Nirvanix shutdown has cloud users wondering who's next

Startups and small providers have the most to lose when one of their own goes under

Do you have data stored on Nirvanix's cloud storage? Guess what -- it's shutting down, and you could be screwed. Customers have been given two weeks to migrate their data elsewhere.

The word came to me last week from a reporter calling to ask for a quote. That was followed by a few worried discussions with companies that use cloud-based storage -- it's very concerning to get those kinds of calls from users because the public cloud requires a certain amount of trust to be viable.

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The six-year-old Nirvanix has raised more than $70 million in venture capital funding, including a $25 million Series C round last May led by Khosla Ventures. Other Nirvanix investors include Valhalla Partners, Intel Capital, Mission Ventures, and Windward Ventures. By my measure, Nivanix was well-funded, so it's perplexing that the company ran itself into the ground.

However, Nirvanix is not the first cloud company to crash, nor will it be the last. A few years ago, EMC shut down Atmos online cloud storage service, leaving many of its customers out in the cold. That decision was due to EMC not wanting to compete with its resellers.

The sudden shutdown of Nirvanix will make it that much harder for small and startup cloud providers to get the kind of large business contracts they need. Instead, enterprises will focus even more on brand-name clouds, such as Amazon Web Services, Microsoft, Hewlett-Packard, IBM, and Google in hopes of avoiding the sudden disappearance of their cloud providers. That trend could hinder the kind of innovation that startups sometimes pioneer, but it may also reduce the number of me-too cloud plays funded by the VCs, who tend to copy each other.

Still, the Nirvanix shutdown will be painful for its users, and that's not what the cloud industry needs to see.

This article, "Nirvanix shutdown has cloud users wondering who's next," originally appeared at InfoWorld.com. Read more of David Linthicum's Cloud Computing blog and track the latest developments in cloud computing at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.

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