Backup & Beyond

I just can’t resist posting this! I don’t know what to feel about the current economic crisis and how the US Federal Reserve and the central banks across the world are going about trying to avert a complete economic collapse - by pumping in more and more money into the system. I do not know if I am feeling depressed or agitated, or both! Here is a simplistic way of describing what the Fed is trying to do; you can judge for yourself if this is all true “free market”.

Let’s say there are 100 people in a room and that all of them are going after 10 goods that are being traded. Out of the 10 goods in the room, 2 are essential commodities and the remaining 8 are just luxury. The money that can be used to buy these goods is the Government/Federal Reserve mandated currency, which in the case of the US, is the US Dollar. For whatever reason, most of the 100 people decide not to buy the luxurious goods - for now!

Here’s what happens next…

At the prodding of Nobel Prize winning economists like Paul Krugman, the Fed (feel free to substitute this with your country’s equivalent - its the same everywhere) appears on the scene and decide to, at random, pick 10 people in the room. Actually its not so random but is based on some unarticulated criteria which, for the purpose of brevity, I will not go into. Suffice it to say that people like Bernard Madoff would surely be one of the “chosen 10″. The Fed decides to stuff the chosen 10 with truck-loads of cash (US dollar in this case) so that demand for the 10 goods can be created!

Now, the 10 people who got the ‘new money’ buy some of the goods using the new money and also lend some of the money to, perhaps, another 20 people in the room - so that they can also pitch in to create demand for those useless goods that nobody really needs. Again, let’s not go into the details of how these 20 people are chosen. Amongst these 20 people would be people like Jeffrey Skilling, Bernard Ebbers, Sanjay Kumar, etc. The Government also chooses a couple of people from the ‘most incompetent people amongst the 100′. These people are given the responsibility of monitoring the gang of 30 and helping make the whole charade appear legitimate. This way, everyone’s focus is on how effectively the gang of 30 is being monitored rather than how the gang of 30 got the new money in the first place. Its an old trick; magicians call it ‘misdirection’

Lets now play out what will happen to the 10 goods in question…

There is more money in the hands of the “chosen 30″ and they go and bid for the available goods and, in the process, they ensure that the prices of all these goods (unfortunately, including the essential goods) go up by an order of magnitude. Out of the 70 people ‘left out’ of the new money, many will work for the chosen 30 - producing more of the 10 goods. These ‘workers’ are satisfied with taking the crumbs left over by the ones with the ‘new money’.

However…

Since the prices for all the goods have gone up, most of the ‘ordinary 70′ can’t afford most things! Most of them would be satisfied with working hard for the crumbs. However, people being what they are, some amongst the ‘ordinary 70′ would compete to get into the first or second ‘chosen’ sets! Membership isn’t too difficult and can be obtained by sucking up to them (the chosen ones)- i.e. by directly eating from what’s drooling out of the mouths of the chosen 30 and cleaning their toilets in return - all so that they eventually can become part of the ‘chosen’ gang.

The “smartest” ones like Paul Krugman would become advisers to the chosen 30 and mathematically model the behavior of the 100 people so that they get to buy the goods without actually doing any work at all.

While the above may appear to be an over-simplification, I am absolutely certain that what the US Federal Reserve is doing is almost exactly what I have described!

The Politicians, the intellectuals at the Federal Reserve, the banking system, and the other ‘crooks’ everywhere - they all make us believe that this is “free market”. We also believe it because every one of us can choose to pledge our self respect and aspire to join the gang - provided we have the skills and the inclination to suck up. We also believe it because in the name of democracy we can also elect the crooks whose toilets we want to clean - and then aspire to be one of those crooks. Indeed, its a beautiful “free market” world we are all living in.

It’s left as an exercise to the reader to figure out what would really be a true free market. The clue here is to start with abolishing the Federal Reserve and abolishing the Government’s right to mandate what money people should use and, by extension, taking away from the Government the right to create money out of thin air.

Finally, if we, the ‘ordinary 70′ in the room do not wake up and stop the Federal Reserve from stepping in, there is no question that all of us collectively would eventually play into the hands of the Hitlers and the communists waiting in the next room. And by the way, the process has already started!

I probably have to take back my last blog post where I talked about why I am impressed with EMC on their Decho spin off which they had announced on the 16th November. The primary reason I thought that’s a very good move from EMC is that running Decho, and hence the online backup business Mozy, as a separate independent subsidiary with its own organization would create focus and also its own nimble culture to respond aggressively to the different business requirements of the SMB market segment. This would have been difficult to do internally by EMC itself as it is not easy to have multiple/polarized cultures within one organization as EMC’s culture which has primarily evolved from selling to a large corporate customer would have clashed with the culture required to focus and succeed in selling to SMBs.

Look at Decho’s blog. The only blog post they have made was the announcement of Decho which was posted on 16th November. There are quite a few comments to the blog post - even as recently as 4th December. Some of the comments even want them (Decho) to post more details or an update post etc. However, there is just silence from the team at Decho. No response of any sort! Not even a response in the comments section! As someone who has co-founded and worked in multiple startups, I can tell you that this is not a good sign as it may mean that the people at Decho are probably not a motivated lot or they have imbibed a big company culture from EMC and have forgotten what makes startups thrive.

The only inference I can draw from this is that EMC’s spinning off of Mozy and Pi as Decho is not really a positive move; at least internally, for the people involved. It is highly possible that EMC, after acquiring Mozy and Pi, has realized that their business model has no chance of profitable growth in the near future. In that case it’s probably perceived as a drain on EMC’s resources given the current economic environment. If my inference is true, it is highly possible that the folks at Decho are a disillusioned lot; this would also obviously explain the lack of response to comments in their blog post. Note that this type of situation is not unusual during acquisitions where a highly motivated startup team gets disillusioned and loses all motivation after an acquisition by a large company because things did not pan out as they expected them to. Obviously, in almost all cases, the startup founders would blame the large company for messing things up!

Only time will tell whether I have to eat my words (again) and stick to my original positive reading of EMC’s Decho spin off. But if my negative reading is true, we may see a day when EMC’s Mozy goes the AOL’s Xdrive route in a year or so!

I should say I am seriously impressed with EMC. I am talking about their announcement of a new subsidiary called Decho, which combines the two acquisitions they had made in the last one year: the online backup services startup, Mozy, and the Personal Information Management startup, Pi Corp. When EMC acquired Mozy I had thought EMC would use Mozy’s technology to come up with some cloud storage initiative for the enterprise and the mid-market segment. I also felt that would take away Mozy’s focus on consumer and small and medium business segment. Of course, it was probably wishful thinking too-because with our StoreGrid online backup solution we focus on the SMB market segment too.

We actually do not compete with Mozy head on as our focus has been on enabling MSPs and IT Solution providers to host and offer their own online backup service to their SMB customers. Now that EMC is creating a new subsidiary, Decho, which will exclusively focus on the consumer (and the SMB ???) segment we need to take note of that and be prepared to start competing with them sometime in the future. But it is always good to have a formidable competitor. That will help us motivate ourselves to think better and work harder to make StoreGrid a better platform for our partners to offer an online backup service.

Coming back to why I am impressed with EMC! Being such a large company primarily focusing on the enterprise and mid-market segment, it would have been an execution disaster if they had tried to keep Mozy ‘in house’ and focus on the consumer/SMB segment. Chuck Hollis, EMC’s VP, Global Marketing, puts it succinctly in his blog  post - as to why this is a great move by EMC.

“I think the decision to create a separate standalone entity speaks volumes as to how EMC’s thinking has matured: this is a market that’s important to EMC, we really don’t have this sort of thing in our DNA, better leave to people who DO understand this space, and give them what they need to be successful.”

I think it is next to impossible for EMC to position themselves in the SMB market given that the company was built on a model of selling to large corporations. With a separate business which will have its own management, organization & business model, they can now be a formidable force to reckon with in the consumer/SMB market segment.

Needless to say,  we are quite positive about the general growth in the market for online backup services and our ability to do well  (in a niche of our own, at the very least) by building a great online backup platform with StoreGrid. Our recent Amazon Cloud support reaffirms our commitment to keeping you at the cutting edge of technology.

Not that we are not worried about EMC….I’d rather say that it helps to have a ‘target Goliath’ - to stay focused and put up a good fight!

The initial interest in our StoreGrid Cloud AMI solution for Amazon Web Services has been extremely encouraging. As we have more and more partners & customers testing it and discussing their ‘use cases’, we have been getting fantastic insights into the myriad possibilities the cloud throws up for all types of users. This includes MSPs and VARs offering online backup services and businesses running custom applications in the Amazon Cloud.

Backup to the cloud

The typical use case and the premise on which we started our Cloud AMI, this deployment  has service providers running the StoreGrid Cloud AMI as a backup server in Amazon EC2 by provisioning their own Amazon EBS storage. Thereafter, they install the StoreGrid Client in their customer PCs & Servers and configure it to backup to the StoreGrid Cloud AMI. This deployment is very compelling for service providers who do not want to host their customers’ backup data in their own data center. Compelling as it is, it is worth mentioning a few disadvantages with this approach…

One of the advantages a local service provider enjoys is her proximity to the customer. This is especially important when a customer has large amount of data, say 100 GB or more, to be backed up. The initial seed backup for that kind of data over the internet is going to take a long time. To circumvent this problem, StoreGrid supports a feature called “Local to Remote Server Migration (L2R)” which allows the service provider to go on-premise and do a local backup of the first full backup to an external drive. The service provider then manually copies the data from the external drive to the StoreGrid backup server deployed in her data center and then runs the “L2R” module in StoreGrid. This will ensure that the subsequent backups are done incrementally, i.e. only changed blocks are sent over the wire on subsequent backups. With an Amazon deployment, using this L2R feature would not be possible simply because one does not have physical access to the Amazon cloud. Hence, the first full backup has to be done over the internet, regardless of however long that will take. The same is the case when you have to do large restores. A StoreGrid online backup Service Provider with her own data center can do a quick server side restore to an external disk and deliver it to her customer. With the Amazon deployment, the restores have to be done only over the internet even if it is 100s of GB of data.

By no means am I trying to discourage service providers from using the Amazon cloud as the data center for their online backup service business. But it is best to take decisions after analyzing all pros and cons along with what exactly the customers’ needs are. It is also best to set the expectations of the end customer upfront so that the customer is fully aware of, and educated on what she is signing up to. That way you won’t have a “but I thought you’d ship me my data in 1 hour” kind of situation.

A hybrid approach - backup locally and to the cloud

In light of the above discussion, service providers who want to leverage the Amazon Cloud but have the benefit of quick on-site restores could explore a hybrid option wherein the StoreGrid backup server is deployed locally in a customer site and the StoreGrid Cloud AMI is run as a replication server in Amazon EC2. In this deployment model, the on-premise backup servers would be replicating the backup data to the replication server in the Amazon Cloud. A single replication server can receive data from multiple backup servers running across multiple customer sites. We have many service provider partners using the hybrid approach already with the StoreGrid replication server deployed in their own data center.

Backup within the cloud - backing up data from custom applications running in Amazon EC2

Very interestingly, there are also a few service providers and some end users who are deploying the StoreGrid Client in Amazon EC2 along with their custom applications (which are already running in EC2). We did not think about this use case initially but in retrospect its a fairly obvious opportunity…

Considering that many businesses are looking at running their custom applications in Amazon EC2, backing up application data (which is typically stored in the Amazon EBS volumes) from these custom applications are extremely important too! Even though Amazon supports backing up the EBS storage to Amazon S3 as a snapshot, this is not always sufficient. The reason being the snapshot backup of a whole EBS volume does not provide the granularity required for a partial data restore. With snapshot backup, you can only restore the whole volume data into a new EBS volume. However, with a StoreGrid client deployed in an Amazon EC2 instance running a custom application, businesses and IT solution providers, now have the option of configuring file level backups of the EBS volumes. This also applies to backing up data from any application which uses a relational database back end like MySQL or Microsoft SQL Server - since these database backups are supported by StoreGrid!

Where would these clients backup to? Typically, to a StoreGrid Cloud AMI deployed as a backup server - ideally, running in a different availability zone in the Amazon Cloud. The backing up of EBS volume at a granular file level would give enormous flexibility while trying to restore data partially. No wonder we are already generating some interest with this deployment option.

A reversal of roles - backup from the cloud to on-premise storage

Honestly, we didn’t see this coming…

An end user mentioned that they wanted to backup all their data in Amazon EBS to their on-premise storage. Read that again - from Amazon to their office!!! I was initially not convinced and wondered why someone would want to do that? Here’s why! Though he (the customer) liked running his applications in Amazon EC2 because of the benefits it offered, he was not wholly comfortable with all his customer data present only in the Amazon Cloud.

“What if the Amazon Cloud goes down or what if Amazon itself loses my application data because of some bug or an issue?”, he said. He asked me if he could deploy StoreGrid Client along with his application in Amazon EC2, have a StoreGrid backup server on-premise in his office, and simply backup the application data (stored in Amazon EBS) to the on-premise StoreGrid backup server. “Why Not?”, I thought to myself, and asked him to try it out - there’s no reason StoreGrid shouldn’t work for this kind of a deployment!

On top of this he also told me he would backup the backed up data to tape periodically and ship it for off-site storage. While I personally believe (and have told him so) him to have ‘data paranoia’, I fully understand that this is the nature of the beast! It all depends on the value you attribute to your data!

Needless to say, we are excited about all these possibilities. We are especially excited with the challenge of enhancing StoreGrid to seamlessly support such possibilities. We are gearing ourselves to explore these new frontiers!

I’d love to hear from our (current and prospective) partners and customers about their views and experiences. Got an Amazon story of your own? Do let us know.

Hot on the heels of Amazon removing the Beta tag and releasing Amazon EC2 for production, we are excited to announce the Beta release of Vembu StoreGrid Cloud AMI, which facilitates deploying StoreGrid in Amazon cloud computing infrastructure. This has been a long pending demand from our partner base, who are MSPs, VARs and IT Solution providers offering online backup services using StoreGrid.

StoreGrid Cloud AMI Beta is available for both Microsoft Windows Server and CentOS Linux Server. Also, the StoreGrid backup server uses the MySQL 5.0 database. All these are bundled together in the StoreGrid Cloud AMI to facilitate ease of deployment for our partners. Of course, we are working on lot more automation as we try to move into production release before the end of 2008.

Why is StoreGrid Cloud AMI relevant for our partners?

Our primary target market segment is Small and Medium Businesses. Considering the growing complexity of IT infrastructure it is our strong belief that it is not easy for software vendors to directly service SMB customers. Close proximity to the customer is extremely important when you service SMB customers. Hence the local VAR or an MSP is in the best position to provide IT services to a small and medium business customer. This is especially relevant when it comes to data backups and more specifically online backups. As we work with large number of partners servicing different types of small and medium businesses with different sets of requirements, it is an absolute must that any IT product or solution we build should provide the maximum flexibility when it comes to deployment options or other relevant functionality.

Given this context, we have always focused on giving as much choice to our partners as they go about augmenting their business with an online backup service powered by StoreGrid. Specifically, as cloud computing as a framework gains momentum, as an aspiring leader in the online backup category, we recognize the need to provide the choice of deploying StoreGrid in a leading cloud computing infrastructure - and nothing beats Amazon EC2 and Amazon S3 for a start.

Moreover, for the last two years we have primarily worked with partners who are willing to host StoreGrid in their own data center and offer online backup services to their customers. Many of our prospective partners had expressed interest in having a solution which they can host in a cloud computing environment like Amazon EC2/S3. With the release of StoreGrid Cloud AMI, we are responding to a long under-served market demand.

With StoreGrid Cloud AMI, any IT solution provider (MSPs, VARs) can now start an online backup service without any capital investment. All they have to do is to get an account in Amazon Web Services, instantiate an instance of StoreGrid Cloud AMI, create and mount the Amazon Elastic Block Store (EBS) volume as a backup storage and start offering online backup service to their customers. It is as simple as that. The backup data stored in Amazon EBS is periodically backed up as a snapshot to Amazon S3 for redundancy. On top of this partners who require another level of redundancy can instantiate StoreGrid Cloud AMI as a replication server and replicate the backup data to another Amazon EBS volume. This again can be backed up as a snapshot to Amazon S3.

Our existing partners or partners who prefer to deploy StoreGrid in their own data center can now use Amazon cloud infrastructure as a redundant storage for the backup data in their data center. All they have to do is to deploy StoreGrid Cloud AMI as a Replication Server in Amazon EC2 and configure their internally deployed StoreGrid backup server to replicate the backup data to the StoreGrid replication server running in Amazon EC2.

As I said, choice and flexibility of deployment is what we provide our partners. To summarize, with StoreGrid, our partners now can offer an online backup service in the following ways:

1. StoreGrid backup server and StoreGrid replication server deployed in their own data center with their own local storage.

2. StoreGrid backup server and StoreGrid replication server in Amazon EC2 with Amazon EBS volume as the mounted storage. And for additional redundancy data in the EBS volume is backed up as a snapshot to Amazon S3 storage.

3. StoreGrid backup server deployed in their own data center with local storage and StoreGrid replication server deployed in Amazon EC2 with Amazon EBS volume as the mounted storage for the replication data. Again for additional redundancy data in the EBS volume is backed up as a snapshot to Amazon S3 storage.

4. Another deployment which is also popular amongst some partners is to deploy StoreGrid backup server on-premise in the end customer location so that there is local copy of the backup data for quick restores. And these partners can now deploy StoreGrid Cloud AMI as a replication server and replicate the on-premise backup server to the Amazon EC2 deployed replication server.

You can learn about more technical details on using the StoreGrid Cloud AMI at http://www.vembu.com/storegrid/amazon-ec2-s3-cloud-online-backup.html

It is becoming clear that the global economy is indeed going into a painful recession. Even though we have not seen the Wall Street turmoil and the resultant credit crunch affect our business so far, we are well aware that it would be a matter of time. We still expect our business to grow though at a much reduced pace. But we are well prepared to even face a negative growth for a few quarters. I am not a fan of Donald Trump but I seem to apply his investing philosophy in the way we run our business - which is “If you take care of the downside, the upside will take care of itself. In other words, if you have a contingency plan for everything that can go wrong, you can’t help but succeed.”

As I said in my blog post why our business will survive and thrive in this environment, we are going to continue to invest in what we believe are strategic investment for the long term. And that includes not just R&D to innovate around our product, StoreGrid, to make it more and more compelling for our partners and customers.

Going forward, we are going to use this opportunity to improve our business across all fronts which matter to our partners as they get impacted by the imminent slow down. This is the time every business is going to be extremely choosy about its spending and who they partner with for their IT solution needs. In order to increase the chances of our succeeding we simply have to raise the bar in what all we do. I strongly believe what we plan to do is applicable to all of our partners who are IT solution providers (MSPs&, VARs and Web Hosting Providers too) as they try to differentiate themselves to improve their chance of succeeding. The theme of what we plan to do is based on “Do More with Less”. These are efforts to ensure we are ahead of our competition when it comes to sheer breadth of our offerings and we are sure we have what it takes to standout from the crowd.

Firstly we are accelerating our efforts to put together premium support options for our partners. These plans will cover 24/7 customer support with guaranteed email response times, IM support, phone support, remote trouble shooting sessions etc. This will enable our partners in turn to offer better support and services to their customers thus improving customer satisfaction. This improved customer satisfaction, we believe, will build trust and get the SMB customers to stick with our partners during these tough times.

Secondly, we are also working on better marketing collateral, sales tools, demo videos etc. to ensure our partners are better equipped to win customers. These are efforts to enable our partners to really “Do More with Less”. If we help them with more tools, collateral, processes etc. they should be able to focus better on winning customers and retaining them.

I will talk about our R&D and other initiatives in more detail on separate blog posts as we make progress in each of those initiatives. Do keep checking for some interesting announcements in the next few weeks.

I write my first blog post at a time when I feel the economy is reaching its state of equilibrium which is to say that I consider the credit induced boom across the globe in the last few years as abnormal and unsustainable and it is indeed good we will be returning to what I consider normal and sustainable economic growth.

First some background. I am no economist and I admit my brain power is limited in a way that I cannot give you a logical analysis of what all was wrong with how the world economy was being managed. Nor I am endowed with a reading habit to read and quote from history. But I am also one to boast that I have tons of what is more important that pure intelligence - that is common sense combined with an optimal dose of self doubt. Common sense dictated that there is something wrong with what was going on around us. If we had followed the hype and planned for a 10 or 50 times growth VCs expect I am sure we would have come a cropper. It is all quite easy to follow the crowd, revel in the hype and convince yourself you are some genius who has directly descended from heaven. Fortunately, we had the guts and the confidence to question the popular wisdom and stay the course based on our instinct.

As a business, what did we do right during those times of euphoria? We just followed our instinct and decided not to participate. That is when startups and VCs were talking about raising money with a fictitious 5-year business plans based on the steroid induced economic growth, we told VCs who contacted us that we would not do business plans based on the then market euphoria. When common sense dictated that those were abnormal times we were uncomfortable in cooking up a plan without conviction. So we passed up any opportunity to raise venture capital. Instead we raised some angel investment from successful entrepreneurs who were comfortable with our approach. That is an unwritten and adaptable business plan based on what we believe are fundamentally sustainable.

We put our focus on building a product and slowly and steadily grew our partner and customer base and all this profitably.  In the process we built an internal culture of frugality combined with hard work and commitment. I strongly believe this culture of frugality, commitment and hard work based on our strong convictions is going to keep us in good stead in these tough economic times. As we expect the market to deteriorate considerably in the near future, we are in a good position to grow and become a dominating company in our category when the economy improves in the next few years. The reason is that our plans are always based on what we consider normal, logic driven economic growth and not the steroid induced growth we seem to have gotten used to in the last decade or so. We have always saved for the rainy day and we can sustain our operations without any revenues for at least two years. As we go into this severe downturn we can afford to and are going to increase our investment on R&D and improve our product and solutions. We will keep our marketing expenses under check to make sure we do not get ahead of ourselves trying to fight a possible market collapse.

From a business stand point I strongly believe majority of our partners who are IT solution providers (MSPs, VARs etc.) share our conviction. Almost all our partners focus on the small business segment. Besides my own conversations with a few of our partners, I follow many of the interactions they have with our partner relations and technical support team. Based on these interactions I know how difficult it is to service the small business segment where the IT budgets are small but the expectations are high. So I am reasonably certain our partners have been put though a grind in servicing the small business segment and in the process they have developed a culture of frugality and hard work. And this culture is what is going to differentiate the men from the boys when the dust settles and when the economy reaches its natural state of equilibrium. Hence I strongly believe that majority of our partners would emerge stronger after the downturn and we will be around to support their online backup business with a superior solution than what our competitors have to offer.

To better times and the return of sanity.