'It's the size of the fight in the dog': Privacy scandals opening up cloud market to Europe's startups
It is easy to see the appeal of the cloud computing market for tech companies both large and small. Analyst house Gartner claims that by 2016, cloud computing will account for the bulk of all new IT spending, while consultant McKinsey reckons the total economic impact of cloud technology could reach $6.2tr annually by 2025 (PDF).
The result of such projected growth is a desperate land grab with the likes of Amazon, Google and Microsoft reducing cloud service prices by as much as 85 percent in the past 12 months to beat the competition.
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Despite the fierce rivalry, UpCloud, a two-year-old cloud infrastructure services company based in Finland, believes the opportunity to break into the sector has never been greater.
"For some customers it isn’t issue, but to put it bluntly, others want to stay away from US companies," said Antti Vilpponen, general manager at UpCloud. Why? Privacy.
Ever since whistle blower Edward Snowden shed light on the NSA's snooping practices, the impact on the US cloud service market is thought to have been significant.
As a European company, Vilpponen now sees demand increasing for alternatives to US-based providers.
The UpCloud pitch for twitchy US customers is simple: host their data on the company’s Chicago servers but store users' personal information in Finland, where it's protected under Finnish law — a move that makes it more difficult for prying eyes to link the data back to the customers it relates to.
"Naturally we comply with the laws of the countries where we operate, but as customers' personal information is always stored in Finland that stays under Finnish law," Vilpponen said.
At least that’s the plan. Currently, UpCloud has datacentres in Helsinki and London, while the Chicago servers are scheduled go live later this year.
It's a sign of the times that North America, whose cloud giants still dominate the cloud industry, is seen as potentially easy pickings for European startups that focus on privacy.
Such a focus is becoming popular: while Vilpponen acknowledges other European companies are also looking to tackle the US privacy issue in a similar manner, UpCloud is also hoping to differentiate itself on cost.
Small is beautiful for the cloud
It offers infrastructure-as-a-service (IaaS) with hourly billing targeted at developers requiring more than 10 servers. Prices start from €13.16 per month for SSD storage, and cost savings increase with volume.
For example, 10GB of SSD storage with UpCloud costs €22.70 per month verses €40.22 for 4GB using Amazon Web Services (AWS) — more than 40 percent cheaper.
The main US cloud players — Amazon and Google in particular — are known for their willingness to repeatedly cut prices, but they often come in exchange for signing up to longer contracts. At entry level they also come with a lack of redundancy: for example AWS outlines that in some cases your data is lost for good if the drive attached fails.
UpCloud stores data on two separate storage backends which are constantly synchronised. Should one server experience a drive failure the other backend automatically takes over.
UpCloud is also making a push for performance advantages with migration from moving-parts hard disk drives (HDDs) to faster more energy efficient solid state drives (SSDs). HDD price savings range from five to 10 percent compared to Amazon, but when SSDs enter the mix, that gap widens to the 40 percent.
UpCloud is hoping to tackle the larger players on both price and performance, since it builds its own software backend. And performance is fast becoming as important as privacy.
"From our point of view one of the pivotal issues is to offer constantly high performance," Vilpponen said. "Our customers moving over from AWS are complaining more and more that the performance offered by AWS fluctuates tremendously. It’s understandable that Amazon has made decisions that support the bigger picture [the price battle with Google and Microsoft] but then we can exploit such weaknesses."
For UpCloud, expansion into North America may be its primary focus right now, but it is just the start for the company.
"We aim to rise into the global league of cloud companies," Vilpponen said. "Many of our competitors operate in the Europe and North America, but we want to get further and be up there with the likes of Amazon, so we are looking into the Asian markets as well."
UpCloud saw threefold revenue growth last year, but as a private company, it's not disclosing hard figures. However, Vilpponen said revenue is in the seven digit range and growth expectations for 2014 are 200 to 300 percent.
He said the cloud services market will become increasingly fragmented as providers find new footholds in specific niches. "The size of a company doesn’t necessarily correlate with its capability."
The CEO added a quote from Mark Twain: "It's not the size of the dog in the fight, it's the size of the fight in the dog."