Cloud Storage: Three Acquisitions In One Week Signals Consolidation On The Way5:12 PM EST Fri. Oct. 19, 2012
This week's acquisition of three small cloud storage providers in a single week is a solid sign that the cloud storage market is finally starting to mature.
However, while this week's three acquisitions help consolidate an industry that is characterized by a multitude of small companies, their rational varies in each case, showing that the industry still has a way to go before becoming fully mature.
The biggest was Microsoft's planned acquisition of StorSimple, a developer of hybrid local and hybrid cloud storage technology for Windows platforms.
It was followed this week by Persistent Systems' acquisition of the cloud platform business Doyenz, which focuses on disaster recovery-as-a-service, and by Carbonite's planned acquisition of Zmanda, the commercial provider of the Amanda open-source cloud backup technology.
While Microsoft has yet to unveil its plans for Santa Clara, Calif.-based StorSimple's technology other than to call it a way to expand its cloud technology and help its customers better take advantage of hybrid cloud computing, it could be used to provide a cloud storage gateway using Microsoft's Azure cloud on the back end. Such a move, however, would mean competing with other cloud storage gateway providers that might use Azure as the back-end storage.
Other speculation about Microsoft's rationale for acquiring StorSimple revolve around the need for a better way to take advantage of Azure as a means for improving ease-of-use with Microsoft's SharePoint application.
For Persistent Systems, a Pune, India-based provider of software and technology services that drives the majority of its business to the U.S. market through its Santa Clara, Calif., office, Doyenz represents a chance for a huge expansion of its managed services business.
Nara Rajagopalan, chief product officer at Persistent, said the company over 20 years has built a business providing technology, engineering consulting and development services to a variety of verticals, and it has also been building a managed services business.
Doyenz is Persistent's third acquisition so far this year in terms of IP-led services, after getting the mobile location service of Openwave and the outsourced product development service division of Infospectrum, Rajagopalan said.
NEXT: Taking Disaster Recovery As A Service To MSPs
Doyenz is Persistent's first move into the cloud storage business. Doyenz's focus on disaster recovery as a service fits well with Persistent's growing managed services business and provides a new customer base for Persistent to take its existing managed services, Persistent's Rajagopalan said.
"Persistent has been focused on tech companies with large engineering teams, and that makes up a good part of our business," he said. "Doyenz will fit in our cloud business with disaster recovery as a service, especially for virtualized platforms. And, Doyenz brings an opportunity for us to take our MSP offerings to their MSPs."
Doyenz CEO Ashutosh Tiwary said that his company does not provide pure cloud backups but instead focuses on disaster recovery as a service.
"We back up customers' server data, particularly their image data," he said. "But the intent is not to provide just a backup like Acronis and many others do. We take the data to the cloud and allow customers to recover operations and run their servers in the cloud."
Persistent plans to keep the Doyenz brand and infrastructure. "Doyenz's customers will see no difference," Rajagopalan said.
Persistent declined to disclose terms of the Doyenz acquisition.
For Carbonite, the acquisition of Sunnyvale, Calif.-based Zmanda provides the opportunity to expand into the business of providing cloud storage for servers, said David Friend, chairman and CEO of Boston-based Carbonite.
Carbonite started out as a provider of consumer-focused cloud storage, and this year, it has moved to expand its SMB business with its first solid channel program. However, Friend said, Carbonite has had to turn away customers and solution providers that asked about cloud backups for servers.
"We've moved pretty aggressively into the small business market," he said. "And every day, companies buying our service say it's great for laptops and PCs, and we want it for our servers. But, we have had no integrated solution. And, our resellers also want a single solution for their customers."
For Carbonite, the primary attraction of Zmanda as a provider of cloud-based server backups stems from the fact that it is the sole commercial provider of the Amanda open-source backup technology.
"We like the open-source angle," Friend said. "We looked at what was out there. There are 200 man-years of development for Amanda. This is the most solid, the most bullet-proof offering out there."
NEXT: The Power Of Open-Source Cloud Storage Technology
Oussama El-Hilali, senior vice president of engineering at Carbonite, said another attraction of Zmanda is the fact that Amanda is the most popular cloud backup application for the open-source MySQL database, which in turn is the most popular database offering in the small business market.
"Look at the MySQL website, and you'll see only one company listed for backups, and that's Zmanda," El-Hilali said. "It also works with Exchange, SQL, Postgres, SharePoint and others. All these have agents for plug-ins to the cloud through Zmanda."
Carbonite's Friend said that small businesses have been relying too long on tape for backups and that tape has become unreliable and expensive.
"Small businesses want to do for servers what they can do for their PCs and mobile devices," he said. "And if you go to Google and do a search on 'cloud backup,' Zmanda comes up No. 1 in the list. That's because they've been doing it the longest. And that's how we found these guys."
Carbonite is paying $14.75 million for Zmanda, a price that does not include the $1 million in cash currently held by Zmanda. The deal is expected to close in a few days, Friend said.
"On the day it closes, when someone calls and says, 'We have 15 PCs and two servers,' we'll be able to take care of them," he said.
Both Persistent and Carbonite see this week's three cloud storage acquisitions as a part of the maturation of this part of the IT business, but for different reasons.
Doyenz's Tiwary said that any market with a lot of small players will eventually consolidate, and that the key question becomes what actually results from the consolidation.
"Doyenz's success is in disaster recovery-as-a-service," Tiwary said. "This distinguishes us from other providers. So for Doyenz, it's not about pure consolidation. It's about taking us to the next level."
Rajagopalan of Persistent said there is a much wider market for disaster recovery as a service than has been tapped so far.
"SMBs and MSPs are a big market," he said. "But this is also exploding in the data center. We feel disaster recovery in the data center is more complex than it has to be. Persistent has the potential to expand this business geographically, as we are worldwide and can take the technology to a wider base. And, we can take it to more MSPs."
NEXT: Consolidation Coming Because Of Need For Scale
Carbonite's Friend, on the other hand, is seeing a consolidation in this market because it is getting hard for smaller providers to survive.
"We have over 230 people in customer support alone," he said. "If you are a $2 million or $3 million company like a lot of these guys, I don't know how you can survive no matter how good your technology is."
When a customer signs with a cloud storage provider like Carbonite, they are getting in bed with the company for a long time, Friend said.
"This is mission-critical stuff," he said. "What is really important for customers is, 'Will these guys be around in three years? Will someone be there to pick up the phone when I call?' In the end, you need scale. So, there will be a shake out."
Carbonite currently backs up 300 million new files a day and is adding 1 petabyte of new storage capacity every two weeks.
"We added 1 petabyte total in our first year," he said. "Back then it cost $1 million. Now it costs $100,000. I don't think there is anybody bigger than us."
PUBLISHED OCT. 19, 2012