Weekly News Analysis: Nobody Stores for Free

If you provide online file storage for free, how do you make money? Increasingly — and unsurprisingly — it turns out that, quite simply, you don't. San Francisco-based Driveway last week became the latest consumer storage provider to shut down its service, giving users less than two weeks notice before it bars access forever and wipes the disks clean. See Driveway Hits The Road, Feb 21st, 2001.

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Is Driveway's failure in the free online storage arena proof of a bad concept? Gives us your feedback at the ASPnews Discussion Forum

But does that mean the end of all free online storage services? Plenty of Driveway's competitors are still online, and Driveway itself is continuing to market its service to businesses as a paid-for, custom offering. Some of those Driveway-powered white-label clients may themselves opt to give its storage away, perhaps as an incentive to sign up for paid services. So free isn't dead; but it's getting rarer.

What is clear is that, despite dramatic falls in the cost of storage hardware, the even steeper falls in banner ad rates have ruled out ad funding as a source of sufficient revenues to sustain a free service. Driveway simply gave too much away for it ever to be viable to fund the operation of millions of accounts from the proceeds of its barely-launched private-label service. So it cut its losses.

What of the other major free services that still remain? Chicago IL-based FreeDrive faces a stiff test of its infrastructure over the next week or so, as Driveway recommended the service to its users in the email notifying them of its own shutdown. Freedrive already claims to be the largest online file storage service with over 12 million members, each storing up to 50MB free of charge. Now it will get up to 6 million more.

To survive, FreeDrive and other majors such as San Francisco-based i-drive and Xdrive Technologies — each with more than 8 million users — must find new revenues to supplement dwindling ad and sponsorship incomes — or find some other method of making ends meet.

FreeDrive has plans to add a $10-a-month premium service. i-drive and Xdrive each offer private-label services to telcos, ISPs and portals. But there is no guarantee that revenues from these sources will blossom fast enough to cover the outgoings on their core free services.

Perhaps lower costs will help bridge the cash divide. i-drive cleverly started out offering its services via US educational institutions, thereby gaining a young, affluent user base while avoiding hefty marketing costs.

Xdrive seems set on a path that will aim to both lower costs and add new revenue sources. In a move that bolsters its infrastructure credentials, this week it hired Karl Klessig from troubled messaging infrastructure company Critical Path as executive VP. Klessig and Xdrive's CEO Paul Gigg were previously colleagues at directory services technology leader Isocor, which Critical Path acquired in January 2000. Their background in high-volume directory services will be a valuable asset for a company seeking to drive down operating costs at the same time as developing revenue-generating new service options.

Yet it just defies reality to believe that any proposition can survive long-term as a service delivered to users that never pay anything back. Online file storage will often be free to users who pay for other services, but it doesn't have much of a future as a standalone free offering.

Process Not Code
Consultants and integrators need to learn new skills when dealing with IT systems for the Internet economy. All their working lives, they've been building static applications that were always finished by the time they went live. Now they have to build for the web, where applications are always changing. IT has to become flexible and adaptable, ever ready to change with the constant evolution of web-based relationships between businesses and their customers and partners.

That means drawing a clear separating line between software code and application logic. The only way to build Internet applications is by assembling them out of ready-made software components. As soon as you cement the business logic with code, you make the applications stiff and unresponsive, because they cannot be unravelled without being knocked down and rebuilt. See Breaking Software Out of the Box.

Learning this new, Internet-aware way of building applications is tough, even at companies that are fully committed to Internet computing. This week at the Oracle AppsWorld conference, company CEO Larry Ellison admitted that even Oracle is having trouble getting its own consultants to implement applications in an adaptable, web-friendly way.

He told reporters that the move away from customization is a major shift in working practices for systems integrators and consultants. But it's essential for successful Internet-based operation, he said. "You should be worried about business processes, not writing code," he advised.

This review of the week's news highlights is by ASPnews.com founder and consulting analyst Phil Wainewright. A comprehensive news digest is published every month in the ASP News Review newsletter, available exclusively to subscribers.

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