Cloud Computing: Traditional Vendors Struggle to Change

By Dick Weisinger

Change. It’s usually for the better, but there are often steep hurdles to overcome to adopt it. In the business world, we see time and again successful business stumble and fall when they are not able to adopt to changes in the business climate. Business examples are numerous ranging from the auto industry to technology. The inability to change is the reason why big companies like Microsoft and SAP plateau and struggle.

While creating a successful business is not easy, and business failure far outnumber business successes, keeping successful business momentum year after year isn’t possible without continually correctly refining and executing on changes to the business plan. We hear more and more frequently about new technologies and how they have the potential to be ‘disruptive’. Technologies like cloud computing are in that category, and traditional software companies that are ignoring the cloud are beginning to feel the power of disruption.

But changing the way that business is done can be difficult. One example in the news lately is Iron Mountain, a leader in the area of traditional paper-based Records Management. Iron Mountain is used by 97 percent of Fortune 500 companies and had annual revenues of $3 billion in 2009. Iron Mountain had the foresight to recognize a future where documents and records will be stored in the cloud. They made an early push to the cloud by establishing Iron Mountain Digital.

But somewhere along the line, Iron Mountain’s execution seems to have slipped. In April, Iron Mountain announced that they would be shutting down their on-line operations. Their digital operations lost $58 million in 2010, following a good year in 2009 where they achieved $220 million in profits. Both the Iron Mountain Virtual File Store and the Iron Mountain Archive Service Platform are being shut down. Third-party service providers that had used the Iron Mountain API to build applications and services around the Iron Mountain digital vault will be affected.

Iron Mountain wanted to emphasize that the announcement didn’t signal a complete exit from the cloud. They are facing tough competition on the low end of the market space from vendors like Amazon and Google. They still say that they plan to create higher margin cloud applications.

Brian Babineau, storage analyst and vice president of research for Enterprise Strategy Group said that “It is also time for them to focus a bit more. They will be in the ‘application’ business delivered via the cloud, such as archiving and eDiscovery. I would much rather be in those than in the commodity capacity business, especially when the competition is Amazon, Google, et cetera.”

Another point of view was made by Yankee Group storage analyst Zeus Kerravala who said that “It’s a decision that Iron Mountain will regret for a long time. It’s like Xerox giving up on Windows.”

The comments by both analysts, while seemingly contradictory, have an element of truth. Cloud-based storage is certain to become central to any future Records Management strategy. While Iron Mountain might see no margin or profits by delivering a stripped-down Amazon-like cloud-based storage application, Iron Mountain failed to differentiate themselves as offering a platform that both offered entry-level storage, backup and archival capabilities, but one that could also easily include premium features like records management and discovery.