Easing The Transition To Cloud Storage

Outsourcing data storage wasn’t successful the first time around, but venture capitalists are optimistic about the second attempt.

In 1999, Paul Flanagan became one of the early employees at StorageNetworks Inc., a company that rented and managed data storage equipment so its customers wouldn’t have to buy their own. The company was an immediate hit, reaching $123 million in annual sales in its third year of business.

But StorageNetworks ultimately fell into bankruptcy because the technology that would let it add more customers without spending too much capital on the back-end just wasn’t there yet. “When I wrote the financial model for StorageNetworks, the worst part [of the business model was] owning all the back-end infrastructure,” recalled Flanagan, who later became the company’s chief executive.

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