Storage Wars: Attack Of The Clones

In the same year that production will begin on a new Star Wars movie, a different type of battle will rage in a cloud far, far away. 2014 is set to be a landmark year for the file storage and sharing industry. With Box and Dropbox rumored to go public -- both with valuations in the billions -- services that help people store and share digital files will be big news over the coming months.

This kind of frothy market has a Gold Rush feel to it. Everyone is buying pickaxes and heading west. Even battery manufacturer Duracell is staking a claim with Duracell Cloud Storage. An industry analyst recently told me that there are more than 70 different cloud-based file services, though I think this number actually underestimates the real size of the bandwagon.

Let's be honest. The world doesn't need that many ways to store files, especially when so many services are mere clones with nothing unique to offer users other than logos in a different shade of blue. While high fives and popping corks may greet successful public listings, 2014 will also witness the more sobering silence of many of these also-rans going out of existence. 

We've already seen the first sign that challenging times are ahead, with some providers moving away from the freemium model of offering a free basic service as a gateway to premium plans. Almost all of the existing file storage and sharing services operate on a similar model, but most don't have the fast growth rates or existing scale for it to be sustainable. Time is running out.

What a lot of these players really need is money to fund the expensive business of continuous innovation. But in a space where everyone sees dollar signs, the lack of follow-on funding for the smaller players is notable. Investors have obviously decided that if an existing business hasn't ramped up fast enough by this stage, it's unlikely to survive the competitive shakeup to come. Most of the new money entering the market is either going to the biggest fish or coming from other businesses that fancy a piece of the pie.

The outcome of the battle for file sharing supremacy isn't just some cloud-based soap opera playing out for our entertainment. We all have skin in the game. If you store and share files online, especially for professional purposes, you need to know that the provider you've trusted with your data will be around by the time the new Star Wars movie hits theaters in December 2015. 

A recent IDC competitive analysis of the file-sharing vendor landscape showed that the current market leaders all serve massive user bases with distinct needs and have strong brands and reputations that will enable further growth. As each has recently benefited from large new investments, it's hard to look beyond these businesses as the eventual big winners.

Being able to focus exclusively on file services is a real advantage, enabling such vendors to commit to ensuring a consistently high-quality product. A number of the other main competitors are part of larger organizations, so their fates aren't essential to the existence of the parent company. As the competition heats up in 2014 and continues with calls for more investment, these huge corporations could easily decide to deemphasize these balance-sheet rounding errors.

As the smoke clears from the battlefield, the pure plays will stand alongside a smattering of smaller providers. I do expect one or two brands more famous for other services to emerge and be successful, though I'd back companies with some connections to digital services, like hardware manufacturers, over more left-field entrants.

For the rest of the clones, it will be time to sign off for good. Even after the inevitable consolidation, the survivors will need to keep innovating. Providing more than just a storage repository is the key to continued success.

The first part of the Storage Wars sets the scene but (much like The Empire Strikes Back) the saga only becomes interesting in the sequel, when more valuable features like sharing and search are added to the storage layer. Only those providers that help users do more with the files they store will have the Force with them.