What Happened to Nirvanix?

Cash is king. And when the cash runs out, business is over. And that’s essentially what caused cloud storage provider Nirvanix to announce last week it was closing up shop, leaving customers and partners in a hurried mess to get their data off the cloud provider’s servers before they went dark.

When the news first surfaced, Nirvanix customers were given two weeks to pull their data off its servers, but thankfully, the company extended that deadline to Oct. 15. Even so, it’s going to be a tight deadline, particularly for the largest of Nirvanix customers that could be transferring hundreds of terabytes of data to other cloud storage options.

It’s the worst cloud nightmare come true. And one source Talkin’ Cloud spoke with indicated Nirvanix may only be the first of several pure cloud storage players to fall over the next few years.

One of the problems associated with cloud storage is its roots as a commodity service, noted Andres Rodriguez, founder and CEO Nasuni, a provider of storage infrastructure-as-a-service that deals with several cloud storage providers for its “backend” storage. Nasuni is also a former Nirvanix partner and once ranked Nirvanix in the top six of cloud storage players.

That was in 2011. Nasuni does regular tests of its cloud storage providers to ensure they live up to the expectations of its customers. Sometime between 2011 and 2013, though, Nirvanix started coming up short. Rodriguez explained as the market changed and customer requirements became stricter, Nirvanix didn’t follow suit, instead offering a commodity storage play with no other services layered on top. He said it was also difficult and time-consuming to retrieve data stored on Nirvanix’s servers. That’s why Nasuni dropped Nirvanix entirely and urged customers to look elsewhere for cloud storage options.

Charles King, president and principal analyst of Pund-IT, noted that providing cloud storage is expensive because of upfront infrastructure investments that are recouped only through long-term service agreements. If revenue doesn’t pick up quick enough to at least pay the bills, then a cloud storage provider hits the wall.

And it looks like that is exactly what happened with Nirvanix. The company simply ran out of money. Rumors surfaced of a round of funding that failed to gain any traction.

“Run out of money (or the patience of willing investors) and it’s all too easy for a cloud services player to have to shutter its operations,” King said.

According to Rodriguez, venture-backed pure cloud storage plays are doomed. He saw that coming some time ago with Nirvanix, he said, and as quickly as possible migrated his customers to larger cloud storage players that layer other services on top of storage. Basically, that means the likes of Amazon (AMZN) Web Services and Microsoft (MSFT) Windows Azure.

“The non-technical answer is they ran out of money. Investors are not stupid,” Rodriguez said. Simply put, Nirvanix’s pockets weren’t deep enough to compete with the big guys, which have a much larger array of resources and can run their cloud storage offerings as loss leaders.

It’s a nightmare for customers and partners left scrambling. And it looks as though there are some who simply won’t be able to migrate their data in time.

Nicos Vekiarides, CEO of TwinStrata, told Talkin’ Cloud that although TwinStrata expects to be able to migrate all of its customers off of Nirvanix servers before the company closes down for good in three weeks, he said some of Nirvanix’s customers simply don’t have the time or bandwidth to migrate in time.

“We got the word from Nirvanix really just a few days before they started telling their customers about the shutdown. We had a tiny bit of runway, but certainly it was as much of a shock to us as it was to everybody else,” Vekiarides said.

Others are also optimistic they can deal with the issue in time. Bob Hankins, vice president of storage solutions at Logicalis US, was another Nirvanix partner who opted to comment on Nirvanix’s closure.

“Nirvanix is one of our many cloud partners. It is unfortunate that Nirvanix is leaving the market, but Logicalis has other cloud storage relationships and Nirvanix’s exit will have no negative impact on our business or customers,” Hankins said in an email.

The whole situation is unfortunate for all involved and could give other cloud storage players a bad reputation. After all, Nirvanix wasn’t exactly an insignificant player. Quite the opposite, in fact. The lasting effects of its closure could be staggering. And if Rodriguez is correct in his thinking, other pure cloud storage players had better start rethinking their business model.