Free Cloud Storage: Customers Get What They Pay For

While free online storage or free online backups may sound sweet to small businesses looking to make the best use of their limited budgets, the reality is that the cost of a properly managed, fully compliant backup is worth far more than its cost.

That's the word from providers of cloud-based storage and backups that every day deal with clients who are attracted by the lure of free storage but who may not understand the potential ramifications of trusting their precious business data to technology more targeted at consumers looking to back up photos and audio files.

Cloud-based storage, whether used for backing up data, adding disaster recovery, or even storing primary data, is becoming a major part of the IT business.

Analyst firm IDC in October estimated that spending by public cloud service providers on storage hardware, software and professional services will grow at a compound annual growth rate of 23.6 percent from 2010 to 2015. IDC also expects combined worldwide spending for public and private cloud storage to hit $22.6 billion by 2015.

As a result, traditional solution providers and managed service providers have found a wide range of technologies from a variety of developers that make it easy to add cloud storage to their line cards with a minimum of investment.

However, channel partners who work with SMBs looking toward the cloud to protect their data often run up against competition from a growing host of companies that provide cloud-based storage, backup, and disaster recovery services at no charge.

Many providers of free online storage have their roots in the consumer market where the typical user may be using the service to store and share photos, videos and music files. Some also provide the ability to back up or collaborate on business documents. And, for many of these providers, the free storage capacity is limited and is focused on getting potential customers to try the service before upgrading to a paid service.

For many SMBs, a free service for protecting data is a welcome way of taking the pressure off IT budgets.

However, said Luis Alvarez, president and CEO of Salinas, Calif.-based solution provider Alvarez Technology Group, such a move would be a mistake for small businesses.

Alvarez said that when customers talk about free online storage, or cloud storage for $30 per year, he responds by pointing out the limitations of such services, including no protection for SQL or Exchange data, no unlimited backups and no backups of open files.

"We also tell customers we can't be responsible for their backups when using a free service," he said.

The idea of a customer trusting its precious data to a free online service is actually quite scary, said Matt Bernard, CTO of One Click Technology Group, a Warren, Ohio-based provider of IT services to small businesses.

"For no exchange of anything, I'm going to trust you to back up my data?" he said.

Bernard said he reminds customers that when a product is free, they are no longer really customers of the provider. "The providers have to be making money by selling your data, or marketing to you," he said.

Bernard said that whenever he hears about a free storage cloud service, his first question is how and why the provider does it.

Next: Understanding The Limits Of Free Cloud Storage

Even companies like Amazon offer bare-bones storage as a service for 8 cents per GB, Bernard said.

"I'm not a fan of any IT price moving to zero dollars," he said. "You can get a solution, but someone needs to get paid for the development. With free storage, I'd question who is storing the data, how it is protected, and whether it is recoverable. And sometimes that is hard to explain to the customer."

Alvarez said he can understand why customers consider free services, given that some of the best-known providers such as Carbonite and Mozy, which do a big part of their business through reseller partners, heavily advertise the free part of their service to attract customers on a trial basis.

However, he said, such free trials are still fraught with the risk that backed-up data might not be able to be restored, Alvarez said. Free services also may not provide quick upgrades and patches, he said. "And customers are notorious for leaving things the way they are, and not proactively looking for upgrades and patches," he said.

Alvarez works with cloud storage partners like eFolder and Axcient, whose services are connected to platforms like ConnectWise and Level Platforms, in order to make sure they can be managed properly.

The biggest argument against free cloud storage is the question of whether customers in certain fields would be in compliance with regulations concerning the storing of data.

This is an especially important question for customers in the medical field, said Zac Childress, president of DarwinTech, an Oxford, Mich.-based solution provider.

Doctors face many regulations related to protecting customer data, including HIPAA regulations on privacy, Childress said.

"Doctors need a business provider agreement to be compliant with HIPAA laws," he said. "When a provider signs that agreement, they become liable for a breach in security. The provider gets to share in the liability. Most free storage providers don't realize that."

Doctors should know about this requirement, but not all of them do, Childress said. "A lot of doctors either don't care about it, or don't understand it," he said. "Part of my service is to help them understand. If a doctor asks me about a free storage service, I tell him or her that if they want to be in compliance, they can't sign up with the free service. The ones who understand that the paid storage solution is worth the investment will sign up for it."

Childress said the safe way to offer such a service to medical providers is to work with a third party like Toronto-based Manta Group, which can sign business provider agreements with such customers.

Compliance with health care regulations has in the past been poorly enforced, but the government is now adding teeth to regulations such as HIPAA, Alvarez said. "So customers are more interested in following the rules," he said.

However, there are still many medical providers who don't realize that they may be out of compliance, Alvarez said.

"We just took on a small dentist practice with one server and a dozen PCs," he said. "They had been using Mozy. But we found out the customer had never backed up its SQL database, or tested its restores. This wasn't a Mozy issue; it was a problem with the previous provider."

Alvarez said that the dentist office serves as a reminder that not all solution providers are up-to-date on requirements. "Lots of providers don't fully understand the customer requirements, or don't do test restores or configuration checks, or the many other things we do to make sure customers are taken care of," he said.

Next: Knowing When To Walk Away

In some instances, a customer mentioning free online storage is a red flag for solution providers.

"If a client says it is looking at a free service, I'd just walk out the door," Bernard said.

Customers who look at free online storage are not really potential customers for Computer Technical Specialists, said Joel Trice, president of Computer Technical Specialists, a Prunedale, Calif.-based solution provider.

"My customers want to know in detail what we do for them and their data," he said.

However, the allure of free storage is changing as customers heavily into mobility and social media better understand the value of their data, Bernard said.

"I've had such customers ask for a trail of where their data is," he said. "They're asking what would happen if I went out of business. Ten years ago, customers wouldn't ask that question."

Scott Lee, director of marketing for MozyPro, the paid service of cloud storage provider Mozy, said that his company's original free, consumer-focused service eventually morphed MozyHome, which offers 2 GBs of storage free of charge.

"MozyHome is a trial, really, for consumer or business users," Lee said. "If customers need more space, they can upgrade their service, or if they are a business with multiple servers or require administration of their service, they can upgrade to MozyPro."

Computer Technical Specialists' Trice said that he has not had to deal that often with customers interested in free storage services.

"Most of my customers are buying me, not the product," he said. "Whether I use Symform or eFolder doesn't matter, as long as they know I am backing them and their business up the right way."

Despite the large numbers of online storage providers and the buzz generated about storage clouds, educating potential customers about the benefits of paid-for services over for-free services is still a primary part of what solution providers do for clients.

For Trice, the education focuses more on the benefits of using cloud storage as a disaster recovery tool than on the need for online backups. "Customers don't want to spend money on storing data on the cloud as much as they want a safe way to do disaster recovery," he said. "So the focus of our conversations is on DR."

Educating smaller customers about the benefits of paying for their online backup and storage needs is easier for solution providers or MSPs who have built a reputation based on trust than it is for those just getting into the business, Alvarez said.

"When we come in and explain the difference between free and paid services, customers get it," he said.