NetApp's acquisition of Data Domain will help it compete against storage archrival EMC and expand its SMB business, said channel partners of the two companies. The partners also said, however, that the $1.5 billion price for the deal seemed high.
NetApp said on Wednesday it plans to acquire Data Domain in a $1.5 billion bid to make it the leading provider of data deduplication technology.
Data Domain is a pioneer in the development of data deduplication technology, and is by far the best-known vendor of the technology. The company manufacturers a series of storage appliances that tightly integrate its deduplication technology with dedicated storage capacity. It also offers software for data replication and virtual tape libraries.
Deduplication, also called "dedupe," removes duplicate information as data is stored, backed up or archived. It can be done at the file level, where duplicate files are replaced with a marker pointing to one copy of the file, and at the subfile or byte level, where duplicate bytes of data are removed and replaced by pointers, resulting in a significant decrease in storage capacity requirements.
For Keith Norbie, director of the storage division at Nexus Information Systems, a Minnetonka, Minn."based solution provider and partner to both NetApp and Data Domain, the acquisition is great news.
"It's a huge move for NetApp," Norbie said. "People worry more about competing with Data Domain in deals than they do NetApp."
NetApp's belief that the acquisition will bring it a wider customer base and the technology to reach that base are correct, Norbie said. "I've always said that Data Domain 'out-NetApped' NetApp," he said.
NetApp and EMC both already have dedupe technology, but what Data Domain did right was dedupe data going to primary storage instead of just for backups or archiving, Norbie said.
"That's big for helping customers cut their use of tape," he said. "That's what NetApp is getting. The main companies that do that now are EMC and CommVault."
The acquisition helps NetApp legitimize the dedupe market and sets the stage for a larger war with EMC, Norbie said. However, he said, "This will conflict with our relationship with companies like EMC and CommVault."
The acquisition is good for NetApp because Data Domain was starting to make its presence in the market known, said Ron Robinson, president and CEO of IT Data Storage, an Atlanta-based solution provider and NetApp partner that just started applying to resell Data Domain before the acquisition was announced.
"I'm running into Data Domain more and more," Robinson said. "I've been seeing it a lot at government offices and figured I'd better get on the bandwagon before it gets too late."
Data Domain will give NetApp a new entry into the small and midsize business market, where it has been losing deals to Data Domain, said Bernard Westwood, CFO at Syscom Technologies, an Atlanta-based solution provider.
Westwood, whose company is a partner of Data Domain and which gets access to NetApp products through IBM's OEM relationship with the company, said that NetApp definitely wants a bigger part of the storage and dedupe market.
"With Data Domain, NetApp gets a fairly strong deduplication technology," he said. "But both companies can be a challenge in terms of their channel relationships."
Solution providers who sell products that compete with Data Domain, including technology from EMC, CommVault, Quantum and FalconStor Software, said they don't see the point of the acquisition, especially given the $1.5 billion price.
Data Domain's dedupe technology is more of a feature than it is a product, said Brian McCarthy, president and owner of Sencilo Solutions, a Lake Mary, Fla.-based solution provider and Data Domain partner.
However, Sencilo prefers to work with Quantum, which McCarthy said has a better channel program, and he is looking to sign with FalconStor, which he said has become very channel friendly.
"I'm not going to miss Data Domain," he said.
Greg Knieriemen, vice president of marketing at Chi Corp., a Cleveland-based solution provider and partner of both NetApp and FalconStor, said he can't see what Data Domain brings to NetApp other than a way to expand its SMB business.
"Data Domain is a one-trick pony with dedupe, and it doesn't even own all the IP [intellectual property]," Knieriemen said. "And then consider that NetApp already has dedupe, and gives it away for free. If it's buying Data Domain for the customer base, that's a lot to pay."
Knieriemen's comment about Data Domain not owning all its dedupe intellectual property refers to a technology cross-licensing agreement it signed with Quantum in 2007.
Knieriemen said he likes NetApp's technology in part because the vendor offers real solutions that partners can take to customers, and not a point product like dedupe. "I just don't know how this benefits NetApp's shareholders," he said. "But it could be NetApp's new SMB play."
Knieriemen also said that NetApp does not have a strong track record when it comes to acquisitions, pointing to its purchase of Decru and Spinnaker.
NetApp acquired data encryption vendor Decru about four years ago. The company acquired scalable storage technology developer Spinnaker in 2003. Neither acquisition had much of an impact on NetApp's technology.