Free Still isn’t Free

How many of the storage providers can long afford this race to the bottom?

By ownCloud GmbH

ownCloud secure cloud solution for filesharing

At the risk of being redundant, I have to comment on the Canonical Ubuntu One story.

Jane Silber, Canonical’s CEO, said:

…. the free storage wars aren’t a sustainable place for us to be, particularly with other services now regularly offering 25GB-50GB free storage. If we offer a service, we want it to compete on a global scale, and for Ubuntu One to continue to do that would require more investment than we are willing to make.

Here was a case of Canonical, a terrific company by any measure, getting caught in that sucking vortex of “free storage.” When millions are taking advantage of “free” cloud storage, the few (industry average is below 5%) who are paying – are REALLY paying the freight. And, as we’ve seen with Canonical, how many of these storage providers can long afford this race to the bottom?

Don’t misinterpret this, there is nothing wrong with Free. But there seems to be this concept in the market today that you can give cloud storage away for free, and make up for it in volume. This makes sense if some people pay, but when more and more is offered for free…the math of recouping that “free” on the backs of those that pay begins to not balance. Give more for free, fixed costs remain…the business model will not work. This is what Canonical found out, and I bet we see more and more of this shake out in the near future.

Why is this cost being driven to zero? Because at least one big player in this market is using storage as a loss leader for other business. Yes, it is Google. More people will jump on Google drive because they get more storage for free (up to 50GB). For Google, this is great – it is a loss leader for their advertising revenue stream. Be wary if your business model is storage (I am talking to you, Box).

Of course, our model is looking really good right now. We too offer free, but it is in the open source model. We don’t sell storage at all. Install us into your existing IT infrastructure, leave your files where they are, take advantage of the investments you’ve already made. Provide users access to files when and where they need them, from any device. And, give IT a single point of control over business files.

So what is the punch line? First, to Canonical users, take a look at ownCloud as the Ubuntu One service unwinds – you will probably find what you need. Second, to enterprises, beware of your provider. Understand their business model, be wary of lock in, and remember that – especially in the enterprise – the best things in life are rarely free.

ownCloud GmbH

April 4, 2014

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