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Nirvanix facing tough battle against Amazon S3

Nirvanix, first out of the gate as a pure-play cloud storage provide, is facing a tough battle against Amazon S3 and other large cloud providers  and there are indications the company is struggling.

Nirvanix has switched CEOs twice since last December, when Scott Genereaux left to become a senior vice president at Oracle. Dru Borden replaced Genereaux, then Debra Chrapaty took over for Borden in May. Although Nirvanix has raised $70 million in funding, industry sources say it is reducing spending as it struggles to compete with larger rivals that can afford to offer lower cloud pricing.

“The problem is they are still a small player,” said Henry Baltazar, a senior analyst for infrastructure and operations professionals at Forrester Research Inc. “They were early [in the market] but they don’t have the resources that Google, Microsoft and Amazon have. Those companies have more resources and bandwidth. It’s a very difficult market to sell services.”

Baltazar said startups in the cloud services market generally have a difficult time competing against behemoths like Amazon. Nirvanix did sign a five-year OEM agreement with IBM in 2011, forming a partnership to be part of IBM’s SmartCloud Enterprise storage services portfolio. However, IBM spent $2 billion to acquire SoftLayer Technologies in June. SoftLayer offers cloud storage among other cloud services, so it competes with Nirvanix.

One venture capitalist who is familiar with Nirvanix said it cannot afford to play the how-low-can-you-go pricing game that Amazon, Google and Microsoft participate in. Those companies have other large revenue streams and are trying to gain a stronghold in the cloud to expand. The cloud is Nirvanix’s only business, and it can’t give its services away.

“The problem is with the business model and not the people at Nirvanix,” said the VC, who asked to not be identified. “How will they compete with Amazon, which is practically giving away its cloud storage for free? And Microsoft and Google are doing the same.”

San Diego-based Nirvanix was spun off from early Internet storage service provider Streamload in 2007. Niranix offers public, hybrid and private cloud storage services with usage-based pricing and accessible via HTTP using the Nirvanix Web Services API based on REST and SOAP protocols or the Nirvanix Cloud NAS gateway.  It currently has 50 employees and manages the data centers used to host customers’ data.

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