What happens to data when a Web start-up dies?

One of the greatest stumbling blocks that a start-up Web service company has to get over is customers' fear that the company will die and take their data with it. Manufacturers of traditional software can go belly-up without it immediately affecting a product's utility. And if General Motors went out of business tomorrow (I know, shocking), its cars would still be drivable. But Web services are different. When your cloud app goes under for the last time, it sinks customers, too.

In the best of the bad cases, when a Web service goes offline, the company in question is able to shut down in an orderly way and let its users know long before the servers are pulled off the Net. Large multiproduct companies generally do this well. When Yahoo shut down Yahoo Photos in favor of Flickr, it gave users plenty of time to offload their pictures, or move them to another service. When Hewlett-Packard shuttered the cloud backup system Upline, it likewise gave users fair warning.

But smaller companies may not be able to keep their servers up when their companies begin to fail. Does that mean you can't trust them with your data? Not necessarily. One company that's planning for the worst is Pogoplug, the makers of the cool, simple network file-sharing appliance I covered in April. Pogoplug's doomsday plan is not exactly fail-safe. The servers won't magically spring back to life if the company goes under. It's more of a seed vault kind of thing, but it's a good solution.

Pogoplug has put the source code for its servers in escrow. If the company goes bankrupt, the terms of the escrow dictate that the code be released to SourceForge as an open-source library. Then someone could come in and restart the service. Pogoplug CEO Dan Putterman says the service is designed to run on cloud services like Amazon EC2, so whoever wanted to re-light the system wouldn't need a large, expensive infrastructure to do so.

It's worth noting that Pogoplug doesn't actually store customers' data files. Rather, the online component of the product is a service that connects customers, their storage devices, and the users they invite together so they can share information. Were Pogoplug to go belly-up tomorrow, nobody would lose data, only the access to the transfer service they paid to use.

If the worst happens and Pogoplug does shut down, whoever restarts the service would have to re-gain the trust of users, who would need to re-configure their accounts and get new passwords to use the service again.

Even so, I like the dead-man's switch aspect to Pogoplug's escrow plan. While it won't guarantee that the product will resurrect if the company dies, it does at least make it possible--maybe even likely.

I'm surprised more companies, especially Web companies that store customer data, don't have public doomsday plans. If you buy life insurance, it's not an admission of weakness. It does not telegraph that you expect to die tomorrow. But if you've got a family (of customers) to support, the insurance can be a smart thing to have.

[whobob]

I'm no lawyer but can a company do this? If they go bankrupt is their source code not an asset that the creditors will end up owning?
Their plan is like me going bankrupt but telling my creditors , too bad, that asset was promised to my kids.

[SIGHUP]

I am not a lawyer either so take this how you will. Rights to source code can be sold like anything else; books, magazines, and multimedia. By putting the code into escrow you have already sold the source code to the customer, they just will not have access until you go out of business. Those rights cannot be revoked by the creditors.

[why do i need a name?]

you read my mind, I had the same initial thought

Although if there is an existing "license" agreement with the users, any creditor or an acquirer would have to abide by the agreement. I guess you could do it with a license between them and their users that says that the code will be escrowed, I've seen this kind of arrangement in larger SW agreements so it could be legit.

[drormata]

Or you can just make your code open source from the get go the way we did at 6zap.com. That way, you can experiment with your data and the software at any time.

[a_wilsch]

Wonderful that someone's finally getting around to a topic that's going to matter more than ever with all this user generated content. While we don't help the companies that go away (which many of them do fail, and many of them will in the future) we help by creating a Vault and place in a separate Foundation that exists solely to ensure that your data is stored - forever. Your most meaningful pictures, docs and stories preserved. We have taken special precautions so that things like: companies going under or acquired and shuttered, loss due to theft or natural disaster, or destruction from technology. We also make sure that what's there will be promised to be "kept accessible" when mp3 is as outmoded as 8-track tapes.

www.storyofmylife.com and www.storyofmylifefoundation.org

[gggg sssss]

IANAL but in a bankruptcy, escrow agreements are null and void. And any data on their servers becomes the property of the trustee, to sell as they see fit. Of course it the thing was worth anything to anybody it woudl not hav egon ebelly up in teh first place.

[gemsFamily]

For my site (http://www.my-msi.net) we have the domain name for nearly 10 more years so we won't be going anyplace. With a few more users I'll have my hosting fee for the site covered, and that will insure that the site will be able to stay up long term.

Genieve, Eric, Mariebeth & Stephanie (gemsFamily)

http://www.my-msi.net - a plan for the rest of us!

[netdocuments]

as a SaaS ECM (content management) for the past 10 years, us small vendors must do the same as HP or Yahoo in providing a continguency plan for our customers....if we didn't have this we would have some of the national large law firms storing all their documents in our service. Redundancy is critical and exit strategies such as leaving the service up for six months following a bankruptcy and having that contractually established with the data centers. Having on-premise backup services that keep a copy of all data on the customers premises on an ongoing basis is also a strategy for customer peace of mind.

If any SaaS vendor is a serious vendor they must take these issues in consideration otherwise all these fly-by-night new vendors leverging Amazon EC2 or force.com better read the fine print.