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How to start an online storage business

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I am eager to start an online storage business. Do you know where I could find end-market data that defines projected growth and end-costs to consumers? How capital-intensive would it be to build an online storage network capable of handling 50,000 users?
There are a variety of resources available from the press and analyst community, as well as publications like SearchStorage.com, that can help you determine the viability of creating an online storage business.

Several years ago there were companies called XSPs or External Storage Providers that came into being on the same premise that you are asking about. Many of these XSPs disappeared due to poor business plans, or lack of customers. In addition, many enterprise IT shops created insourced XSP models, bringing the outsourcer inside and creating an IT organization. The model is relatively simple: deliver storage services based on a specific...

cost model within the organization. These services are alive and well and succeeding within many organizations. Many large IT companies offer the XSP model in addition to hosting Internet-related services. These co-location services enable an IT organization to host their storage environments off site. Some of these services are blossoming, specifically in the area of off-site backup and DR, where moving the costs off of the balance sheet enables the organization to deliver the services through a third party.

As far as the capital investment, this is a very hard number to determine as the numbers will be based on a variety of variables. To help you understand some of the variables please find a list below:

1) Will the storage pool for each user out of the 50,000 users be a variable number, or a fixed number for each user?

2) What are the availability and performance requirements of the storage pool?

3) Will the users require separate resources for their storage pools? (You wouldn't want a Ford and a General Motors to share the same storage pool.)

4) Will there be backup and restore facilities offered?

5) How will the users manage their storage resources? Will you need to purchase software and creating tools that enable your customers to manage their own storage?

6) What support resources will be required to deliver these services? Is the operation a 24x7 operation with Service Level Agreements (SLAs) in place, so the customers will receive their money back if you can't deliver on the SLAs that they sign up for?

There are many other variables including the physical space and power requirements for the environment that need to be considered as part of the business plan for this venture. I would strongly encourage you to talk to others within the industry to get a view of the environment and whether or not it is conducive to this venture.

This was first published in October 2004

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