Should Apple and Microsoft Buy an Online Backup Company?

Yesterday, I read an article which claimed that 30% of people have never backed up, while the overwhelming majority are way behind on backups.

In the early 1990s, about a year into my very first job out of college at a large global financial, I ran the server backups. Yes, in retrospect, I wonder what they were thinking giving that level of responsibility to the inexperienced kid I was. Either way, it was a great learning experience. I also had the privilege of working with a brilliant engineer, former Navy officer, who introduced me to many great sayings, most of which were very educational, but should not be printed in a professional publication.

One of his favourite sayings was, "you are only as good as your last backup."

He meant that which, in later years, we called Recovery Point Objective, or RPO. If you have catastrophic failure of disks, servers or an entire building, you can only restore from your last backup. Everything from then until the moment of failure is utterly lost. So your backups better be reliable, frequent and tested.

On my own home computers, I ran my backups first to floppies, then switched to burning CDs and eventually DVDs, shipping them to an alternate location once a quarter.

Over time, with the growth of the Internet and broadband, online backups became viable. Nowadays, even consumers can have reliable "set it and forget it" backups just like companies, but without the labour cost or the need to remember. The leaders in the online space are:

Yet, with all of these great services available, consumers still do not back up, businesses still forget to protect their laptops, and plenty of businesses still run tapes that they (try to remember to) take offsite.

The problem is that backups are like insurance; actually, they are insurance. Unless you worry about it, you just don't get it... until it is too late.

Is there a better way? Sure.

The way to make backups inevitable is to make them part of the system itself. I don't mean additional HP or Dell "bloatware", but as a core part of the operating system. While ten years ago none of the pieces was in place, today they all are:

  • Storage and processing infrastructure is cheap, and all of the operating system (OS) providers have lots of it.
  • Broadband is ubiquitous. It may not be always-on, but it is "sufficiently-on" that it can be relied upon. OS updates have been distributed online for years. Some have "App Stores" for desktop software as well.
  • OS vendors have learned how to sell and support subscription services online, like Office365 or Azure or iCloud.
  • OS vendors also sell tablet OSes, most of which have some form of built-in online backup, like iCloud.

My recommendation is that Apple and Microsoft each explore acquiring one of the major online backup vendors. They could build it themselves, but I would not recommend it.

  1. The existing vendors are trusted brands.
  2. The vendors solved many of the thorny problems with storage, bandwidth, security, filesystems, client performance, firewalls, networking, and many other challenges.
  3. Customers already have massive amounts of data stored with the existing vendors, and are unlikely to switch willingly.
  4. Existing vendors invested heavily in making systems more recoverable, which helped consumers and businesses feel comfortable with using the systems. Apple and Microsoft would be better served creating even more wins for them, thus improving software vendor relationships, than undercutting them.

What is the additional value? Let's do some quick math:

  • Carbonite, the only publicly trader entity, has >1.1MM customers, although the $122MM FY2014 revenue reported in its annual report and $60 average selling annual price would imply closer to 2.0MM customers.
  • Mozy does not officially report total customer base, and it focuses heavily on enterprise, although a support forum thread from 2011 claimed they had 3MM customers.
  • We can assume liberally that CrashPlan is as big as Carbonite, so let us say another 1MM customers.
  • Across all 3 services, then, we have 1.1+1.1+3MM = 5.2MM customers.
  • Let's double that to be really safe, and say 10.4MM customers using online backup.

How many Windows and Mac computers are out there?

  • Apple sold 18.9MM Macs in 2014 alone.
  • Gartner and IDC both estimate that 4Q2014 had >80MM PCs shipping, with slightly lower numbers in 3Q and 2Q. Sales were over 300MM units in 2014.

This means that, at the absolute limit, 2.7% of new shipment were backed up regularly online, and that is only if the entire stock of backup services was deployed on newly shipped computers, an extremely unlikely scenario.

There is no reason Apple and Microsoft cannot include online backup services built into every single computer it ships, including a few GB for free as iCloud does. Even a 5% paid conversion rate - which should be eminently doable - would be a multiple increase in the number of paid backed up computers, an 1+ order of magnitude increase in the number of minimally backed up computers, and great brand value for protection and ease-of-use for the acquirer.

Will they do it? I do not know. It certainly should be a viable and valuable option.