By Category By Month Recent Posts
Consumer Internet IPOs Consumer Internet M&A Enterprise Internet IPOs Enterprise Internet M&A

« Top 10 Software Stocks of 2006 | Main | Private Equity's Software Buying Binge »


36 Days: Online Storage Ain’t All It’s Backed Up To Be

Online back-up is getting a lot of press lately thanks primarily to a slew of Web 2.0 start-ups focused on online storage/back-up as well as the impending debut of Windows Vista, which imbeds back-up functionality into the core operating system.

On the surface online backup seems very appealing. Not only do you get anytime/anywhere access to your data, but you also get professionally managed, secure, and (hopefully) disaster proof off-site storage. What’s more, thanks to rapidly declining storage prices and generous VCs willing to subsidize “loss leading” businesses, all this goodness can generally be yours for the very low price of “free” for quantities under 5GBs and just $50-$100/year for 10-100GBs of storage.

But before you decide to “upgrade” to online backup be sure to do some basic math. You see, as great as online backup/storage is, it also happens to be painfully slow thanks to the very poor upstream bandwidth associated with most Internet connections. For example, while the average cable connection might advertise a 1.5 megabits per second (mbps) download speed, that same connection can usually only upload at 256 kilobits per second (kbps). Fact is, the average consumer and most small businesses are stuck at somewhere between 128 kilobits and 768 kbps for their upload speeds.

Why does this matter? Because it takes a long, long time to back-up a reasonably sized hard drive at 256 kbps per second. How long? Well if you have 100 gigabytes (GBs) of information @ 128 kilobits (kbps) per second it will take almost 36 days!!  (And that assumes your connection is working perfectly the whole time.)  See the table below to see just how long your connection would take to back-up 100 gigabytes:

Connection SpeedDaysHours
64 kbps15117
256 kbps3515
1.5 mbps (T1)522

Granted, most online backup services only force you to do a full back-up once and then do incremental back-ups thereafter (often in the background), but even incremental back-ups will run several gigabytes (my outlook files only take up close to 2 gigs) and that will take a least 24 hours to run. Compare online backup to the more pedestrian external drive alternative and the advantage is clear: while it takes 36 days to backup 100 GBs over your cable connection, a standard Firewire drive can handle that in about 1 hour. Add the fact that a 120GB external drive will only set you back $100 these days and it seems pretty clear that online back-up won’t be threatening external drives anytime soon.

Once you realize that backing up your hard drive can take up to 36 days, you tend to look at online back-up in a slightly different light. First you realize that online back-up is really a misnomer as online storage, for now, is practically limited to small subset of files that are either A) so critical that you need to have remote copies of them stored away for safe keeping or B) important enough for you to need to have anytime/anywhere access to them C) files that you need top share with others on a regular basis. For true backup, nothing beats a decent external drive attached via a Firewire cable. Second, you realize why some start-ups are charging only $100/year for 100 GBs of storage: because they know that almost no one will be able to use that much capacity.

Ultimately, the real promise of online storage is not as a backup medium, but as the primary storage medium behind the “web desktop”. This is worthy of a whole other post, but suffice it to say, the combination of very cheap online storage with reasonably fast downstream bandwidth and next generation web browser interfaces makes it increasingly likely that a lot of user data will never leave “the cloud”. When this happens the desktop (and its OS) become much less relevant and that is why Google is so excited and Microsoft is so scared. But as I said, that is best left for another post.

January 15, 2007 | Permalink


Legal Disclaimer

The thoughts and opinions on this blog are mine and mine alone and not affiliated in any way with Inductive Capital LP, San Andreas Capital LLC, or any other company I am involved with. Nothing written in this blog should be considered investment, tax, legal,financial or any other kind of advice. These writings, misinformed as they may be, are just my personal opinions.