Summary:

Last week Iron Mountain shut down its cloud-based Virtual File Store service. Iron Mountain’s hard luck in cloud storage is surprising, but it might just be another instance of an old-school company trying its hand in a new market where it couldn’t compete.

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Almost a week after closing down its cloud-based Virtual File Store service, archival expert Iron Mountain has replaced CEO Bob Brennan, a situation some are pinning on Brennan’s big investment in the failed cloud storage business. Iron Mountain’s hard luck in cloud storage  is somewhat surprising considering the growth of many providers and the big money that venture capitalists are pumping into cloud storage services. However, it might just be another instance of an old-school company trying its hand in an entirely new market in which it wasn’t cut out to compete.

Nasuni CEO Andres Rodriguez e-mailed me his thoughts on the situation, and he’s particularly well qualified to talk about it. Nasuni provides a cloud-based file system that relies on cloud storage providers for the actual storage, and Iron Mountain was among its partners until recently. “The fact of the matter is, cloud storage infrastructure providers must grow very rapidly, or else they will not achieve the economies of scale that enable them to be profitable,” he explained. “Iron Mountain is an example of a company that was unable to achieve this scale.”

Iron Mountain isn’t the first cloud-based storage service to close shop (luckily, it’s just a fraction of the company’s business), and Rodriguez doesn’t seem to think it will be the last. He added that:

Over time, we will see more consolidation and a few extremely large players will dominate the market.  Large web properties like Amazon and Google have the required infrastructure in place already, and thus are likely to have the most long-term viability — their own infrastructures trump even the largest enterprise data centers in the world.

Presently, Nasuni utilizes the following cloud storage services: Amazon S3, AT&T Synaptic Hosting, Microsoft Windows Azure, Nirvanix Storage Delivery Network, Peer1 CloudOne and Rackspace Cloud Files. Other cloud-storage startups, such as Cirtas Systems, also leverage the cheap storage of some of these providers as the backends of their value-added products.

Apart from economies of scale, Iron Mountain also might have suffered from a lack of vision surrounding its cloud business. Of Nasuni’s current storage providers, for example, Nirvanix is the only provider without a cloud computing service to bolster its storage offering, but it has raised $45 million to help its cause.

One might also look for answers in VMware taking over operation of the Mozy cloud storage service for parent company EMC. Mozy has a both consumer- and business-focused offerings, which gives it a broad base of potential users. Going forward, its association with VMware all but guarantees that Mozy will have a cloud computing story, too, as VMware is working hard to integrate its deep cache of cloud components.

Cloud storage is big business, but it’s also very competitive, and providers need something to distinguish themselves. Whether that’s a cloud computing connection, massive economies of scale or just a laser focus on the product, they have to do something. Iron Mountain, it seems, just never got its cloud story in order, but considering its legacy as a physical archiving and backup provider, it might never have had a chance.

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