Own safe storage or outsource to the competition
As a fast growing company many startups use a large amount of data to run their businesses. Quickly, this market newborns have to figure out a way to easily storage all their costumer’s data and their own information. Usually, the company’s decisions makers are left with two choices: of whether they should spend their money on storage plus security or hire some other company services to do the exact same thing and pay by usage.
Naturally the most common response its outsourcing, this way retail companies, for instance, can allocate their resources and men power on activities that are crucial for the organization core business. Beyond that, storage enterprises like Amazon Web Services have outstanding arguments, such as the number of employees working on web security plus cloud storage (over 500 people) and the plea that the ownership of the content belongs to the costumer [1].
Just like Amazon Web Services there are at least 5 other companies, such as Windows Azure, Google Compute Engine, IBM BlueMix and RackSpace [2] that allow small, medium or big firms to outsource the duty to securely storage their costumer’s data and their own information. On the other hand, there is a raising concern about how clean-fingered the storage companies behave themselves when it comes to storage their competitors informations and keep their eyes closed about startups ideas.
On 2012 Netflix moved its entire structure to Amazon Web Services, this migration raised the eye brows of the whole video streaming industry due the fact that the giant e-commerce competes with its new client on its main business. This may sound as a mad deal specially for Netflix, but as time goes by and their relationship remains intact the mistrust on cloud computing and Amazon policies starts to fade.
Netflix structure:
[3]
Later, Amazon Web Services (AWS) CEO, Jeff Bazos said: “We put just as much care into Netflix on AWS as we do Amazon retail. We may compete on Prime instant video, but we bust our butts every day for Netflix on AWS. The whole point of what we are doing is to standardize that layer. Amazon retail gets the benefit of standardizing that layer.” [3]
Final Impressions:
The cloud storage business gains a lot of reliability with the relationship between the two giants on video streaming (Amazon, trough AWS and Netflix). There is no doubt that other companies look at this example as a cornerstone of professionalism and are encouraged to trust on cloud computing and storing policies.
[1] https://aws.amazon.com/compliance/data-privacy-faq/
[2] Daniel Barreto, Stanford University. Lecture 2 – Leading Trends in IT
[3] http://www.zdnet.com/article/netflix-and-amazon-quite-the-co-opetition-case-study/
3 comments on “Own safe storage or outsource to the competition”
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Currently Arthur is working as a Project Manager Officer (PMO) for the Customer Relationship Management (CRM) team at Lojas Quero-Quero. The retail company is controlled by the private equity fund Advent International.
After reading this I had a few questions. First of all, how much more cost effective is it for a company to outsource the work of storing personal data versus, hiring their own department to complete this task? It seems to me that in the long run it would make more sense to be a vertically integrated company that autonomously stores their own data. My final thought was in regard to the consumer. Would a consumer feel safe knowing that their own information was being sent to a third party to store, especially if they do not know this company?
Hello Arthur!
This was a very interesting and insightful blog post . Foster brought out a great point in the comment, in regards to cost. Which of the two options would be more cost effective? We could also say that there many more factors affecting the cost of any of these options, such as company size and business model.
I think one additional factor to consider beyond what Foster has mentioned about the cost of in house storage versus external storage is that the true cost needs to take in to account the costs of potential data breaches in either location. The risks are somewhat different in either case. A small or medium sized business is unlikely to have the resources to dedicate to security that a large cloud storage company will have, which will make them more vulnerable to penetration. Conversely, a large cloud storage operation is an attractive target due to the higher quantity of data available for theft, however since their entire business depends on security they will likely have greater defensive capacity. With in house storage, the company will obviously receive the blame for any data breaches and security lapses. With a third party storage solution, though, the original company is still likely to suffer the majority of the blame from their customers in the event of a third party breach. The only steps a company can take when turning their data over to a third party storage provider is to thoroughly vet the operator and their security practices. Regardless of the choice, particularly for small companies and start ups that might lack the resources to effectively store data in-house, the unique costs of a data breach in either scenario need to be captured in the price and utilized to analyze the decision.