HP, Yahoo Shutter Online Storage Plays

The much-hyped market for online data storage appears to be winnowing, and a few high-profile names are among the casualties.

HP (NYSE: HPQ) and Yahoo (NASDAQ: YHOO) have notified users that they will be shutting down their online data backup services at the end of the month, following the closure of AOL’s XDrive service in January.

Yahoo’s free Briefcase service was bypassed by users who preferred the greater storage capacity of its e-mail and Flickr offerings, while the XDrive Web site now directs users to offerings from Box.net and ElephantDrive.

HP’s Upline service got off to a rocky start last year, suffering an outage soon after it launched in a blow for one of the cloud storage market’s higher-profile entries. HP is no longer backing up customer files, but will allow customers to access files through the restore feature through the end of the month.

And all this before Google’s (NASDAQ: GOOG) long-awaited GDrive service even arrives.

Taneja Group analyst Jeff Boles said the closures are “the wheat and chaff separating out” in an industry that is just beginning to mature.

Storage vendors, he said, “keep taking a run at this hosted storage thing with very little innovation in how we are trying to do it. Moreover, at the consumer level, some of these services remain pretty hard to use, try to tackle too much, or represent a partial set of functionality.”

The most successful consumer services, like EMC’s (NYSE: EMC) Mozy and Box.net, are targeted at narrow use cases like backup or single user archives, he said. “I think we’re seeing the community filter out the strongest players there, and you can easily tell who the front runners are,” said Boles.

For the higher end of the market, Boles said, “we’re just starting to see real innovation take place, supported by thoughtfulness about how users work together and collaborate.”

Services have paid little attention “to how technology might be able to bridge the gaps presented by remote storage, and harness Web app extensibility to add something to traditional collaboration,” said Boles.

For now, Boles wants to see “something that has more caching and performance, while maintaining the lightweight front ends that Web users expect. Ideally, for the end user, a small form factor appliance that can do some differencing and bridge a network time machine-like approach to the cloud is what I’m shopping for,” with file syncing and deep operating system integration.

Boles said Iron Mountain’s (NYSE: IRM) VFS file archiving service is a “validation” of caching approaches, a strategy pioneered by Nirvanix. “It seems natural that this will start moving downstream in software eventually, and create an ecosystem where users can collaborate better,” he said.

Greg Schulz, founder and senior analyst at StorageIO, said of the cloud storage market, “There is too much confusion, too many solutions, and not enough revenue or paying customers today, especially if your cloud service is not being subsidized
via some other means. In the future, this could all very well change as IT
customers realize where and how cloud-based services are complementary. … However, like the dot.com era, hold on to your hat, as the cloud crowd is just getting warmed up. … It should be fun to watch and make for good conversation, and maybe for some, even involve some business.”

But analyst Lauren Whitehouse of Enterprise Strategy Group said she doesn’t think there are too many cloud service providers, although the tough economy could be limiting uptake.

“I think that it’s a tough game to be in,” Whitehouse said. “This is a land grab, and there is high flight risk. I can sign up with anyone I want, whenever I want. I think these vendors are only as good as the level of service they offer, price they charge, or latest-greatest feature, and not necessarily in that order. If the vendor has the business model that allows them to be cost-competitive while still maintaining good service levels and they continually innovate, they are in good shape.”

HP Upline “had some service-related issues,” she said. “I also think HP limited its sphere of influence with how they positioned and sold the Upline service.”

This story originally appeared on Enterprise Storage Forum.

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