Every year, global demand grows for technology which enables individuals, companies and governments to retain digital data. Indeed, the market size of data storage across the world is forecasted to reach $76220m by 2026 – up from $50540m in 2020, showing a CAGR of 7.1% between 2021-2026. What opportunities lie for investors in this exciting, growing space as we enter 2021? Which new players might be set to disrupt the market?
Why is demand for data storage growing?
A huge driver in the worldwide growth of data storage is the rising penetration of the Internet of Things (IoT) in sectors where it is yet to permeate (e.g. retail, healthcare, and manufacturing). The global proliferation of mobile computing devices – such as laptops, smartphones and tablets – which store large amounts of data is also a significant factor. Research shows that nearly 60% of the world’s population now use the internet, with 321m new users since October 2019. Mobile users stood globally at 6.95bn in 2020, with figures expected to rise to 7.1b by 2021 and 7.41b by 2024. Finally, there is rapidly-increasing demand – across industry verticals – for higher volumes of digital information. Healthcare is a notable example, where there is more pressure to gather and store additional data about patients – their behaviour, lifestyle, family medical history and more. This requires more computing power to store this escalating amount of data.
Big players & rising stars
Of course, the biggest player springing to mind in the data storage space is Amazon Web Services (AWS). Generating $9.95b in Q4 of 2020 alone, AWS is often credited as Amazon’s biggest earner and accounts for 33% of global cloud market share. Microsoft currently accounts for 18% whilst Google, Alibaba and Tencent comprise 17%. Others in the 2020 “Top 10” include IBM, Salesforce, Oracle. Yet whilst these large companies still hold much to offer investors, it is not the case that they have nothing to fear from new, disruptive technology companies.
One of the most notable examples of a rising challenger in the data storage space is Filecoin. This builds on the idea of Airbnb, Uber and others – that empty properties and other “idle” assets can be leveraged for commercial use. Whilst these two make use of empty homes/bedrooms and cars, respectively, Filecoin engages unused computer storage.
This sets Filecoin apart from the likes of AWS. The latter builds and maintains large, dedicated data storage facilities – e.g. 38 Virginia, 8 in San Francisco and 8 in Seattle. This structure leaves AWS and its rivals to at least some degree of vulnerability. After all, what happens if a fire tears through one of its centres? A natural disaster could then put great strain on other data storage locations. Moreover, there is also concern amongst many users that their data is often stored in another country to their own – leaving them less in control over it.
2021 & decentralised storage networks
This is where companies such as Filecoin – which offer a decentralised approach to storing data – can hold a competitive edge. This open source solution is mysterious to many investors, which leads many to fail to spot how it can rival AWS. To assist, here are some of its defining traits:
- No need for a central server or for arbitration by an intermediary.
- A distributed network is built and owned by its user base.
- Money is protected by multi-signature wallets.
- Individuals can buy and sell without an institutional authority controlling the transaction.
- No fees and no censorship.
- Anyone can participate as a data storage provider.
In short, Filecoin democratises data storage – allowing new businesses to more easily compete with larger, entrenched ones – and brings the cost down considerably. For comparison, at the time of writing AWS charges $0.021 to $0.026 per gigabyte (GB) of data storage (depending on your region and volume of data). Filecoin, however, offers users a price of $0.018 per GB at the time of writing. Filecoin raised US$206m in its initial coin offering (ICO) in 2017, and by October 2020 it had reached a total network storage power surpassing 1 EiB (exbibyte) – i.e. over 1.1m TB (terabyte). To put that in perspective, this is enough data storage space to house 290m Full HD movies or 4,500 copies of Wikipedia.
Filecoin and its counterparts (e.g. Sia, Storj) compete largely on price, giving them ample space for growth in 2021 in an already-amplifying global storage data market. Whether these are able to sustainably undercut Amazon’s pricing is uncertain, yet they certainly hold an edge for those consumers whose buying decisions are driven more by ideology and censorship resistance. The potential here for investors should not be underestimated. Cloud providers such as AWS have highly concentrated wealth and power, allowing them to instantly censor and de-platform other services They can access and copy “private” data and use it to squash rival start-ups. Across the world, consumers are increasingly frustrated by the oligopoly of “big tech” companies and, therefore, receptive to Filecoin’s message – that anyone can pay for access for storage or earn revenue by providing access to data storage.
If you are interested in expanding your portfolio into these kinds of exciting spheres of investing, then we invite you to get in touch with us here at Bure Valley and to consider joining our exclusive investor network:
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