Operating an Online Backup Company

You might start out with just a few clients and have ambitions to grow to thousands. My advice is geared toward companies who start out servicing fewer than one hundred end users, and who would like to scale up to thousands.

The Online Backup Guide for Service Providers is a complete 196-page guide on starting and operating an Online Backup Service – the latest revision of Rob Cosgrove’s industry defining RBS Book originally published in 1987. The entire book is being published here, chapter by chapter.


The quickest, least expensive way to start up an Online Backup business is by sharing the resources of an existing company that has customers who are good prospects. This includes:


Internet Service Providers 

Regional Telephone Companies

Alarm Monitoring Companies

Retail Computer Shops

Computer Repair Companies

Network Engineers

Independent Computer Consultants 

Web Developers and Programmers

Accountants and Bookkeepers

Electronics Stores

Wireless Telephone Shops

Airport Convenience Stores


You will need at least two kinds of talent – technical and sales. Both are required, and are often found in the same person. There are many successful one person Online Backup services.

Technical – The technical person in a small Online Backup company handles technical support, installs client software, installs and manages the Online Backup Server. He or she also helps the sales people understand the software and the technical aspects of the business, and might assist with sales in a technical capacity by designing a backup strategy.

Sales – The sales person is responsible for generating income. He or she might cold call prospects, do follow-up, manage telemarketers, design advertising materials and call scripts, take orders, and do customer service. He or she will help set prices and service levels, track sales figures and goals, and might be the first person a customer calls for support.

Normal Expenses

You will need all the trappings of a regular business. This includes office space, furniture, computers, telephones, software, insurance, utilities, and a business license. If you plan to operate your own Online Backup Server, you will also have the hardware, hosting, power, and Internet expense associated with that.

If you use Remote Backup Systems’ Virtual Hosting plan (http://www.remote-backup.com/vhosting.htm) you will have a single startup fee and monthly expenses for software licensing and storage space.

RBS can also help you host your Server in the Amazon cloud. For more information, see http://www.remote-backup.com/amazonservers.htm or http://www.remote-backup.com/ec2.htm

Server Hosting

Many small Service Providers start with their offices at home, hosting their Online Backup servers in data centers. Others have clients who are more comfortable knowing the server holding their data is closer to the Service Provider, so the choice is made to host the server in the same office.

Wherever the server is hosted, it will need the following equipment and environment.

Server Hardware – This is the server itself, and its storage space. The requirements for your server depend on the number of customers to which you want it to scale, and can vary from a single computer with internal storage for small numbers of users to clustered servers with large storage arrays.

Server Accessories – This includes any routers, switches, appliances and other network devices required to make your server operate on the Internet and to allow you to manage it.

Operating System Software – RBackup runs on a Windows operating system and requires only one CAL. So, regardless of your number of clients, the least expensive Windows operating system in a class will suffice. While the RBackup server will run on Windows XP (and this is adequate for 25 clients and fewer) I recommend using a Server operating system.

Online Backup SoftwareRBackup or Mercury.

Uninterruptable Power Supply (UPS) – This is a battery backup device that provides uninterrupted power to the server and its accessories. It plugs into the primary power outlet, and the server plugs into it. If the primary power fails, the UPS provides a few minutes of power from its internal battery to keep the server running until the primary power comes back online, or until the backup generator starts.

Surge Suppression – Suppresses power surges such as those caused by lightning storms or other devices on the same power line. Usually built into the UPS.

Power Conditioning – Delivers “clean” power to the server. The power conditioning device eliminates any inconsistencies in the electrical supply. This function is usually built into the UPS.

Backup Generator (optional but important) – This is a generator designed to operate for days or weeks at a time if necessary, to provide power to run the server and its accessories, the climate control units, and anything else required to connect the server to the Internet. Good data centers usually have two backup generators in case one of them fails.

Fuel – If you have a generator you should also have a supply of fuel, enough to last twice as long as the longest power outage you might expect. If you cannot store that much fuel, then you need a plan to quickly acquire fuel in the event of a disaster that brings down the primary power supply.

Climate Control – Servers get hot. They are designed to operate only within a certain temperature tolerance, usually colder than sixty eight degrees Fahrenheit. Most data centers are kept much colder than that, and usually have a backup climate control system in case the primary fails.

Fire Suppression – It’s not a good idea to pour water on an electrical fire, and you shouldn’t use general purpose chemical fire extinguishers in a computer room. Instead, special fire suppression gasses are used that do not harm electrical equipment. This kind of fire suppression is dangerous to people, so its use is usually regulated. Check with your local authorities.

Physical Security – You will need to keep your server and its accessories and connections physically secured against theft and unauthorized access. This can be as simple as locking it in a room with an intrusion alarm or as complicated as a data center with biometric security, man traps, cameras, and armed guards.

Digital Security – This includes firewall appliances or software, routers, antivirus software, and other active and passive security protocol. It can also include the services of companies which run simulated attacks against your server and report the results to you with their recommendations for fixes. McAfee SECURE (www.mcafeesecure.com) provides a service like this.

Internet Connection – Online Backup servers rely most heavily on their UPSTREAM bandwidth because that handles incoming data – backups from customers. You will need access to the Internet at a bandwidth that is adequate for your highest expected load. Some Service Providers have two or three Internet connections to multiply bandwidth and so they have a backup in case one of the connections fail. You can estimate your bandwidth requirements using one of my handy calculators:



Reporting is a function of your Online Backup software, your accounting system, and your network monitoring system. You will need all the standard business reporting functions from your accounting system, and all the standard network reporting. I will not address those here.

You will need the following reports from your Online Backup software.


Client Detail Report – This is a simple list of all your clients, their contact information, email address, and maybe other information. You should be able to sort it by various fields, and view it on screen, export it to a spreadsheet, and extract email addresses.

Session Detail Report – A detailed look at user backup sessions for any time period, sorted by account group and session outcome (Success, Failed, Missed) containing the number of files sent or received, dates and times of sessions, and total file size (compressed and native).

Executive Summary Report – This primary management report is usually run daily. It is an executive summary of the previous period of activity, usually the previous 24 hours. It is used to manage by exception, so it should be sorted with missed backups first, then failed backups, over-quota backups, then new users and successful backups. It should contain totals for all the native and compressed file sizes that were in transit during the reporting period. You will use the higher of the two totals to monitor your bandwidth usage as a percentage of available bandwidth.

Disk Usage Report – This on demand report shows usage information about your hard drives. Use it to keep track of your inventory of free space.

Quota Report – This report shows your customers who are over their quota and who are within about 75% to 100% of their quota. These customers may need to be contacted by a sales person to upgrade their accounts or to buy more storage space.


Email Reports

Some reports are more effective when automatically emailed. Your Online Backup software should give you the flexibility to have these emails sent automatically to you (the Service Provider), the end user, or the group account administrator.

Missed Backups (Email) – Sent in case of a missed backup. These emails should be sent once a day, triggered by a backup that has not happened by the end of the Attempt Window.

Failed Backups (Email) – Sent when something went wrong with the backup – it started but didn’t finish or it contains files that did not back up for some reason.

Successful Backup (Email) – Sent when a backup is successful, it contains session information like start time, end time, number of files backed up, and their total native file size.

New Client (Email) – Sent to you (as the Service Provider) when a new customer signs up for your service.



It is important to set disk storage space quotas for each client, even if you offer an “unlimited” storage plan. Quotas allow you to control (and properly charge for) your storage space – your “inventory.” Service Providers make use of quotas several ways.

If you offer an unlimited plan, you will probably also have a Fair Use Policy built into your Terms and Conditions. You will use Quotas as triggers for reports so you can enforce your Fair Use Policy.

If you do not offer an unlimited plan, you will use quotas to trigger notifications to customers, which can inform them that they are approaching their quota, and they can take some of the following actions, depending on your Terms of Service:


1. Delete some files from storage.

2. Review their file retention policy.

3. Deselect some files for backup.

4. Upgrade to the next higher storage plan.

5. Buy additional gigabytes of storage.


To Stop or not to Stop?

Some service providers have their software automatically stop accepting backups if a user hits his quota. I think this is a bad idea, especially for Business customers.

Rather, I like the idea of building into your costs of doing business a percentage of customers who will go over quota for a period of time, and sending notices to those who do, giving them some time to select one of the above actions.


Rob Cosgrove

Rob Cosgrove, CEO Remote Backup Systems

Rob Cosgrove is the President of Remote Backup Systems, founder of the Online Backup Industry, and a vocal advocate for maintaining the highest standards in Online Backup software. His latest book, the Online Backup Guide for Service Providers: How to Start and Operate an Online Backup Service, is available online now, on Amazon.com, and at bookstores.

Remote Backup Systems provides brandable, scalable software and solutions to MSPs and VARs enabling them to offer Online Backup Services.

Would you like a FREE download of the complete Online Backup Guide for Service Providers as an E-Book? Only 200 available through May 15. [PICK THIS LINK].

About The Author

Rob Cosgrove / http://remote-backup.com

Rob Cosgrove is President of Remote Backup Systems, developers of the fully brandable RBackup Online Backup software platform, powering more than 9,500 Service Providers, MSPs and VARs wordwide since 1987. He is the founder of the Online Backup industry and author of several books, the most recent, "The Online Backup Guide for Service Providers", available at Amazon.com and bookstores. http://remote-backup.com