Cloud backup service Backblaze is telling its story of how it survived the Thailand floods without raising its prices. While the cost of raw storage was more than quadrupling, the small company had to act... and act fast.
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Its solution: buy up stocks of consumer external drives, which curiously hadn't risen in price so dramatically. Then rip them apart to get at the hard drive inside. Ugly and labor-intensive, but it worked.
On the one hand, it's a truly inspirational example of how to exploit an opportunity.
On The Other Hand, it's a zero-sum game: These were hard drives that real consumers were prevented from buying.
Stephen Shankland reports:
What do you do when you have a 1,000-unit-per-month hard-drive habit -- then Thailand floods wipe out your supply? ...when the natural disaster last year raised the price of a $129 3TB drive to $349, you improvise.
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Extremely labor-intensive procurement of 1,838 hard drives with more than 5.5 petabytes of capacity -- and a business that averted its own price-hike disaster. ... The first plan: Buying external drives at Costco andBest Buy . One early trip...yielded 52 drives, enough to accommodate about two or three days' worth of Backblaze's...data needs.
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The story illustrates the kind of plight that can hit a smaller company that may not know all of its risks.
Derrick Harris adds:
...the company had to get creative to keep up its 50TB-a-day hard drive habit. ... “We buy lots and lots of hard drives. ... [They] are the single biggest cost in the entire company.” Those are the words of Backblaze Founder and CEO Gleb Budman. ... “Literally overnight...all the places we would go to get drives said, ‘Sorry, we don’t have any drives.’”
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[Soon] some suppliers were offering...drives that used to cost $129 for around $600. ...something had to give. ...behind the scenes, the company was working like crazy farming hard drives from the only places it could still get them at a reasonable price. ... [It would] buy up the external hard drives sold for consumer backup at stores...remov[ing them] from their protective enclosures.
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In the end, Budman tells me, its ingenuity meant Backblaze was able to procure...about 5.5 petabytes worth of capacity in the three months it was actively farming them.
But why were they buying cheap, consumer drives? Your humble editor recently described the Backblaze storage "Pod" like this:
A 4U rackable server, containing as many cheap, desktop-grade SATA drives as could be squeezed in. ... At today’s prices, [$8,000] could provide 90TB; a typical 19 inch rack containing nine Pods could store more than ¾ of a petabyte. It’s not an incredible performer, nor will it offer the ultimate in reliability...thanks to its consumer-class hardware. But it...provides huge amounts of storage on a bootstrapped startup budget.
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The entire hardware design is open source. ... [But] the company retains some secret sauce — its techniques for de-duplication, encryption, and managing a data centre full of Pods.
Backblaze's Andrew Klein picks up the story:
...by mid-October 2011, violent floods in Thailand had crippled the factories that helped produce nearly half of the world’s hard drives. ... To survive this crisis without raising prices...Backblaze deployed every last employee, as well as friends and family, to acquire drives in what became known internally as “drive farming”.
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In late November, Brian was banned from buying drives on Costco’s online store, and Billy was banned from purchasing them at any Costco in the Bay Area. Other Backblaze employees were also asked to leave. ... [So] the call went out to friends and family – buy hard drives and send them to Backblaze, NOW.
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The tragic flooding in Thailand began in August 2011 and by early-October...800 people died and many more were homeless and hungry. ...even though we at Backblaze weathered the drive challenge it pales in comparison to the challenges faced by the people of Thailand. ... Our hearts go out to them. If you wish to help, please consider a donation through Give2Asia or the relief organization of your choice.
So what were they doing with external drives? Kyle Wagner explains:
It turned to cheaper external drives. Basically, the answer was to buy the drives, rip them open, and stick their guts into the 135TB "pods" that the company uses—like shucking an oyster. ...employees started driving out and buying 50 or so 3TB externals at a time.
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1900 bargain basement hard drives later the company is doing just fine. It's a story packed with ingenuity—unless you were trying to buy a 3TB external hard drive last holiday season. Then this is the story of the jerks who ruined your Christmas.
Meanwhile, John Rose alleges profiteering:
Think about the customers for bare drives and external drives. One is directly purchased by consumers; one is purchased primarily by OEMs. ... If the external drives weren't priced reasonably, consumers wouldn't have bought them. If the internal drives weren't priced reasonably, OEMs...had to buy them anyway. ... Drive manufacturers knew OEMs still had to buy the drives [and that] OEMs would eat part of the price premium themselves (to stay price-competitive with other OEMs).
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That's why internal drive prices tripled even though drive manufacturing capacity only dropped by 50%.
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Richi Jennings is an independent analyst, writer and editor. You can
