’s easy to provide the solution to 50 or 500 users; it’s challenging to provide to 50,000 or 500,000 users (or many more). We’ve seen a number of failures because many of the entrants simply couldn’t scale.

    I’m also glad to see you highlight Raghu and ProSoftNet. As an avid watched of this space, I have often seen Raghu’s justifiably frustrated posts when blogger’s provide detailed coverage of a company that simply issues a press release and has a cool looking interface, without mentioning companies like his that are doing good work. I’ve felt the same sort of frustration myself, as ElephantDrive (http://www.elephantdrive.com) has been providing a rock solid service to a growing paid subscriber base built by a bootstrapped effort.

    Raghu – keep up the good work. We would much rather compete against a quality offering that have to fight the growing lack of faith in the online storage space that other failures engender.

    Om – keep up the good work. As I said above, it is great to see you present a variety of perspectives on the online backup and storage space. This is what separates GigaOm from the pack.

  3. Raghu Kulkarni Tuesday, August 12, 2008

    Thank you Michael.

    I think the tech blogs are doing a great job in general; their insights are very useful. They are excellent at analyzing social networking ins and outs, new gadget reviews, cloud storage and the works.

    The thing with online storage and backup is that it takes time to study. This is the biggest bandwidth hogger for any Web application. Nothing comes close. Online backup is inherently slow, so to do a proper analysis of a product, it might take days to figure out pros and cons for each product.

    So most resort to a quick and dirty review based on published information, ‘noise’ and look and feel.

    Even S3, the famed amazon service – amazon only published that they use more resources on this than their main stay services. So what? cloud storage services are infrastructure intensive. That has no relevance on the revenues and the profit potential.

  4. Carbonite CEO: Online Backups Sell – GigaOM Sunday, August 31, 2008

    [...] How to standout in a sea of storage startups resulted in a spirited conversation, including some really insightful comments here and else where on the web. Raghu Kulkarni, CEO of Pro Softnet, a Woodland Hills, [...]

  5. I have tried Carbonite, Mozy and Idrive.

    I must say that Idrive is way better than the other two products.

    However, what is missing from Idrive/Ibackup is leadership in promoting their products out in the market. Their marketing plan sucks. They hire poor Indians to blog about their products for peanuts and they expect, out of these blogs, that they will sell their products.

    To the contrary, Carbonite has been spending millions of dollars taking the subject of online backup to nationally syndicated radio talk shows, by sponsoring, e.g., the Rush Limbaugh, Howard Stern and other shows. This is a brilliant marketing plan.

    Mozy is now acquired by EMC, this means EMC can spend their millions as they have deep pockets to promote Mozy.

    I believe that Idrive/Ibackup could emerge in the top if it tries its best to promote their products. Mind you Carbonite and Mozy are fairly new companies compared to Idrive/Ibackup, but any time someone blogs about online backup, only Carbonite and Mozy are mentioned as examples. What does that say?

    Idrive/Ibackup claims that they are making profits, but how long will that continue? At their current marketing plans, not for a long time. Other aggressive companies will take over Prosoftnet’s market share.

  6. PC Makers Give Storage Startups a Boost – GigaOM Friday, September 5, 2008

    [...] One Online Storage Startup Backs Up Profits [...]

  7. Great post Om, this sector is growing very quickly. There are tons of providers out there as you already know and posted on. I was actually trying to find a solution for my self in that sea you spoke of and found if very difficult to sort them out. Thus I recently reviewed 37 of the top online storage and backup services and decided to share them. My review includes a comparison spreadsheet that includes pricing, storage amount, and available features that are offered by each provider. You can find it here: http://tomuse.com/2008/09/01/ultimate-review-list-of-best-free-online-storage-and-backup-application-services

  8. Alec Reynolds Friday, October 10, 2008

    I backup my files and emails with a very easy to use software called Titan Backup, the destination is a 500gb WD harddisk, but the company stated that an online feature is under work also. Give it a free trial here.

    I also got my hands on a 30% discount coupon from them, during the order process enter this coupon:NEOB-M5VL

  9. CTERA Doubles Down On Storage Tuesday, January 6, 2009

    [...] about to back up information while the computer is turned off, but it still will face a battle for differentiation and profits in the crowded space. Want to know more about the rapidly changing Cloud Computing landscape? [...]

  10. Why Google Needs the GDrive to Fight Microsoft Friday, January 30, 2009

    [...] They can charge for these services, but that means a long gestation period. There are some that manage to make a decent living offering back-up services, but such revenues would represent little more than a drop in Google’s overall business [...]

  11. IDrive and IBackup are good services. They have been in the shadow of Mozy and Carbonite but I can see that changing in 2009. I would not be surprised if IDrive exploded this year with some of the controversy Carbonite has had recently over stacked reviews.

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