Cloud Computing

Nirvanix Slump Sends Chills through the Valley

The slide into Chapter 11 bankruptcy protection of cloud storage provider Nirvanix will be making a few people queasy in California this week and it might make CIOs a little more risk-averse when it comes to selecting suppliers.

Silicon Valley (and the tech world generally) is awash with funds at the moment. Even as a seasoned reporter meeting young tech companies on a regular basis it can be hard to take in the sheer wealth that is sloshing around. The VC funding of a relatively unknown company parading itself to press and analysts will usually be measured in tens of millions of dollars and sometimes hundreds of millions.

These companies are taking advantage, not just of a funding sector enamoured of tech and internet companies, but also some fundamental changes in ICT.

Broadly, the world is transitioning from client/server systems, on-premise equipment, RDBMS, Windows, email, PCs, wired networks and command-and-control fleet-management IT. And broadly, it is transitioning to a world of cloud, wireless, BYOD, Big Data, social networks, mobile, NoSQL databases, apps, browser-centric devices and so on. These serial inflection points mean there are tremendous opportunities for startups to disrupt the status quo and win big.

But they can’t all succeed.

There are a few things unusual to note on Nirvanix. The company had strong, big-name funding, $70m in all, and received $25m of that total only last year. But then it was in a capital-intensive sector where datacentre build-out alone would swallow up vast sums. Lesson: just because a company has won VCs from blue-chips doesn’t mean it’s a safe bet.

Second, customers were only formally told that they should move data out of Nirvanix care a couple of weeks ago. That’s pretty short notice given that it was reportedly sitting on many petabytes of customer data. You’d need plenty of bandwidth and ability to get deals done quickly to dispel possible disruptions. But blame is a two-way game. You can point the finger at Nirvanix but what of the customers that signed off on contracts? Did they stipulate what would happen in the event of a shutdown? And if not, why not?

Whether Nirvanix’s partners can help those customers make an orderly exit in time could have a significant effect on other cloud startups and the perception of risks involved in dealing with them. If, as seems entirely possible, Nirvanix becomes a warning story, many CIOs will stick with the big boys and apply the old motto: nobody ever got fired for buying IBM. Only in this case, IBM was reselling Nirvanix...


By Martin Veitch, Editorial Director, IDG Connect


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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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