Storage Show Down

CA and Veritas challenge one another

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BEA Systems vs. IBM. Dell vs. Compaq. Microsoft vs. Netscape (and the Justice Department). The technology industry has had some classic duels in the past, but now a new rivalry is brewing in the realm of storage software.

In one corner is Veritas Software, a storage leader and quite possibly the biggest software company that no one has ever heard of. In the other corner is Computer Associates (CA), a 25-year-old software giant that, despite being a $5 billion franchise, has never quite achieved greatness. The two are going at each other's throats, holding nothing back. Veritas CEO Gary Bloom calls CA's storage suite BrightStor "last year's news" and that CA's storage strategy isn't bright at all. Not to be outdone, CA president and CEO Sanjay Kumar calls Veritas a good company, but says "we're going to kick its ass."

While storage has not been immune to the recession, it's a market that literally will not stop growing. For instance, analyst firm IDC recently stated the need for data storage is increasing so much that many enterprises are boosting their storage capacities from 50 to 100 percent,annually. The Hurwitz Group says the world's yearly production of new print, film, optical and magnetic content alone will require 1.5 billion GB of storage,approximately 250 MB of data for each person on the planet.

That ever-growing blob of information has become so troublesome that many IT managers don't even know how much storage they are trying to handle. Enterprises are putting a premium on not only managing their storage, but also using it more efficiently. Thus, storage software has been highlighted as a lucrative market, and two companies have targeted it for domination.

CA and Veritas are two of the three top independent storage software players in the market. According to IDC, Veritas is the No. 1 independent storage software provider, while CA is a distant second. Mountain View, Calif.-based Veritas is a $1.5 billion company with a goal of becoming a $5 billion storage operation. CA already is a $5 billion business that wants to double its storage revenue by year's end. Both have aimed their firepower toward this space and have taken an aggressive partnering approach. Veritas and CA want to outgrow each other, and they want their partners to help them.

It's a battle reminiscent of the application-server-market clash between BEA Systems and IBM; the younger, smaller Veritas is hoping to hold off an older, larger competitor in CA, which is intent on stealing market share. The prize is undisputed leadership of the storage software market, now generating more than $5 billion a year. Which company will turn its bark into bytes?

The Technology

If there's one area of similarity between Veritas and CA, it is the method by which they built their storage businesses; both companies are harnessing the technology they inherited from past acquisitions. CA, based in Islandia, N.Y., has long been known as an acquisition machine, but the company has not made a major purchase since its pivotal $3.9 billion Sterling Software acquisition in April 2000. Veritas, however, has made a series of recent acquisitions dating back to 1997, when it purchased OpenVision Technologies to expand its backup and hierarchical storage management solutions.

In January, Veritas bought The Kernel Group for an undisclosed amount to leverage its Bare Metal Restore technology, which automates and accelerates system recovery with Veritas' NetBackup. That acquisition was a direct result of experiences with a large segment of the 100 Veritas customers that were affected by the Sept. 11 tragedy, Bloom says. "There is an enormous gap from the time of the disaster to the time we could start the recovery," he explains. "[Customers had to get and load the machine, load the operating system, put all their software on it, and connect all the devices. Then the recovery could start."

With Veritas' Bare Metal Restore product, customers can rebuild a server at a fraction of the time it took before. Those in the trenches salute Veritas' backup Unix utility as top-notch,not a major surprise because the company started out as a provider of utility software for Solaris, says Jon William Toigo, an independent consultant and author of the Holy Grail of Data Storage Management.

"Their No. 1 strength is their backup product for Unix," Toigo says. "Absolutely, without a doubt, it's one of the best in the business."

But acquiring technologies brings its own kind of headache. Analysts and customers say it will be practically impossible for Veritas to go from its $1.5 billion size to $5 billion goal by continuing what it has been doing in delivering a potpourri of point products. That's why, at its recent Veritas Vision conference, executives finally announced its first common architecture,the Adaptive Software Architecture, a new software and services model.

"It's becoming more difficult to produce massive point products," says Arun Taneja, an analyst at Enterprise Storage Group, based in Milford, Mass. "It's absolutely critical for Veritas to do this because it will be impossible to double the company if they don't have a coherent architecture."

More than a year ago, Bloom admitted to financial analysts that it would take a couple of years to integrate all the pieces it has acquired,technologies that work on Solaris, Windows, Unix, AIX, HP-UX and NetWare. Today, Veritas has some 44 individual products geared primarily toward distributed environments.

Toigo says he was once a huge fan of Veritas. But now he has awarded it with his "Most ICKI Software Award." That is his acronym for "Incredibly Complex and Kludgy Implementation." He explains that Veritas' buying spree has resulted in a lot of different products that are poorly cobbled together.

"Some are good, some are pretty average and some are pretty poor," Toigo says. "They need to be a little more open to the deployment of third-party software and not require customers to buy their software. I would say they need to stop overselling the capabilities of their products. They need to find their strengths and specifically address those strengths."

CA also owes its storage fortunes to key acquisitions, most notably Sterling, which it purchased from Texas entrepreneur Sam Wyly, who last summer orchestrated a failed proxy battle for control of CA (and who could be angling to do the same this summer). CA saw the merger as a way to compete with more established players like Veritas and strengthen its presence in storage, which was a modest showing since its acquisition of Cheyenne Software in 1996.

While CA was on the brink of disaster last year amid hostile takeover threats and government investigations into accounting and merger activities, the company now finds itself in perhaps its strongest position ever, thanks to its storage business.

"I don't think they realized what they had when they bought Cheyenne or Sterling years ago," says Anthony Ferringo, CTO of AlphaNet Solutions, a CA partner. "Now they see storage as a huge market."

Following the Sterling deal, CA officials quickly put together a storage-management strategy and spent several months bringing together the respective products, such as Sterling's data-protection and virtual-tape technology and CA's BrightStor ARCserve Backup software, into an integrated product suite. The BrightStor brand was introduced last summer with a series of integrated solutions such as BrightStor Enterprise Backup and BrightStor Storage Resource Manager (SRM), and soon became a star within the CA portfolio. Storage sales generated $478 million in fiscal 2002, representing 18 percent of CA's product revenue.

"Our storage business has continued to grow in the past 12 months, even in a down economy," says Stephen Richards, executive vice president of sales at CA.

Analysts have lauded BrightStor as an exceptional storage-management software suite that automates enterprise storage operations and uniquely covers both distributed and mainframe systems. IDC analyst Bill North wrote recently that BrightStor is "a significant advance in enterprise storage management" by decoupling storage usage and management from the physical storage implementation in open, multivendor network environments.

CA's newest storage product, BrightStor Portal, may be the ace to help the company match Veritas. BrightStor Portal, introduced at CA World 2002 in Florida this spring, has been praised as a revolutionary new storage-management tool by analysts. The key product for CA's enterprise storage-automation solutions, BrightStor Portal acts as a flexible platform that manages storage resources through disparate systems, environments and hardware. A recent Strategic Research report called BrightStor Portal a unique and robust product.

"No other enterprise storage-operations-class product has the capability to create a vendor-independent, data-management platform," the report stated.

Customers such as Parker Hannifin, which is in beta testing for BrightStor Portal, were pleasantly surprised by the exceptional capability of the BrightStor family. "We needed a product that offered automated storage management," says Jack Norton, senior systems analyst at Parker Hannifin. "I didn't really expect CA to come through, but they did."

BrightStor can help bring customers back into favor with CA, which has never been a popular vendor with its client base and now must contend with new government probes into its accounting practices. Summit Strategies analyst Dwight Davis says the mood was positive among customers and partners at CA World this year.

"Historically, they've had some problems with customer satisfaction, but they really seem to be going the extra mile now," Davis says. "They have a compelling story to tell with BrightStor, and people are listening."

The Partners

To fulfill the promise of storage software, both Veritas and CA have implemented new partner programs in an effort to increase sales and adoption, which could mean big bucks for solution providers. CA recently rolled out its most ambitious channel strategy to date,a "channel-preferred" model essentially teams CA's vast 5,000-person direct-sales force with channel executives to help increase BrightStor sales through VARs and hopefully catch up to Veritas. Now, CA salespeople are compensated for making a sale through a partner instead of directly.

"I'm willing to pay you to help you reach new people," Kumar told solution providers during a channel symposium at CA World. "We have to grow a lot. If we just grow our storage business a little, we lose."

Currently, 60 percent of BrightStor products are sold through the channel, but the company says it's aiming for 100 percent partner involvement with the new model. Mark Milford, senior vice president and general manager of North American channels, says the company needs to add roughly 100 Enterprise Storage Partners in North America this year to meet its goal of doubling the BrightStor business. It will also have to add mainframe-familiar solution providers, as mainframe-based BrightStor solutions were previously sold through direct sales only. Milford believes both goals can be easily achieved because of the strength of CA's storage channel, which has more than 3,000 VARs.

"The reason we started with BrightStor is because we've got the strongest set of enterprise solution providers for this product line," Milford says. "We feel very comfortable turning these leads over to them."

Even with the new model, it won't be easy for CA, which has an uneasy history with the channel. Richards says the company's partner initiatives were often undercut in the past by conflict with CA's extensive and aggressive direct sales force. "Whenever we've felt like we've started to make some inroads with the channel, we've inevitably come into some form of conflict that's driven us away from the channel," he says.

Still, CA's partner-based revenue in North America grew 10 percent last year, in large part to CA's Solution Partner Program launched last summer. Of that channel business, BrightStor was clearly the strongest brand, according to CA. The company is now trying to shed its past reputation as a difficult partner and an arrogant and unfocused technology vendor.

"We've changed a lot, and we spent a lot of time with partners over the past 12 months to figure out better ways to do things," Kumar says. "Clearly, the message we're getting from partners is that they like where we are going."

Some solution providers say it's working. PC Mall, a CA enterprise-storage solution provider, has seen positive changes in CA's channel strategy.

"We cemented the relationship two years ago and went through some growing pains that first year, but this year I've been very impressed," Gertrude Pillay, director of product management at PC Mall, says. "They've really listened to partners, and they realized they need the channel because you can't just sell storage software."

While CA is embracing partners, Kumar says Veritas is alienating them by moving more to a direct sales model instead of leveraging the channel. Richards says that because of CA's size and diversity, it can invest more heavily in the channel, whereas smaller companies cannot.

"Organizations like Veritas, in order to continue to satisfy Wall Street, are moving more to a direct sales model because they can't afford to give away 35 to 40 percent of the margin to partners today," Richards says.

Despite CA's claims, Veritas says it's making advances with partners as well, building off its solid base of OEM partners. Currently, Veritas has a direct relationship with some 1,800 of the Global 2000 enterprises and does 55 percent of business through the channel. But like CA, Veritas is betting its future on partners, although focusing on technology vendors more so than on resellers. "We just think they are absolutely critical to our success," Bloom explains. "It's that cross-industry support that is going to ensure success."

Veritas has set up two new industry-wide programs, which gives some insight on what philosophy the company is relying on. Veritas Powered is designed to support established and emerging networking hardware platforms, while Veritas Enabled helps establish heterogeneous environments. The plan is to build a multitude of vendor partnerships so its software is embedded everywhere. In the past, Veritas' partnership program was a series of ad hoc efforts to execute on individual products, according to Kris Hagerman, senior vice president of strategic operations at Veritas. "It just was not a very successful approach."

The Powered program, in particular, shows that Veritas understands that management will not exist solely in the host,it's moving into the fabric. This new program is an attempt to take its product capabilities and put them into the hands of people who have a vested interest in migrating the functions into different parts of the storage architecture. For instance, Cisco and Veritas have teamed up to build next-generation storage-networking solutions.

"It's not an entirely new way of thinking for Veritas, but it's the first time they have come out publicly with it," IDC's North says. "And they now have set it up as a program, which means they have a cookie-cutter. They can duplicate this where necessary."

But along with praise for its backup tools and its forward-thinking on partnerships, critics have lobbed some complaints as well,particularly at Veritas' pricing model.

"End users have the following observations," Toigo says. "No. 1, for every one product from Veritas that you do want, you have to buy seven other products that you don't want,products that are not particularly useful to you or considered by the end users as best-of-breed products. It's basically an effort to gauge more money out of the customer by selling them a bunch of software they don't need."

So far, Veritas' position is relatively secure. More than 86 percent of the Fortune 500 companies rely on Veritas' software solution to either protect or manage their storage hardware. Bloom warns that people should not underestimate the barrier-to-entry faced by those targeting his space.

"We are starting from a position where we are already plugged into [customers' products," he says.

Veritas clearly has a head start, and for the moment CA may not even be able to read Bloom's license plate. Although CA is a relative beginner in storage software, it has clearly identified the market as the key to its future. Plus, with its other brands, the company has an installed customer base that includes 99 percent of the Fortune 5000, giving it plenty of potential to cross-sell BrightStor.

The execution of the partner programs, however, could be the determining factor in how this tug of war plays out. Veritas needs to build its partner foundation and continue to leverage joint solutions to stave off competition not only from CA, but others like EMC, IBM, Legato and BMC Software. Kumar and his team must show their love for the channel is real and attract enough VARs for CA to compete with Veritas. Both companies are betting all they have on storage software, which Gartner predicts will become a $16.7 billion market by 2005. If their plans fail, there may be no backup plan or recovery solutions for them.

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