Ernest Sampera

By: Ernest Sampera on August 23rd, 2018

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Your Cloud Provider Just Went Out of Business. What Happens Now?


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As more organizations make the move to cloud-based storage and applications, cloud Infrastructure as a Service (IaaS) and Software as a Service (SaaS) will continue to present profitable opportunities to small companies looking to create disruption in the IT marketplace.

Gartner expects IaaS revenue to grow from $45.8 billion in 2018 to a whopping $72.4 billion in just two years. With more small players entering the market, companies have a wide range of services to choose from, but those options don’t come without risks. If history is any indication, as many as 1 in 4 cloud providers can go out of business in any year as a result of acquisition or bankruptcy.

For organizations storing valuable data in the cloud, learning that their cloud provider is discontinuing services can be a harrowing experience. This worst case scenario came to pass for customers of Nirvanix in 2013. Despite being one of the pioneers of cloud-based storage, Nirvanix failed to diversify and simply couldn’t compete once heavyweights like Amazon, Google, and Microsoft threw their full weight into the cloud market. When Nirvanix announced its closure, customers had only two weeks to retrieve and move their data.

Considering that every single hour a company can’t access its data can cost more than $300,000, it’s vital for them to have a plan in place to account for the possibility of their cloud provider going out of business.

Choose a Reliable Cloud Provider

Of course, the best strategy companies can take to deal with this problem is to make sure it never happens in the first place. When considering options for cloud services, they should conduct extensive research into the overall financial health of the provider. How long have they been in business? How many customers do they service? Do they have aggressive expansion plans? Asking questions like these can help to identify potential problem areas that could land the provider in financial difficulty if they’re not there already.

Any cloud provider should also provide very specific terms explaining what will happen to customer data in the event of a bankruptcy or acquisition. If there are no terms or the details of how data will be handled are vague, this could present a problem. Even if the provider does allow customers to retrieve their data, there may be questions about whether or not the data is provided in usable form. This can be an issue even with major cloud providers with proprietary systems like NetSuite and Salesforce, who often return data to departing customers in simple spreadsheet format that makes it almost impossible to export to a new provider.

But having access to the data is only the first step. As Nirvanix customers learned the hard way, sometimes there are time constraints that make it very difficult to retrieve data. Many companies accumulate huge amounts of data over time and it can be difficult to download all of it quickly. Even using a 1,000 GbE connection, it could take more than twelve hours to download five terabytes of data; and that doesn’t take into account the likely spike in traffic that could limit bandwidth significantly.

Have a Contingency Plan

Even if a cloud provider proves reliable, it makes sense to have a backup solution in place. This could come in the form of a disaster management plan. In many cases, the easiest solution is to utilize an entirely separate cloud provider to stores mission critical data and applications in the event of problems with the primary provider. Maintaining separate cloud providers may create challenges in terms of data management and record keeping, but the extra effort is certainly preferable compared to the prospect of losing valuable data altogether.

These contingency plans can help protect not only against the cloud provider going out of business, but also against unexpected service outages that can affect even the largest and most reliable providers. After Amazon Web Services experienced outages that affected the eastern US for several hours in February of 2017, The Wall Street Journal reported that companies in the S&P 500 lost $150 million, to say nothing of the numerous smaller companies who can’t afford to lose valuable business to downtime.

Organizations can also protect themselves by identifying mission critical data and applications that can be backed up locally. These backups can be accessed quickly to make it easier to switch providers in the event that something goes wrong with the original provider. Colocating with a data center can be especially helpful in this process. Many data centers provide access to multiple cloud providers, making it much easier to back up data and transfer services in the event of one provider’s failure.

In many ways, planning for a cloud provider to go out of business is similar to planning for a disaster. Losing access to its data can be devastating to any organization. Even if a cloud provider seems reliable today, migrating operations to the cloud is a long-term investment, and there’s no guarantee that a successful provider will continue to thrive in the future. By carefully scrutinizing service agreements and taking steps ensure that vital assets won’t be lost when a cloud provider ceases operation, companies can avoid suffering lasting collateral damage.

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About Ernest Sampera

Ernie Sampera is the Chief Marketing Officer at vXchnge. Ernie is responsible for product marketing, external & corporate communications and business development.

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