Friend & Flowers Return With Wasabi, Take on Amazon in “Hot Storage”

In the market for cloud storage and related tech services, there is Amazon—and then there’s everybody else.

The Seattle-based company’s (NASDAQ: AMZN) Amazon Web Services business generated $12.2 billion in sales last year, and it controls an estimated 33 percent of the global market for cloud infrastructure services, according to a recent analysis by Synergy Research Group.

But that isn’t deterring Wasabi Technologies, a new Boston data-storage startup, from entering the fray. And the 18-person upstart is taking direct swipes at Amazon in its initial marketing campaign. Cue the David versus Goliath clichés—in this case, it’s David Friend and company versus the tech giants.

Yes, Wasabi is the latest tech startup from Friend (pictured above) and Jeff Flowers, the entrepreneurial duo that have now created six companies together since the early 1980s. Their most recent venture was Carbonite (NASDAQ:CARB), the 12-year-old cloud backup and data protection firm that went public in 2011.

Friend, Wasabi’s CEO, and Flowers, its chief technology officer, formed their newest company—initially known as BlueArchive—last year. But they’ve been keeping details under wraps until today.

Wasabi is selling cloud-based “object” storage as a service. Object storage refers to a data-storage approach that houses information as individual “objects” placed in digital “buckets,” as opposed to storing files in tree-like hierarchies or blocks. Wasabi claims its storage service is significantly faster and cheaper than competing products, and is just as reliable, if not more.

Clearly, Friend and Flowers are having too much fun naming their companies. Carbonite’s namesake is the ice-like substance in which Darth Vader encased Han Solo at the end of “The Empire Strikes Back.” So, why name their latest company after a spicy Japanese food?

“We’re hot storage,” Friend says of Wasabi. In this context, hot means fast.

Wasabi says its service can read and write data more than six times as fast as Amazon’s Simple Storage Service (S3), and users can access the stored data in milliseconds, Friend says. At the same time, Wasabi says its prices are around one-fifth the cost of S3, Microsoft Azure, and Google Cloud Platform.

“We’re cheaper than the cheapest, but faster than the fastest,” Friend says.

The company also touts the security of its storage. Wasabi puts data in “immutable buckets,” which basically means the company has set it up so that once data gets written on disks, it can’t be modified or deleted, Friend says.

Wasabi is making bold claims that it will obviously have to back up if it’s going to succeed. But Friend, Flowers, and some of their colleagues have built up enough of a track record with their previous companies that they’re worth taking seriously. “We’ve been working on storage technology for 15 years,” Friend says.

Ellen Rubin, co-founder and CEO of Boston-based ClearSky Data, says there could be demand for Wasabi. (Her company provides on-demand primary data storage to businesses, and it is a large consumer of object storage, she says.) Amazon’s S3 is great for cheap, long-term data storage, Rubin says, but when users “try to retrieve lots of data quickly” they get “hit with a huge bill.” And the speeds at which users can upload data to S3 are “not that fast,” Rubin adds.

The pitch Wasabi is making—if its technology works as advertised—is that its users won’t have to make those tradeoffs, Rubin says. “I think people will take a look at it,” she says.

So far, Wasabi says it has raised $8.5 million from individual investors, which it’s spending on research and development, marketing, and building up storage capacity, Friend says. The plan is to raise more capital this year.

Friend says Wasabi’s service achieves its stated performance at a low price thanks to software it has developed that manages how data center hardware stores and organizes information. “We actually control the movement of the heads on the disk drives,” Friend says. “That’s how we get a lot of the efficiencies.” Wasabi hasn’t filed any patents yet, but it plans to do so, he adds.

Wasabi’s goal isn’t to supplant Amazon Web Services, Friend says. The startup is only offering cloud storage; it doesn’t plan to provide other services, like computing, he says.

In fact, part of Wasabi’s pitch is that it has configured its storage service to be compatible with Amazon’s Elastic Compute Cloud (EC2) service. That means instead of storing data in Amazon S3 and running it through EC2, businesses and organizations could move their data over to Wasabi, but still pipe it to EC2 for computing tasks—without changing their software or applications, Friend says.

“Anybody who’s storing a lot of data and who cares about how much it costs to store it, I think, will take a serious look at us,” Friend says. “That’s all I want to have happen.”

The question is how large the demand will be, and how easy Wasabi will make it to switch from popular products like S3, Rubin says.

“I think the challenge for them would be to convince the customer that there’s enough reason to not just stay where they are with their existing Amazon services,” Rubin says.

Friend acknowledges that potential customers might be skeptical of Wasabi. “The offer itself sounds so counterintuitive that a little startup in Boston could be more cost-effective and higher-performance than a giant company like Amazon,” he says.

But he thinks Wasabi’s prices are so low that businesses and organizations will be willing to at least give it a shot, if only on a trial basis or as a second backup for their data.

“People will say, ‘Who the heck is Wasabi, and why should I trust you?’” Friend says. “But that’s why I think the marketing is important. I’m a firm believer in building a trusted brand, just like we did at Carbonite.”

Friend thinks Wasabi could be particularly attractive for users that are storing huge amounts of data and need to access it quickly for analytics or other computing tasks. He gives examples like genomics research labs, film studios, police departments storing video from body cameras, and social media startups.

Ultimately, Wasabi is trying to help turn cloud data storage into a commodity, like electricity. That means that it will not only be cheap, but also standardized, Friend says. His analogy is that there aren’t three different outlets in the wall for plugging in devices—with “good,” “so-so,” and “crappy” electricity output—there is just one outlet that kicks out the same voltage.

“Right now, we’re in the Betamax versus VHS wars, with each vendor trying to lock you into their own proprietary cloud,” Friend says, using another analogy (which will sail right over the heads of most people born after 1985). “I can’t see that continuing forever. … Eventually everybody’s going to decide on one language for cloud storage.”

The effect, he says, is cloud vendors will “compete on price and performance. That’ll drive down costs and be good for the consumer.”

But can Wasabi build a strong, profitable business with such low prices? And could it survive a price war with Amazon, the king of low prices and profit margins? “We make good money at this price,” Friend says. “But commodities in general reward those companies that are most efficient and can produce the best product at the lowest price. That’s the way I want to compete.”

Wasabi is betting that Amazon and other big cloud storage providers won’t “drop their price by 80 percent,” Friend admits. “That seems highly unlikely,” he adds.

But the cloud storage price war has already begun. IBM, Amazon, Google, and Microsoft have all cut their prices in recent months, according to a new report from 451 Research. The firm notes that there “is little data suggesting cloud is anywhere near a commodity yet.”

Rubin, of ClearSky, says it’s possible that Amazon could develop a competing product that is as cheap and high-performing as Wasabi. Amazon rolled out over 1,000 new features for its cloud services last year, she points out. “You always want to be thinking very hard [about], is the white space that exists going to exist in a year or two from now?” Rubin says. “It isn’t that [Amazon would] just try to retrofit S3. The question is, would they build something new if they see demand for it?”

In the end, Wasabi’s prospects come down to how good its technology is and how efficiently it can run the business, Rubin says. And it will take time to build a successful, large company.

“The trick always is the software taking advantage of the [data center] hardware in ways that it’s never been done before,” Rubin says. “But it’s really hard for a startup to do anything on a massive scale, fast.”

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