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Starting a Cloud storage & Hosting Business – A Complete Guide

Do you want to start a cloud storage business? If YES, here is a complete guide to starting a cloud storage and hosting business with NO money and no experience.

Okay, so we have provided you an in-depth sample cloud storage & hosting business plan template. We also took it further by analyzing and drafting a sample cloud storage marketing plan backed up by actionable guerrilla marketing ideas for cloud hosting businesses. In this article, we will be considering all the requirements for starting a cloud hosting business. So put on your entrepreneurial hat and let’s proceed.

What is Cloud Storage and Hosting; and Its Uses?

Cloud storage provides users with immediate access to a broad range of resources and applications hosted in the infrastructure of another organization via a web service interface. Cloud storage can be used for copying virtual machine images from the cloud to on-premises locations or to import a virtual machine image from an on-premises location to the cloud image library.

In addition, cloud storage can be used to move virtual machine images between user accounts or between data centres. Cloud storage can be used as natural disaster proof backup, as normally there are 2 or 3 different backup servers located in different places around the globe.

User’s access cloud computing using networked client devices, such as desktop computers, laptops, tablets and smartphones and any Ethernet enabled device such as Home Automation Gadgets. Some of these devices—cloud clients—rely on cloud computing for all or a majority of their applications so as to be essentially useless without it.

Examples are thin clients and the browser-based Chromebook. Many cloud applications do not require specific software on the client and instead use a web browser to interact with the cloud application. With Ajax and HTML5 these Web user interfaces can achieve a similar, or even better, look and feel to native applications.

Some cloud applications, however, support specific client software dedicated to these applications (e.g., virtual desktop clients and most email clients). Some legacy applications (line of business applications that until now have been prevalent in thin client computing) are delivered via a screen-sharing technology.

Why Start a Cloud Storage and Hosting Business?

Cloud computing is an emerging paradigm computing concept that enables both information technology infrastructure and software to be delivered directly over the Internet as a service.

This arrangement, whereby companies can expand network capacity, and run applications directly on a vendor’s network, offers a host of advantages with the most primary being radically lower IT costs. The lower budgetary requirements and commitments allow even smaller companies to piece together an IT project without spending on purchasing legacy server, and storage systems.

Additionally, the burden of developing and maintaining the technological expertise required in running the network is transferred to the service provider. The pay-per-use basis of cloud computing helps transform the way IT departments create and deploy customized applications during these difficult times.

By offering a more cost-effective, less risky, and fundamentally faster alternative to on-site application developments, cloud computing is poised to transform the economics of information technology in the next few years.

With the Internet being a foundation for cloud computing, the term “cloud” is used as a metaphor for the Internet. Thanks to new and improved networks, the Internet is fast emerging into vehicle for delivering computational requirements.

The ubiquity of the Internet and the widespread availability of high-speed broadband access are the primary factors driving the movement towards the cloud. Although still a small percentage of the total IT spends, cloud services are strong drivers of incremental growth

Starting a Cloud storage & Hosting Business – A Complete Guide

  • Industry Overview

The global cloud storage market is expected to grow from USD 18.87 billion in 2015 to USD 65.41 billion by 2020, at a Compound Annual Growth Rate (CAGR) of 28.2%.

The cloud storage solution and services are currently being offered by numerous vendors such as IBM, Microsoft, Google, Amazon Web Services, VMware, Box, Fujitsu, RackSpace, AT&T, and HP. These vendors are selling variations of cloud storage solutions and managed services.

Interesting Statistics About the Cloud Storage and Hosting Business

However, there is a price war between these cloud storage service providers globally, as they keep reducing the prices at regular basis and increasing the volume of storage. The storage solutions are evolving as several companies have entered into the market and are offering advanced solutions to store the data at minimum costs.

The first digital storage device was introduced in 1890 when Herman Hollerith, founder of Tabulating Machine Company, used punch cards to read and record data. Thus, the storage market has evolved and in the present scenario, the user can save up to 1 GB of data free of cost on cloud storage and access it from any remote location.

Factors such as rising need for big data storage and increasing adoption of cloud storage gateways are driving the demand for cloud storage solutions globally. The cloud storage market has been segmented on the basis of types into solutions and services.

On the basis of solutions, it is divided into:

  • Primary storage solution
  • Backup storage solution
  • Cloud storage gateway solution
  • Data movement and access solution

On the basis of services, it is divided into:

  • Consulting services
  • System and networking integration
  • Support training and education

On the basis of deployment, it is divided into:

  • Public
  • Private
  • Hybrid

On the basis of organizational size, it is divided into:

  • Small and medium businesses (SMBs)
  • Large enterprises

On the basis of verticals, it is divided into:

  • BFSI
  • Manufacturing
  • Retail and consumer goods
  • Telecommunication and IT
  • Media and entertainment
  • Government
  • Healthcare and life sciences
  • Energy and utilities
  • Research and education;and others

On the basis of regions, it is divided into:

  • North America
  • Europe
  • Asia-Pacific (APAC)
  • Latin America
  • Middle East and Africa (MEA).

Growing recognition of economic and operational benefits and the efficiency of cloud-computing model promise strong future growth. As companies ease out gradually from the economic uncertainties and financial shackles, widespread adoption of cloud services is in the offing.

The pragmatic and successful adoption of this technology concept by early adopters will pave the way for mass enterprise adoption of cloud services in the upcoming years. The transition of enterprises from virtual machines to the cloud will additionally extend the impetus required for strong growth.

Poised to score the maximum gains will be end-to end cloud-computing solutions that offer complete functionalities ranging from integration of internal and external clouds, automation of business critical tasks, and streamlining of business processes and workflow, among others.

Starting a Cloud storage & Hosting Business – Market Feasibility Research

  • Demographics and Psychographics

Companies need only pay for the storage they actually use, typically an average of consumption during a month. This does not mean that cloud storage is not expensive, only that it brings operating expenses rather than capital expenses.

Businesses using cloud storage can minimize their energy consumption by up to 70% making them a more green business. Also at the vendor level they are dealing with higher levels of energy so they will be more equipped with managing it in order to keep their own costs down as well.

Organizations can select between off-premises and on-premises cloud storage options, or a combination of the two options, depending on relevant decision criteria that is complementary to initial direct cost savings potential; for instance:

  • Continuity of operations (COOP)
  • Disaster recovery (DR)
  • Security (PII, HIPAA, SARBOX, IA/CND)
  • Records retention laws
  • Regulations and policies

Storage availability and data protection is intrinsic to object storage architecture, so depending on the application, the additional technology, and effort and cost to add availability and protection can be eliminated. Storage maintenance tasks, like purchasing additional storage capacity, are offloaded to the responsibility of a service provider.

  • Niche ideas in the Cloud Storage and Hosting Business

Cloud computing as a whole is a hosted infrastructure; it uses the internet in order to deliver IT services, thus eliminating capital expenditure (CAPEX) on infrastructure. It also helps in ensuring consumption-based billing, and is witnessing increasing adoption in a number of end-use sectors including government organizations.

This is expected to be the key driving force for the market in the coming years. Concerns regarding security, privacy, and data access are the major restraints to market growth, since they may adversely affect business performance. Niches or ideas that may make you stand out in this vast industry include.

  • Medical Cloud computing
  • Social media cloud computing
  • Cloud computing consultancy
  • Large companies cloud computing
  • Small business cloud computing
  • Cloud computing for Universities
  • Tax cloud storage and computing etc.

Level of Competition in the Cloud storage and Hosting Business

According to Forbes, $47.4 billion dollars will be spent on Cloud Services in the year 2016. In the next four years of economic growth that amount is envisaged to double. Over 76% of enterprises have some type of business strategy which incorporates cloud services into future plans. Of those organizations, 74% are expecting to increase spending by greater than 20%.

Nearly half of many organizations use cloud computing services in some form now. Those that don’t are 30% more likely to incorporate the new technology into operations in the next 18 months. Cloud computing houses a Platform-as-a-Service sub-industry known as PaaS.

The PaaS market is currently valued at $1.9 billion and is projected to double in five years or less. All these factors make the cloud storage and Hosting industry very tempting and lucrative, with individuals diving into it to claim their own share.

  • List of Well Known Cloud Storage and Hosting Brands

There are a great number of cloud storage and hosting brands that have started and have done greatly for themselves. Some of these brands are such that can be said have gone from being small to being really big.  Here are some of the well-known brands that exist;

  • Akamai Technologies Inc.
  • Amazon Web Services LLC
  • CA Technologies
  • Dell Inc.
  • ENKI
  • Flexiant Ltd.
  • Google Inc.
  • Hewlett-Packard Development Company L.P.
  • IBM Corporation
  • Joyent Inc.
  • KloudData Inc.
  • Layered Technologies Inc.
  • Microsoft Corporation
  • Netsuite Inc.
  • Novell Inc.
  • OpSource Inc.
  • Oracle Corporation
  • Rackspace Hosting Inc.
  • Red Hat Inc.
  • com Inc.
  • Skytap Inc.
  • Terremark Worldwide Inc.
  • Yahoo! Inc.

Economic Analysis

The services or applications organizations are moving to the cloud are largely dependent on company size and industry. For instance, storage is the primary service for 40 percent of small businesses and 35 percent of mid-sized businesses, whereas large businesses and the federal government are first and foremost going to the cloud for conferencing and collaboration applications (40 percent and 39 percent, respectively).

Organizations are also turning to the cloud for messaging, office and productivity suites, and business process apps and compute power. However, reducing IT operating costs is only one of several cloud benefits, according to cloud users surveyed by CDW.

In fact, organizations implementing or maintaining cloud computing point to increased efficiency (55 percent), improved employee mobility (49 percent), increased ability to innovate (32 percent) and freeing current IT staff for other projects (31 percent) as the top benefits. Reduced IT operating costs come in fifth on the list of benefits (25 percent).

Business operations frequently must balance between fixed costs, concrete and intangible inventories, and unforeseen operational costs. Fixed costs can include information processing, file retrieval and data storage. Before the advent of modern information technology space was needed for filing cabinets and document storage in the form of boxes or containers.

The progression of electronic media capacity and the Internet’s influence on business transactions presents many advantages to improve data handling. Instead of paying rental fees for a building or storage facility, organizations now have the option of paying for cloud server storage.

The cost of a cloud server is much smaller than the cost of a lease or payment for physical facilities which also require the maintenance and monetary investment of often multiple individuals to care for both the property and the documents.

Is a Cloud Storage and Hosting Business Worth Starting from Scratch or is Buying a Franchise Better?

While the term ‘cloud computing’ is new, the concept of sharing by multiple businesses and locations via secure remote centralized data centres has been around since the mid 1960s (someone say ‘time-sharing’).

In the full sense, cloud computing today underscores a paradigm shift from local office computing systems that are on-site to a “utility computing” model in which shared and scalable computer infrastructure, software and business processes are provided via the Web for a monthly or annual fee.

Buying into a franchise in this industry is better than starting from the scratch because unlike starting from the scratch, buying into a franchise offers you the following benefits:

  • Easy access
  • Integrated applications
  • Flexible and scalable
  • VOIP Unified Telephony
  • Security

Possible Challenges of Starting a Cloud Storage and Hosting Business

Cloud storage and hosting is one of those innovations borne out of the need for companies to reduce costs of operation. Cloud computing makes it possible for companies to cut down on overhead costs by conducting the computer-related aspects of their business virtually. Possible challenges to starting a cloud storage and hosting business include:

  • Deciding on the type of services you want to sell
  • Deciding the best place to locate the server
  • The need for high-level technicians/programmers
  • Falling pricing due to competition
  • It is capital intensive
  • Operating cost will be high especially in locations with poor power supply

Starting a Cloud Storage & Hosting Business – Legal Aspect

Best legal entity for a cloud storage and hosting business

There are several ways by which you can form a business (Sole Proprietor, LLC, Incorporation, etc.), so you’ll need to do a little research and see which model is right for the services and products you intend to offer.

When considering how to start a cloud storage and Hosting business, it seems unlikely that you will want to organize as a sole proprietor. But again, always do your own research!  It’s much better to know why you are running your business the way that you are, rather than relying solely on the advice of others.

The legal entity you choose will depend on the size of your cloud storage and Hosting business, but for the sake of this article, the LLC is the best entity for a cloud storage and Hosting business. The benefits of forming an LLC business structure is well known to the world, but the reason why it is the best structure for a cloud storage and Hosting business is because it provides security, flexibility and credibility.

Catchy Business Name ideas for your Cloud Storage and Hosting Business

  • Space Inc.
  • Access computers
  • XYZ electronics
  • Deltasone LLC
  • Tribune clouds
  • Darkage clouds
  • Shred cloud business Corporation
  • Airfire Communications
  • Fundit network solutions
  • Favour connection Inc.
  • Antique corp

Getting Insurance for your Cloud Storage and Hosting Business

Whether you offer virtual private servers, SaaS hosting, file hosting, cloud storage, or other web hosting services, your business faces risks each day. You can be sued by clients, vendors, employees, and even the guy who delivers your packages.

Insurance protects you from these lawsuits. Because one lawsuit can easily cost $100,000 or more, many small-business owners invest in insurance policies to cover their liabilities and prevent them from having to file bankruptcy after a lawsuit. You probably won’t need all of this insurance protection listed below, but here is a list of the basic insurance policies most relevant to a cloud storage and hosting business

  • General Liability Insurance.
  • E&O Insurance.
  • Cyber Liability Insurance (Data Breach Insurance).
  • Business Owner’s Policy.
  • Workers’ Compensation Insurance.
  • Employer’s Liability Insurance.
  • Fidelity Bond Insurance.
  • Employment Practices Liability Insurance.

Intellectual Property Protection in the Cloud Storage and Hosting Business

IT professionals know that handing data over to a third-party is always risky, but cloud storage and Hosting creates unique concerns for IP. Protecting your intellectual properties can be stressful but in the modern world where ideas and patents are been stolen on daily basis you need to consider protecting your hard earned intellectual property rights.

  • Pick a right provider
  • Select the right service
  • Read and understand your fine prints
  • Expect to pay more
  • Consider IP creation
  • Secure it yourself
  • Prevent a lockout
  • Revisit control on daily basis

Is Professional Certification Needed to Run a Cloud Storage and Hosting Business?

Certifications measure your knowledge and skills against industry- and vendor-specific benchmarks to prove to customers that you have the right mix of cloud skills, knowledge, and expertise. Professional certification in the cloud storage and Hosting business includes:

  • CCSK — Cloud Security Alliance
  • Cloud U – Rackspace
  • CompTIA Cloud Essentials — Comp TIA
  • Cloud Certified Professional — CloudSchool.com
  • IBM Certified Cloud Solution Architect v1 and v3 – IBM
  • com Certified Professional — Salesforce.com
  • VMware Certified Professional – Vmware
  • Red Hat Certificate of Expertise in Infrastructure-as-a-Service — Red Hat

Legal Documents Needed for a Cloud Storage and Hosting Business

Understanding what licenses and permits you need for your business can be very confusing. Each document requires time, energy and paperwork for you to be able to obtain the proper registrations. As unpleasant a task as it may be, don’t risk your business shutting down before it fully begins.

Conducting business without the proper licensing is a criminal offense in some states, while others hand out hefty fines. Here are some legal documents needed for a Cloud storage and Hosting business.

  • Business license
  • Insurance
  • VAT registration
  • Employment agreement
  • Federal tax identification number

A Detailed Cost Analysis for Starting a Cloud Storage and Hosting Business

Just as water is piped to a home and you pay for as much or as little as they are used, cloud computing resources are available whenever needed and charges are based on how much they are used. When it is turn it off, the water that would have been used is available for use by others and, in the same way, shared cloud resources can be used by others when not used by one individual.

Things you need to start a cloud storage and Hosting business may include:

  • Rent and office equipment – $3,500
  • Cloud app like Dropbox – $1000
  • A web host that supports PHP5 and MySQL (or SQLite) – $500
  • A URL for remote access – $200
  • Installations of mobile and desktop sync – $150

From the above analysis, it will cost approximately $5,350 to start a small scale cloud storage and hosting business. A medium size will cost above $214,866 and a large scale is envisaged at $965,523.

Financing a Cloud Storage and Hosting Business

Most businesses require outside funding, but many business owners don’t know how to find it, or the amount to ask for.

  • Personal savings
  • Pitching
  • Angel investor
  • Partnership
  • Venture Capital
  • Loans and grants
  • Alternative funding source like Crowdfunding

Choosing a Suitable Location for your Cloud Storage and Hosting Business

A good location for your business is vital, but choosing the right one can be something of a balancing act. Ideally, the location should be convenient for your employees – without being too expensive.

  • The level of passing trade
  • The number of competitors
  • Transport links and parking
  • The number of tech startups in the area
  • Planning restrictions
  • Local council charges and business rates for services such as waste collection
  • Local amenities

Starting a Cloud Storage and Hosting Business – Technical and Manpower Requirements

Cloud computing resources can be rapidly provisioned and released with minimal management effort or service provider interaction. This means that an organization can use more or fewer servers, stores, applications, or services, and can configure the ones it uses to meet its requirements, as and when it wishes to do so, and without major effort. Cloud computing has five essential characteristics.

They are on-demand self-service, broad network access, resource pooling, rapid elasticity, and measured service. These are the features that distinguish it from other computing models. It has three service models. These are the basic kinds of service that cloud service providers provide. They are:

  • Infrastructure as a Service (IaaS)
  • Platform as a Service (PaaS)
  • Software as a Service (SaaS).

It has four deployment models, corresponding to different ways in which cloud resources are owned and operated. They are Private Cloud, Public Cloud, Community Cloud, and Hybrid Cloud.

The Service Process of a Cloud Storage and Hosting Business

When you get into cloud hosting these server farms behave as one large storage space and processor. The actual website data (such as HTML/CSS files, images, etc.) is spread out over a cluster of hard drives connected together, much like one virtual disk with tremendous capacity.

The clusters can provide a cloud setup with literally unlimited machines to run through. You could also build a cloud space with just 5-10, so the methodology is scalable to boot. You may be wondering how the combination of multiple server environments will scale as any cloud system grows in size. The distribution of power and storage capacity is often controlled by a backend software OS/system.

The server admin would be able to log into the backend via terminal and check CPU load of all the machines, along with other vital system information. This process is called virtualization which provides a layer of abstraction between the software and hardware components. Cloud server administrators can easily optimize the cluster for storage efficiency, optimal energy usage, data backups and more.

Starting a Cloud storage & Hosting Business – The Marketing Plan

  • Marketing ideas and strategies for a cloud storage and Hosting business

Too many small-business owners think marketing is like a trip to the dentist—something you just have to do every six months or so. When marketing is continuous and targeted, business gets easier. If prospects have a positive view of your products and reputation, you’re that much closer to getting a sale.

  • Take steps to make customers feel special
  • Create business cards that prospects keep
  • Stop servicing break-even customers.
  • Develop an electronic mailing list
  • Boost your profile at trade shows and conferences
  • Combine business with pleasure –charity
  • Create a destination
  • Be an expert
  • Finally, don’t let customers simply slip away

Finding the Right Product Pricing for your cloud storage and Hosting Business

Even if the cloud’s control and security issues were suddenly resolved, the morass of cloud pricing would still be a challenge. Although cloud providers like to tout the simplicity of their services, IT managers have found that pricing cloud services is anything but simple.

Pricing structures are based on a multitude of factors, from storage space needed to clock cycles used to monthly traffic allotments, and that’s not all. Some service providers have additional charges hidden deep within their service-level agreements (SLAs).

To determine total pricing for a cloud service, users need to understand the individual service elements that a provider bills for and how those charges are calculated. Does the provider, for example, bill based on traffic, storage space needed, server CPU time or a combination of these factors along with other elements?

Another critical factor in determining true costs comes down to the type of service needed. For some, that service may be little more than a hosted, dedicated server to run applications in the cloud. For others, the service may be cloud-based backup or business continuity or basic hosted storage. Perhaps, the easiest way to break down pricing is to focus on the primary services offered.

The majority of cloud service providers break down their services into three primary areas: servers in the cloud, storage in the cloud, and sites and applications in the cloud. Each is governed by its own formula for pricing. Servers in the cloud come in two forms: virtual and physical. In other words, you can purchase time on a virtual server (where the physical hardware may be shared with others) or time on a dedicated server (where you are the only “tenant” on that server).

Strategies for Winning Competitors in the Cloud Storage and Hosting Industry

We all know that unless we’re different from our competitor, we can never expect the price we get to be more than what they get. We also know unless we show customers what makes us different, there is little reason for them to buy from us.

Your challenge is to differentiate yourself to ensure you stand apart from your competitor and, therefore, are capable of commanding a high price.

  • Start from yourself
  • Focus on the customer’s solution.
  • Allow customers to see solutions they didn’t know exist
  • Focus on the customer solution
  • View what you sell as an investment the customer is making rather than a purchase.
  • Sell not only to the decision maker, but also to the one who is going to benefit from what you’re selling
  • Don’t use comparison

Increasing Client Retention for your Cloud Storage and Hosting business

To retain a customer you need to provide an experience that blows the customer away, keeps you top of their mind, and gets you into discussions with their friends.  Far too often marketers spend all of their attention on the chase and the sale and not enough on how to retain and create remarkable experience.

  • Wow your customers
  • Follow them up
  • Provide some personalization
  • Choose the right tools
  • Make it simple
  • Protect their ideas and interest

Supplier/Distribution Network of a cloud storage and hosting business

The first step is to decide whether your organization will provide a complete cloud storage services solution. This is an issue of size and focus. Don’t buy into the conventional wisdom that only a few huge providers will be able to succeed in this space.

Remember that people have been saying for at least a few years that VARs increasingly won’t be able to make money on hardware and software, yet sharp, regional storage resellers continue to prosper, and it will be the same for cloud storage services providers.

A small regional cloud storage services provider may have some advantages over a large provider, because of the local service advantage. Many large cloud storage providers cite customer service as their key differentiator. What better form of customer service is there than when it’s locally based?

While cloud storage services are inherently remote and therefore not tied to a location, a local presence and face-to-face contact still helps to build trusted relationships with customers — especially when that customer trusts you to handle an important part of its business operations.

The second part is a matter of focus: Will offering this service distract you from your main course of business? Even if you aspire to someday provide only cloud services, you have to make sure you keep the rent paid while you grow that new business. Gone are the days where venture capitalists would dump tons of cash into an unproven start up. If the cloud storage services business can be built without the distraction of or, even better, complementary to the core business, that’s ideal.

Tips for Running a Successful Cloud Storage and Hosting Business

A cloud storage and hosting business is a super lucrative business that requires hard work and attention to be able to be successful. As an entrepreneur, it is your duty to make your business outshine that of your competitors and leave a landmark to be envied by many. Running your business can take a lot but to be able to do that you need to keep the following in mind.

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