Nexo, Inc. (a private company) Disrupts the Movement of Big Data
A New Era of Information Sharing Has Begun
This discussion is about 1.5X longer than my regular columns on innovative, disruptive, beneficial technology, and fairly technical to boot, but I believe you will all find it compelling and well worth your time. As it explains Why the “cloud” is not the answer to secure, fast, efficient and economical big data transfer.
Back in May I learned that Nexo, Inc. was developing a disruptive, patented software platform designed to change how we move, manage and collaborate around digital files.
Their software combines the fastest, most secure and most flexible data transport with enhanced recipient permissions and access control to give users a completely new approach to the distribution and use of their digital content across all workloads.
The company estimates the current market for Nexo to be $11.2-B in Y 2016, growing at 18.2% annually.
I dug right into it with its veteran CEO, Steve Douty and Biz Dev VP, Tim Devine.
During my discussions with these gentlemen I came to appreciate just how hard it is even for tech-savvy individuals or businesses to exchange information quickly, affordably and securely. This is because there’s no one-size-fits-all solution, the technologies on the market today are at least a decade old, and most of the alternatives are getting more and more expensive as files get larger. In other words, it’s a market ripe for disruption.
How Did We End Up with this Mess?
The story of how this market evolved is relevant to understanding the need for rethinking how we do things today. Back in the 90s, PC users first started sending each other email attachments, and in the relatively rare case that a file was too big, they’d have to ship a CD-ROM, DVD or Zip Drive (remember them?).
Sending bigger files was a job for IT. In fact, they still use a computer-to-computer program called file transfer protocol, or FTP, which dates back to the 80s. But it’s slow and has a modest size limit, certainly by today’s standards.
By the mid 2000s, there were more than a billion people on the web, many of them with work, home and eventually, mobile devices. To make the transition from one device to another more seamless, cloud-based file synchronization services hit the market. And their timing couldn’t have been better, because at that same time, file sizes were becoming increasingly too big to attach to emails.
So, these vendors (like Dropbox) realized that they could hack their sync engines so that users could ostensibly “send” a file by just syncing it with a different user’s account. Due to the lack of alternatives, this quick-fix was eagerly adopted by file sync users, which by that time numbered in the millions, and it worked well enough to keep more purpose-built products out of the market.
In other words, Dropbox and its competitors basically fell into the file sharing business, and the File Sync & Sharing (FSS) market took off. But just as email’s limits created opportunity for them, FSS has started hitting up against its limits.
Way at the other end of the spectrum, Managed File Transfer was a response to FTP’s inability to handle huge digital motion picture footage. MFT is a very complex, technical solution that can cost hundreds of thousands of dollars per year and has been slow to migrate outside of the movie business.
For a user that just wants to send a file, life has gotten complicated. Depending on its size, it’s either attached to an email, shared via FSS, sent with MFT, or put on a thumb drive and Fedex’ed.
When You’re a Hammer, Everything Looks Like a Nail…
All the leading FSS and MFT companies are Cloud-based. The great majority of these companies were founded during Cloud Mania – an investment era from 2000 to 2009 when startups that weren’t Cloud were unable to get funding. In other words, being a Cloud company was more important than whether the Cloud was the best solution. This is especially true when it comes to sharing files.
The Big Q: Why?
The Big A: Because the cloud is: 1) more expensive, 2) less secure, and 3) much slower than the peer-to-peer (P2P) approach used by Nexo.
Now for Something Completely Different
Nexo makes it easy for groups of users to converse, exchange files and work together in what they call Channels. They are different in one very important respect: the Nexo platform is NOT Cloud-based. Instead, they use a peer-to-peer architecture. Their approach appears to deliver far better performance, more securely, without limits and without the cost burden of the Cloud – and with state-of-the-art collaboration.
Notably: the Nexo platform is NOT cloud based.
The Rise of Distributed Computing
Don’t get me wrong – there are plenty of applications for which the Cloud is well-suited. But not for transferring files. One of the hottest topics on the Internet today is the Blockchain. This is a way to store information by securely spreading it across hundreds of devices. It’s founded on the basis that, a) normal users are sitting on a ton of spare disk capacity and CPU power, and b) there is no single, central entity that has disproportionate control over the information. Bitcoin is one example of this new decentralized and distributed ethos.
Peer-to-peer software enables the flow of information directly between any number of devices – desktops, laptops, mobile phones – without the need for centralized storage. If you’ve ever used WhatsApp, you’ve used a peer-to-peer technology. And what they have done for super-efficient voice and chat, Nexo plans to do for files.
The core Nexo platform is comprised of software installed on user devices, a rich Application Program Interface (API) that interfaces it with user applications, and a set of orchestration services for establishing connectivity between the devices.
The company explains that “Except for the intermittent participation of the orchestration services, action is initiated, connectivity is established and delivery is completed entirely by and between devices running Nexo’s PeerFlow™ software.”
Here is a general overview of Nexo’s business, product, positioning and value proposition: https://vimeo.com/174392030/8253c116e2
With no centralized storage to sync or transfer files, Nexo eliminates the high cost of equipping, securing and staffing large datacenters. These costs are so high for the FSS vendors, that they could not survive if they didn’t pass them along to their customers.
Despite the financial resources of Dropbox, Amazon.com (AMZN), Google (GOOGL), Microsoft (MSFT), IBM (IBM), and other FSS providers, the cost to support a storage infrastructure for hundreds of millions of users is too big to fully subsidize.
On the other hand, Nexo can charge significantly less than other data transfer providers, and still make money.
Because the cost of supporting 1,000 Cloud-based users is about $2,000 per year, where those same 1,000 users cost Nexo $10. Why would anyone spend 200X the cost to accomplish the same result? It’s no surprise that Dropbox has blown through nearly $1 billion in funding, and that Box.com losses amount to 43% of revenue.
This gives Nexo a permanent, significant cost advantage, opening the door for them to disrupt the FSS market by eliminating data volume fees, and instead make its money on more modern ingredients that are unique to PeerFlow.
Security is Top-of-Mind
The cloud appears to be very vulnerable, and one expert I spoke to describes it as a sieve or Swiss cheese, easily hackable. I don’t think it’s a coincidence that the growth of the Cloud market is almost perfectly correlated with the rising rate of cyber-crime.
The fact is, security is a massive problem facing all companies. Public cloud services are incredibly enticing to cyber-criminals because they’ve conveniently gathered millions of users for them at one attack point.
Before the Cloud boom, bad guys had to go after each person or company one at a time.
On the other hand, Nexo’s distributed peer-to-peer approach is inherently resilient to attack and presents no target larger than a single user. In fact, I understand that no government intelligence agency is allowed to use cloud-based file sharing – they only consider peer-to-peer to be secure enough.
Files Will Only Get Bigger
The Aberdeen Group reports that the pace of sending progressively larger files is accelerating – the aggregate size of all files transferred doubles every four years. And it isn’t just about motion pictures. There are dozens of applications that are generating very large files, including genomics (a fully-sequenced human genome is 120 GB), the Internet of Things, architecture, security (think of surveillance videos), legal, virtual reality, and others.
The fact is, file transfer and file synchronization are very different processes. The goal of file transfer is to securely move a file from one user to another as quickly as possible. The goal of FSS is to create a version of “the truth” in the Cloud, and then replicate that across multiple devices.
With FSS, millions of concurrent users continuously send and receive files and updates to the Cloud, and therefore must vie for access to a central hub. Complex algorithms continuously broker this stream of requests such that no individual user dominates the hub (e.g., with a large file) and no one is blocked. The hub therefore becomes a choke point for file throughput, and slows the entire process down. This is why a Cloud model is such an inefficient way to transfer files, and explains why Nexo can claim to be 12X faster than Dropbox.
For example, if you have a MacBook and cable modem and want to send someone a 20 GB file, it would take Dropbox about 8 ½ hours. It would take Nexo 43 minutes.
No Size Limits
The lack of intermediate storage removes any concern with file size.
With packets flowing directly between all participants, the system does not have to monitor how large files might impact shared hub, worry about the allocation of new storage, or decline a user request due to account or subscription limits.
There are no massive in and out pipes or redundant data centers, or the energy and people it takes to operate them. And the highly distributed nature of Nexo’s approach makes them infinitely scalable as their software leverages the copious compute power and bandwidth their users already have. It just makes a lot more sense.
And the opportunity in MFT can be immediate because MFT customers spend $100,000s per year, mostly on data volume fees. Nexo does not charge by volume.
How Nexo Works
It would appear that besides being more secure, faster and less expensive than FSS, Nexo also has a far more streamlined and sustainable business model. It also appears to be much simpler to use.
When a Nexo user hits “send,” a peer-to-peer mesh is created directly between every participant. Encrypted pieces of the file are passed among all the recipients, which are both sending and receiving at the same time.
This produces a net increase in overall bandwidth.
In fact, every node added to a mesh contributes its own bandwidth to the aggregate throughput of the overall system.
The cloud on the other hand, creates multiple point-to-point transfers over the same pathway. So, the greater the number of recipients, the less bandwidth there is for each participant.
This is why PeerFlow is so much faster, less expensive and more secure than the Cloud.
Collaborating Around Files
Nexo is developing PeerGroupTM, an irresistible application that is the centerpiece of this business plan. But PeerGroup is just one instance of an application using the PeerFlow API to access its mesh networking capability.
Nexo is building a full-stack API that will enable 3rd-party software developers to take advantage of their applications and plugins to the PeerFlow transport.
For example: Existing applications that involve the distribution of files or messaging to other users can be modified to call PeerFlow’s APIs instead of invoking their existing capability.
As Nexo continues to build out components like the API, Admin Console and Global Ledger, these features can also be accessed in addition to the pure transport layer.
This promises to be a compelling partnering strategy for Nexo and its customers enhancing the relationships.
The PeerGroup Application
Any user can create a “channel” and invite members to it, who then can access or add files to the channel.
PeerGroup leverages the speed, security and low cost of the mesh to give any number of users the ability to interact around unlimited numbers and sizes of data files.
The idiosyncratic capabilities that make PeerGroup compelling are as follows:
- Automatic routing of files to other members of the channel; beginning the moment data files are 1st added.
- Seamless OS integration, enabling drag/drop of files into a channel, and right-mouse access from other applications.
- Automatic versioning for “Full Access” files. The file owner can specify the number of older versions that are saved or disposed.
- Access controls for each file: Degree of access to a file’s content as shown in increasing level of security
- Full access, copy-only, and screen-only access options.
- True file revocation.
- Auto-delete: the file owner can specify conditions that cause files to be automatically deleted from other members’ devices
- Auto-expiring chat
Users often want to share what’s inside a file without actually giving the file away – sort of an “eyes only” concept. With Nexo’s “screen-only” option, senders can prevent recipients from saving, copying, scraping, editing, printing or forwarding a file – its contents can only be viewed using our software. It doesn’t even appear in the device’s file system. There are other features like revoking access, auto-deletion and even barring access outside of specific geographic areas.
The Nexo Business Model
Nexo will offer two tiers of service consisting of Pro and Enterprise Editions. The Pro edition will come with a 30-day free trial.
The firm’s pricing strategy leverages its low cost of carriage, remember 1/200th the cost of cloud-based services, and offers the equivalent of its competitors’ premium features for free.
Because they are cloud-based, matching Nexo’s pricing will seriously disrupt their business model.
Also, users will be receiving unique value –instead of just more data volume – that cannot be provided by any competitor.
Nexo users can send an unlimited number of files and folders, with no size limit on either.
Pro users pay $6.00 per month and have access to the advanced control features like Screen-Only. Enterprise users pay on a per-user basis, starting at $14.00 per month with aggressive volume discounts.
Management has identified several use cases as immediate opportunities for PeerFlow and PeerGroup.
- Data center migration to the cloud
- Media distribution
- Media production
- Digital publishing
- Direct-to-Consumer (D2C) entertainment distribution
- Digital Cinema
The business opportunities are massive, and the revenue estimates are huge.
For more information, click here: www.nexoinc.com
I have scheduled sit down with Nexo’s CEO, Steve Douty for an Exclusive HeffX-LTN/Paul Ebeling Interview.
For an overall all view of the cloud and where it is now go to: http://www.livetradingnews.com/technology-cloud-solution-support-workloads-long-way-off-11890.html#.V7FSiJgrKM8
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