With public cloud storage costs quickly heading toward zero, it may not make sense for some Enterprise File Sync and Share (EFSS) providers to store customer files in their own data centers.

Last night news broke that EFSS provider Egnyte will now leverage Google Cloud Services to store client files.

It’s a move that didn't shock Alan Pelz-Sharpe, a research director at the 451 Research.

“Many cloud service providers are finding out that low cost and free subscriptions are hard to upsell and the cloud storage costs alone can be a huge drag on the limited finances of a startup,” he said.

And though Egnyte has yet to put out a press release on the Google cloud storage matter, CEO Vineet Jain confirmed that the judgment had been made.

“We have decided to start utilizing Google Cloud Services for our backend infrastructure,” he said.

Egnyte currently stores roughly 40 petabytes of data on their own servers in data centers in the US and Europe.

“Moving forward, barring everything continues positively,” said Jain, “Egnyte will look to store all new incoming data with Google.”

Competing with the Big Leagues

This move for Egnyte certainly makes sense from a cost perspective. Cloud storage is becoming incredibly cheap making it hard -- if not near impossible -- for smaller EFSS vendors to compete with larger vendors on that particular feature.

Consider that in the last few months Microsoft has increased OneDrive for Business storage from 25GB to 1 TB in its EFSS offering, that other large providers like EMC Syncplicity offer customers more storage than they could ever use, and that still others like IBM and Salesforce have abundant resources at their disposal.

Contrast that with Egnyte’s rates.

And though some vendors who are EFSS pure-plays like Dropbox feel some heat from the aforementioned providers, they have no plans to offer their services for less.

“We’re not cutting prices right now,” Drew Houston, CEO of Dropbox told Re/code’s Liz Gannes and Walt Mossberg at the inaugural Code Conference last month in Rancho Palos Verdes, Calif.

But cost is not Egnyte’s only motivation.

“We decided to make this move as of a result of need for scale out storage,” said Jain. “We were also looking to reduce the capex, and most importantly get the data closest to the edge. We are able (via Google) to scale and grow much more efficiently and cost effectively.”

EFSS Ain’t About Storage Anyway

And while letting a third party store your customer's precious files may seem risky (either for your customers, your business, or both), the reality is that storage -- whether cloud-based or not -- is not where the best EFSS providers add value.

The mobile experience, the UI, the ease of collaboration, the number and availability of quality apps and such are key.

We believe EFSS has to start with the end user because if you can't exceed their requirements, they will gravitate to consumer-grade tools that make the company less secure,” said General Manager of EMC Syncplicity, Jeetu Patel. “So, Syncplicity invests heavily in innovative ways for users to sync, access, share, and protect files across all of their devices while providing IT the security and storage choice they need.” 

Enterprise-grade security isn’t only about little toy soldiers, drones and encrypted files, but also about permissions, audit trails, remote wipe and many other features that don’t impede or annoy users but also allow CIOs to sleep at night.

And while storing customer files on the Google Cloud may not be a factor or show-stopper for some enterprise customers, there are reasons that Egnyte competitors, like fellow start-up Box, build and/or leverage their own data centers.

“There are many benefits to having your own data centers or at least building 'hybrid' architecture,” said Box CEO Aaron Levie (the latter is Box's approach). “Additional reliability, performance tuning, ability to have customers audit your data center, supporting compliance efforts that public clouds can't, and more,” he added.

Learning Opportunities

Levie said that Box primarily operates out of three of their own data centers, but also uses other cloud services for fault tolerance and performance improvements in various regions. “This structure allows us tighter control of our infrastructure and operational environment (allowing us to support audits, HIPAA compliance, etc.), while also benefiting from the cloud when it makes the most sense,” explained Levie.

It would be worth asking if Box could have landed the GE deal with the Google Cloud on the backend, but that’s a hypothetical question that Box may not be able to answer given its pre-IPO status.

Egnyte doesn’t expect that the Google Cloud arrangement will hinder its business at all.

“We encrypt all customer data with their own keys and hence data in transit AND at rest is always encrypted,” Jain explained.

He also claimed that Egnyte is unique (we think that some Egnyte competitors might debate this) as a hybrid provider that enables customers to keep their restrictive data behind the firewall (i.e., not move it to the cloud).

“It enables the most compliance sensitive industries to adopt the cloud (Healthcare, Finance, etc.),” said Jain.

It’s worth noting, too, that Egnyte can also accommodate storage on Azure, Amazon or other cloud services a customer might choose.

“It is purely up to the customer if they have a preference, but our default moving forward will be a Google setup,” said Jain.

Cloud Skeptics

All of that being said, there’s at least one EFSS provider that thinks any cloud is a bad idea.

Here’s what Accellion's CEO Yorgen Edholm told us when we asked for his take on the Egnyte news,

In a saturated cloud storage market, dominated by players such as Box and Dropbox, it's not surprising that Egnyte is pursuing a hybrid storage approach to try and gain some advantage. However while public cloud players such as Google or Microsoft have matured with market demands and claim security features where they can, there's no question that on premises cloud data storage is the most secure solution for the enterprise, particularly in a post-Snowden era. To alleviate privacy concerns, companies -- especially those outside of the US -- want as much control as possible over their customer data. On-premises is simply the best answer for that."

Everything else being equal, Edholm might be right on the money, but the chances of that being the case aren’t good. That being said, for enterprises that are nervous about the cloud, Accellion provides an attractive solution.

And finally, it’s worth noting that moving massive enterprise files to the Cloud (for enterprises that might choose to do so) may not be as expensive and burdensome as some suggest. Companies like MetaVis Technologies have tools for that, as do other vendors.

Only time will tell if Egnyte's move to store its customer files on Google Cloud Services is a big deal.

Title image by kilukilu (Shutterstock)