Web storage services not way to 'customer lock-in'

As more vendors emerge to offer cloud storage services targeting both consumers and organizations, an industry analyst urges vendors against using such services merely as a way to "lock-in" customers and instead to align these offerings closely to their core businesses.

John Brand, vice president of research at Springboard Research, said an increasing number of online storage options will emerge over the next three to five years due to reduced storage costs as well as increasing affordability of connectivity and technical improvements to online infrastructure.

"The perception from users of the value of storage, in general, will also have an effect on the viability of the online storage market," Brand said in an e-mail interview.

Additionally, the analyst predicts storage will be tied to specific environments and applications. For instance, he pointed to online storage offered by financial planners and tax agents for the backup of financial and accounting records as well as vaulting and archive-based storage supplied by data security and "hygiene" vendors.

That said, he urged online storage providers to "think carefully about the strategic nature of online storage to their own businesses" and "avoid the temptation" of using such services primarily as a potential customer "lock-in strategies".

Sid Deshpande, senior research analyst at Gartner, delineated the differences between cloud storage services available in the market today. He explained that cloud storage could mean either consumer-oriented offerings that allow users to store their digital media and then remotely stream content into devices, or more large-scale options offered by infrastructure-as-a-service (IaaS) vendors such as Amazon Web Services (AWS).

"Vendors offering online storage and music streaming will appeal to the first group of users. Success in the IaaS category will not directly lead to more customer growth for online storage and music streaming, though," Deshpande said in an e-mail.

However, he added that vendors such as AWS will be "well poised" to handle growth in capacity demand from consumers as an increasing volume of music content is available online.

Music streaming leads way
AWS had jumped ahead of competitors Google and Apple when the Internet giant launched its digital music locker service, Cloud Drive, in March. The hard-drive backup service is accessible via the Web and allows consumers to store their digital songs, videos, photos, documents and music. In addition, Amazon also rolled out the Cloud Player which enables users to play the songs they uploaded to Cloud Drive.

Cloud Drive, though, is not the first of its kind in the market. Canonical, which markets the Ubuntu Linux operating system, said its Ubuntu One "personal cloud" service allows users to access their contacts, notes, bookmarks as well as music collections from the Web or via their iOS or Android devices.

The online music streaming market, however, is still at an early stage, Deshpande noted. The Gartner analyst added that the market will need to go through "several points of evolution", the first of which will be cross-platform integration.

Currently, for most users, their choice of online music store is typically governed by their existing comfort and familiarity with the platform. For instance, Apple users will prefer to use Cupertino's iTunes service. According to Deshpande, this consumer behavior had spawned a slew of online music and radio streaming platforms serving different demographics.

But the entry of larger players such as Amazon in the cloud storage and music streaming realm empowers consumers and creates demand for market players to provide cross-platform support, he said.

To better differentiate their online music storage offerings, he suggested vendors look at integrating their music-streaming service with other consumer-focused, value-added services such as bill payments.

"This will help them retain customer loyalty because once there is cross-platform integration, users will need added incentives to stay with a particular provider," Deshpande said.

In a previous report, Ovum forecasted that the Asia-Pacific region will account for 35 percent of global digital music revenues, or US$7 billion, by 2015. Comparatively, worldwide revenues for digital music will reach US$20 billion. Ovum revealed that strong demand in subscription services will drive the market's growth in the region.