The Future Economics of Online Storage

In the book, The Wealth of Nations, the great social philosopher and father of modern economics, Adam Smith, describes a pin factory’s ingenious method of separating each part of the pin-making process into separate functions and assigning those parts to separate master pin-makers. This process was broken down into stretching out wire, cutting it into specific pin-size lengths, straightening it, putting a point on the end, and forming the eye of the pin, and each part had an individual whose sole role was only their process and they specialized at their step so much that this pin factory could generate 48,000 pins in a day whereas if each pin maker undertook the entire process themselves could only manage less than 100 pins per day. Smith was describing what we now know as the assembly line, and more importantly is what is involved in the market-dominating concept made especially famous by JD Rockefeller of Standard Oil known as the economies of scale.

Cloud computing is a relatively new field whose birth in business can be traced back to 1999 when a company by the name of began offering Software as a Service (SaaS) to customers. At the same time a software design and consulting firm, FilesAnywhere, began offering an online storage as a service. Eventually, thanks to FilesAnywhere’s pioneering efforts, many more online storage companies began sprouting up due to the profitability of such an industry. Following FilesAnywhere companies such as Dropbox,, Sugarsynch, and Mozy came along to dominate the growing market. Despite the tremendous growth in market users it is nonetheless ponderable as to where and what place online storage will have in the future of computing.

To answer this question we have to look no further than the current explosion of data and information in recent years and many studies of their growth trends have shown that they are being produced faster than we are creating the means to store such tremendous amounts of useful data. Due to the progress of computing and the amount of information generated by the increase of transactions placed online, our necessity of having a service to house data in economies of scale fashion has never been in more demand than now. Although these services are being presented to individual consumers, their biggest benefit will come from the realm of business-to-business storage. As cloud computing becomes more powerful, stable, and cost effective it will ultimately attract more users. The online storage companies will have to begin competing for the business of individual cloud computing companies to offer the benefits of specialization and the economies of scale savings.

It doesn’t make economic sense for a cloud computing company to have their own online storage service offering because it takes away dollars they could spend on bettering and expanding their computing business.  At the same time that these cloud computing companies are spending their investment capital to grow into their niche, online storage services will be using their investment dollars to lower costs, increase market share, and raise the barriers for newcomers to try and come into their market to compete by lowering their profit margins as well as their prices. Such a strategic economic maneuver has been seen many times in the past, and online storage will use it to not be overrun by cloud computing companies.

Some Additional Thoughts on the Future of Online Storage

  • While these services primarily targeted people in the business community, service providers are now realizing that individual consumers are equally important. In the near future, almost every second person will own a website, picture gallery, video gallery, document, or briefcase online. So it is clear that the importance and acceptability of online storage will increase.
  • As internet connection speeds increase along with a substantial drop in broadband charges, you may see online storage replacing traditional storage media. Who wouldn’t like to keep all data in one place and enjoy the freedom of accessing it as and when required? While people are only using online storage for essential data, they may start using online data storage services to store everything they have got. Slow internet connection and costs don’t allow this change at the moment.
  • Storage cloud may soon evolve in the form of an internet network where there is no clear ownership. Everyone will be sharing and retrieving data from online locations with the help of modern tools installed on computers, mobile devices, wireless equipment, etc. The possibility of a peer-to-peer storage network in the near future is actually very high.
  • Online data storage service costs will drop substantially with time. However, the costs of higher protection and superior guarantees may increase in the near future. People will enjoy TBs of data storage to store their videos, pictures, and other data on a number of public sharing platforms.
  • The growth of the internet, social media, and cloud computing will play a great role in this process. Online data storage companies may soon offer services that allow a person to host a website or start a social network on his/her own and initiate a data broadcast from an online location.
  • A number of big players will join the online data storage industry very soon. Those who offer some useful features for managing vast amounts of data apart from the usual security features may soon win the game.


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