Synology Inc., a Taiwanese company providing Network Attached Storage (NAS), has entered into competition with hyperscale cloud providers like Google and Amazon. Founded in 2000, Synology adopted a strategy contradictory to most Taiwanese tech startups. Europe became its first growth market, and retains a heavy share in the company’s revenue.
Empowered by European SMEs
Recognizing the massive data storage demands created by the onset of the internet, Synology was initially founded as a software company, seeking to build an ecosystem hinged on its self-developed operating system, the BSD-based Filer OS. Without its own hardware, however, the company found it hard to troubleshoot technical problems, and had to be in constant contact with its hardware providers to address issues.
After overhauling its strategy, Synology took inspiration from Toyota’s entry strategy in the US market in the 60s, releasing low cost products for individual consumers and small enterprises. The company also used this opportunity to develop its own hardware, strengthening its capability of hardware-software integration. The result was its first NAS server, DiskStation DS-101, powered by Synology’s own OS, DiskStation Manager.
The strategy worked out pretty well, and gradually Synology expanded its reach back into enterprise NAS, targeting the underdeveloped storage market for small and medium-sized enterprises (SME), especially in Europe. In addition to its high concentration of SMEs, the geographical preference was driven by a few other factors: first, Europe was a less competitive market compared to those in the US and China. Second, it had a better network infrastructure. Third, Europe was more receptive to foreign brands as well as cutting-edge technologies.
Thanks to the European market, Synology has grown to become one of the largest vendors in the NAS market, rivaling larger competitors like IBM and NetApp. According to a report by IT-Markt in 2019, for example, Synology was the second largest enterprise storage vendor in Switzerland, having a 17% market share.
The secret to challenge Google, Amazon and Microsoft?
Having observed the increasingly saturated NAS market, since 2017 Synology started to extend its frontiers from NAS to hybrid cloud, and to edge computing.
As Philip Wong, Synology’s CEO, observed, “traditional centralized storage deployments can no longer keep up with ever-increasing bandwidth and performance demands. Edge cloud products, like Synology’s storage management lineup, are one of the fastest-growing solutions in the market.”
In accordance, in 2017 Synology released a beta cloud service for its European DSM users. The service, Cloud2 (C2), optimized NAS backup with a public cloud storage. Recently, Synology also updated its operating system for data management, adding cloud-supported functionalities. The product, DSM 7.0, was released together with an enhanced version of C2. It marker a further integration of Synology’s on-premise and cloud architectures.
In the past, cloud service providers like Google and Tencent approached Synology in the hope of integrating its private cloud into their own public clouds. With Synology’s entry into the hybrid cloud market, it has put itself in competition with its former partners. Synology, however, is confident that its cloud backup service gives it a key advantage over others, citing insufficient backup solutions in mainstream public cloud services. According to the Synology, most public cloud services, in order to conserve computing resources, are not designed for backup scenarios and usually include no NAS. Synology believes its competitive advantage lies in the integration of cloud and NAS to enable a better backup service.
Coming home for the Asia Pacific market
Synology’s first C2 data center was built in Frankfurt, Germany in 2017. Last year, the second data center was constructed in Seattle, USA. For Synology, the choice to set up its first data center in Europe was primarily the result of Europe’s preference for data localization. This year though, for the first time, Synology is planning to build its third data center in Taiwan, seeking to serve the Asia Pacific market, following Google and Microsoft Azure’s decisions to set up data centers on the island.