Pender Turns Its Peril into Profit
A consulting firm starts a data protection service after learning the value of data protection -- the hard way
P> As fast as you can say "database," George Meidhof lost his $1.2 million consulting firm. In the split second that knocked out his electricity, he lost his database of 600 clients, the company's accounts payable and proposals. All because he did not have a backup plan for his database.
"There are only two kinds of computer users. Those that have lost data and those that will lose data," said G. Morgan Watkins, manager of microcomputer technologies for the University of Texas in Austin. "People just assume they won't lose their data."
Two weeks after Pender Group in Chantilly, Va., suffered the loss, Meidhof started to offer data protection services. He consulted the Chamber of Commerce and Precision Data Corp. in Memphis, Tenn., who gave him a list of horror stories from other companies that have also lost important files.
Since October 1995 when he started the service, he has served 35 clients in the Washington metropolitan area. His data protection service uses software developed by Precision Data Corp. Once each night it reboots the computer and takes the new data, compresses it, encrypts it and sends it to Pender Group's servers. In the morning, the Pender Group backs up the information and stores it on a magnetic disk for short-term or long-term periods. When there is a loss, the tapes are consolidated, and the lost files are extracted from the tape.
Although Meidhof continues to do consulting as part of his service, the data loss prevention technology could become his primary revenue generator. In 1996, he expects to make profits of $200,000 on data protection services.
Any company that uses a computer to store files and company information is the potential victim of data loss. And companies suffer from data loss daily. According to Intel Corp., 95 percent of all U.S. corporations do not have a backup plan for their PCs. And only 10 percent to 15 percent of networked PCs are backed up regularly.
There are several factors behind a data loss disaster. Natural disasters, human error, equipment damage and burglary are the leading causes. According to Precision Data Corp., a software company specializing in backup systems, 25 percent of businesses that are not able to recover their data go out of business within one or two years.
Businesses lose data every day, and most of them are too busy or lazy to back up their systems. Companies can spend up to $100,000 to recover data and several weeks inputting lost data.
But Meidhof was not so lucky. He barely recovered his business by waiting for clients to call, and frantically scraped together information for his quarterly file with the Internal Revenue Service, 10 days after the disaster.
Despite the company's rebound, the business is certainly not as successful as it was before the disaster. "We are not as active as we were before," said Meidhof.
Since the influx of personal computers in the 1980s, the nation's utility companies have had to deal with the supply of electrical power. According to Jeff McWhirt, a power quality specialist for the northern division of Virginia Power, the rate structure does not provide for a separate computer-grade power source.
Virginia Power reports that a power interruption of only 15 milliseconds is enough to disrupt the operation of most computer systems. Virginia Power reports that the average customer spends two hours annually without power. Therefore companies are required to provide their own data protection systems.
There are several different options for data protection. One is to subscribe to a service such as the Pender Group for $60 a month and $75 per hour for recovery time. The other is to buy shrink-wrapped software from companies such as Hewlett-Packard Co., the leader in backup software programs.
According to Willy Gatling, retail manager at CompUSA in Tysons Corner, Va., the CD-ROM system made by Hewlett-Packard sells for $800 to $1,500. The CD-ROM version holds 650 megabytes or an entire 1.2 gigabyte hard drive. Gatling recommends the CD-ROM system for important, large documents. The second software package, also made by Hewlett-Packard and Iomega, is a tape backup system. The tape comes with a software program that backs up the files on a hard drive. The user then rotates the tapes daily. These packages sell for $149 to $300.
"Companies must learn to spend the time to back up files, which in the long run equals the amount of information they would lose if they don't," said Watkins. He suggests that companies take advantage of their local area networks, and keep company files stored on one network. Companies then can back up one system, instead of doing backup procedures on each PC.
The time and money spent on data backup systems is inconsequential compared with the consequences of losing an entire company. Especially for people like George Meidhof who went from the owner of a $1.2 million consulting firm to a $310,000 company.