Tuesday, 2 December 2014

Bitcasa’s unlimited storage “a wildly money-losing proposition”

When Bitcasa opened for business in 2011, it attempted a business model that would eventually result in the end of the hard drive in favour of unlimited storage on a Bitcasa cloud server. The company had every intention of being a serious competitor to Amazon and others offering inexpensive storage capacity for cloud computing. However, its own business model could end up being the California company's very undoing.

In October 2014, Bitcasa announced an end to their popular Infinite Drive platform of unlimited storage for $999 annually.  It gave customers just three weeks to migrate data to one of its new fee-based options or take their business elsewhere.  Those who did not act were informed that they would risk the potential loss of all their data.  This did not sit well with some customers, resulting in a lawsuit filed by one specific client.

Although Bitcasa won the court battle, the requirements placed upon it by the court will likely end up forcing the company into bankruptcy, according to industry speculation.  Bitcasa can simply not afford to subsidise their largest data users without a sound business model to attract more paying customers.  Gigaom says Bitcasa’s largest client was costing them $3,000-$4,000 per month by using more than 80TB of storage.

“It’s not fun to stare at your earliest and largest users in the eye and say ‘we just can’t do it anymore,’” said Bitcasa CEO Brian Taptich.  “It’s a terrible feeling.  You wish you could subsidise those [customers] forever.”

Bitcasa ran into a serious problem once it decided things needed to change.  Taptich said that the company had no way of knowing what customers were storing and, worse yet, how much of the data they were hosting had been orphaned by clients.  The only way to clean up the environment and implement better management practices was to force customers to migrate themselves to a fee-based plan.

The Next Step

The next step for Bitcasa is to get its financial house in order so the company can be saved.  It has had very patient and supportive investors thus far, but one must wonder if those investors will stick around in light of the change in plans.  If so, Bitcasa could emerge a stronger company for it.  If not, its clients would have been faced with the need to migrate anyway, so better to do it now.

Looking at the bigger picture, the data centre industry is quickly approaching the day when storage capacity may become a much more serious issue.  Big Data has resulted in companies saving every bit and byte in the hope that it will someday be usable for some sort of analysis.  In a sense, we have become data hoarders.

Business models will have to change and adapt as the total amount of stored data grows ever larger.  The only question is how and when that transformation will take place.  Perhaps Bitcasa's troubles are the start of a complete data storage revolution and something good may come from it.



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