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In the World of Enterprise Cloud Services, Transferring a Couple of Gigabytes Can Earn You Millions

Do you remember what the workplace was like before the cloud?

You’d store digital tools and data locally, on your computer, or via a shared on-site server kept in a climate-controlled room – both belonging to or licensed to your company.  

Maintenance and upgrades were expensive. System outages were common. If anything happened to the location of that server – such as flooding – well, you’d lose everything unless your company regularly backed up data on another physical server stored elsewhere. 

Today, we’re so used to working in the cloud that we forget that our data still sits on storage servers. They’re just not our servers but a cloud storage provider’s instead. 

Cloud storage, aka storing data in offsite servers, only showed up en masse in the early 2010s. It has since become the preferred way to store and access data. It’s proven cheaper, scalable, and to fail less often – a worthy upgrade for any business.

Founder Patrick Kennedy laid the groundwork for his cloud data transfer service, Cloudflyer, by helping media companies (like CBS and Disney) migrate from physical servers to the cloud. 

Until 2017, incumbent cloud providers like Microsoft, Amazon, and Google dominated the space. Then new providers emerged that offered cheaper subscription fees. But if you wanted to transfer to these new providers, you had to pay a hefty fee to the provider you left. 

Over the next five years, Patrick and cofounder Michael Asadoorian helped businesses transfer away from the incumbents to cheaper alternatives. Leveraging connections to a handful of large enterprises, they made $3 million in their first fiscal year.

Cloudflyer today is one of the only businesses of its type helping create a more competitive cloud industry where five players had once dominated. Here’s how it started and where it is going today.

Helping Old Media Giants Get On the Cloud

Patrick had worked in LA for years helping media companies manage their data when he created his own business in 2012. He’d been the VP of Sales for a systems integrator with clients like CBS and Disney. 

But eventually, the cutthroat and fear-driven corporate cultures pushed him to strike out on his own. “The truth is I have a bad attitude when it comes to working with assholes,” says Patrick. “I’m customer service-centric and I saw a better way to provide services to our customers.”

Patrick left his job, took his clients with him, and created ACES, a more tech-oriented alternative to support their workflow, data storage, and infrastructure. 

Back in 2012, the data storage and infrastructure industry was very different. Most businesses would buy large data storage arrays for in-house use – with support costs often surpassing the hardware costs. Their primary concern was buying storage devices big enough to keep hordes of data yet fast enough to access it efficiently.

Over the next two years (2014-2015), Patrick saw more businesses shift to “the cloud.” Providers like Amazon Web Services (AWS) let business store their data in their regularly maintained and updated servers for a small fee – drastically reducing security risks and upgrading workflow.

By 2014 many businesses had made the switch, but media companies like CBS and Disney were moving slower than other industries. “Large companies are sometimes slow to change for a range of reasons,” he says. “In many cases, they simply didn’t have internal knowledge of how to best take advantage of these new cloud technologies.”

To get these large companies onto the cloud, Patrick self-funded a SaaS in 2016 called Acembly to help media businesses store and manage files across multiple cloud services. That same year, Patrick met his cofounder, Michael Assadorian, Cloudflyer’s current CTO and product lead. 

Patrick had been looking for a cofounder and thought Michael with his long experience in infrastructure, networking, software development, and management was a perfect fit.

They had a product and a market, however, the cofounders realized there was a more pressing problem to solve. Most businesses had already made it over to the cloud. The real demand was for moving from one cloud provider to another.

Cloud customers could be interested in moving for many reasons. Maybe it’s because of compliance or they’re not happy with their current provider.

“Cloud customers could be interested in moving for many reasons,” says Patrick. “Maybe it’s because of compliance or they’re not happy with their current provider. It could also be a political move or simply cost-driven. Unfortunately, until now, there hasn’t been a simple option to move that data out in any situation.”

The two worked together on Acembly for two more years until they’d acquired enough customers to launch the new service. In 2020, they closed down Acembly and focused full-time on Cloudflyer.

Why It’s Hard to Move Between Cloud Providers

Gartner reports that just five companies owned 80 percent of the cloud industry in 2018: Amazon, Microsoft, Google, Alibaba, and IBM.

Only these super companies could provide the size, speed, and security to run a complex business. However, maintenance fees skyrocketed. Today, cloud technology has become more accessible, creating a growing number of smaller cloud service providers offering similar benefits but at a fraction of the cost.

Large cloud providers are hard to leave due to “egress costs.” Patrick says it can cost as much as nine cents per gigabyte to transfer files off their servers. That might not sound like much, but enterprises like CBS store billions of gigabytes of data on the cloud. Transferring even a small percentage of their files can cost millions.

Cloudflyer makes it simple and affordable to move out of expensive cloud providers to more affordable ones with a simple drag and drop interface. The company gets cheaper rates than large enterprises because it maintains accounts on all of them.

“We’ve built Cloudflyer so that it’s not reliant on any individual cloud technologies. However, we have built within AWS, Azure, GCP, and other hyper-scaler cloud services for cost efficiency purposes. Cloudflyer is hosted in all AWS or Azure regions (data centers), allowing us to assume the customer’s egress costs and move them with ease,” says Patrick.

Since Cloudflyer is hosted on all major providers, a file transfer only costs about two cents per gigabyte. They charge their customers five cents per gigabyte instead of nine and take the rest as profit. That pricing model makes them profitable whether they work with large enterprises or small to mid-sized businesses.

Why Cloudflyer Stands Alone

While Cloudflyer hasn’t spent much time on marketing, Patrick is confident that there are few obstacles to growth – from competitors and cloud providers alike.

“We know that this space will grow immensely in this decade,” he says. “Because we’re in a market that has such growth, having a high-value tool or service makes us feel like we’re well-positioned to be one of the leaders in the space.”

Cloudflyer takes a different approach to its niche than other companies that Patrick dubs “hyper scalers.”

“Most of our competitors focus on smaller data and workplace migrations through a Dropbox system,” says Patrick. “We have yet to find a competitor using automation and auto-scaling to move large amounts of data the way we do.”

What of the major cloud providers that Patrick helps businesses leave? He believes they are too big to care at this point. “We haven’t gotten to a point of disruption where they worry about us,” he says. “We also help move customers between the big guys so that helps their business.”

Patrick thinks Cloudflyer will soon be the go-to service to move between any cloud provider with a simple drag and drop interface. It will also provide better analytics for customer data.

“Since we can easily touch customer data storage, we’ll be able to apply analytics and intelligence for automation and optimizing costs in the coming years,” he says. “By 2023, we plan to have intelligent features built-in. Once a customer connects their cloud account to Cloudflyer, we’ll automatically know how much they spend and where they should move. Then they can choose to either trigger the transfer themselves or rely on Cloudflyer’s intelligent automation to send the data there.”

“For example, say they have 500 terabytes in AWS and 150 in Microsoft Azure and they want to back that up or offload it to Wasabi or Iron Cloud. Our automation will tell them which cloud they should move to for cost efficiency based on their data requirements and automatically do that.”

Patrick believes there will soon be a race to the bottom for data storage services.

“Two years ago, storage was six cents a gigabyte. New storage companies charge four cents. Soon we’ll see businesses doing two cents a gig. We’ll be there to help businesses get these prices. There’s going to be a race to the bottom for price and efficiency.”

Patrick’s advice to other founders: Create products for paying customers.

Avoid spending money on marketing or sales until you have a proven product.

“Don’t spend money on ideas because you think they’re going to be successful,” he says. “Work toward identifying high-value propositions with your product or service and turn that value into revenue as quickly as possible. From there, refine the value of the product or service that you’re delivering and build iteratively towards what the market is asking of you. Avoid spending money on marketing or sales until you have a proven product.”

What is happening in the cloud industry today is the same happening in advertising, finance, and energy. Monopolistic business practices and high prices have left large companies vulnerable to disruption from smaller providers. Such disruption creates two opportunities: to provide better value and to help businesses switch to the better value option.

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Andrew Gazdecki
Andrew Gazdecki
Andrew is an award-winning serial entrepreneur with three exits. He’s the founder and CEO of MicroAcquire, the world’s most founder-friendly startup marketplace, and its rebellious child, Bootstrappers, which gives voice to the entrepreneurial underdog. When not building businesses, he writes for Forbes, Entrepreneur, and now, Bootstrappers.

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