How Veritas Innovates In Technology

Today, the Mountain View, Calif.-based company is considered king of the Unix space, particularly for backup and recovery with its NetBackup. And customers say one of its core technologies is host-based replication, again specifically in the Unix market, with its Volume Manager Foundation Suite.

But now that storage software has become a hot market, Cush has one word of advice for CEO Gary Bloom: innovation. "Over the years, Veritas has become the backup company," explains Cush, CTO of Adexis Storage, a division of Cranel and a key Veritas partner. "The question is, how does it continue that momentum and expand to become complete data-management experts? The company needs to innovate."

That's the technology challenge that Veritas faces at this moment. According to storage experts, Bloom has to take a company that has its roots in server-centric technology and successfully maneuver it, along with its installed customer base, into this increasingly crowded area of storage software management.

In fact, recent revenue numbers seem to support that Veritas can't become the $5 billion company Bloom wants it to become unless it stretches beyond its server-centric model. Sales of the company's current product line have slowed. For example, results from the recent 2002 fourth quarter reveal that license sales were down from the previous year. For the quarter ending Dec. 31, 2002, user license fees fell to $264.4 million from $267.7 million year-over-year. For the year, user license fees slipped to $1.0 billion from $1.1 billion tallied the year before.

But the reason overall sales continue to grow is mainly due to increased services revenue which, according to Banc of America Securities, was up 32 percent year-over-year in the last quarter. According to a report issued by the securities company, "service and maintenance revenue continues to outpace license revenue growth."

Veritas executives know you can't become an 800-pound gorilla just by pulling in $100,000 deals. And you can't do it by just offering technology that solves problems at the storage and server levels. So how does one become a software company that pulls in more million-dollar deals?

"You have to solve more and more of the CIO problem," responds Jeremy Burton, Veritas' chief marketing officer. "The idea is to raise the service levels and lower the cost of the infrastructure at the same time. That is something the CIO is going to listen to."

Veritas, says Burton, is working on "filling the holes" of its product set so they can get the attention of the CIO and not just the systems administrator. "CIOs think from the application down. Storage is an important part of the puzzle, but it's not the only part."

To get a glimpse of where Veritas is going, just look at its recent acquisitions. In December 2002, they purchased Precise Software in a $537 million deal,expected to close this spring,and inherited a performance-tuning technology that keeps mission-critical applications like SAP, Oracle, BEA Software and Microsoft Exchange running by proactively identifying problems that affect applications' response times.

This technology will fill out Veritas' product set on both the server and application side of the equation. "That was a great acquisition," Cush says. "What that shows me is the company is doing more on applications."

Veritas also purchased Jareva Technologies for $62 million, thereby adding a server provisioning tool that automatically pools and allocates capacity as applications need more horsepower.

"Veritas historically has been good at mergers and acquisitions," says Gary Pilafas, a senior systems and storage architect at United Loyalty Services. "You don't hear people say, 'Yeah, Veritas really screwed up when they bought X, Y and Z.' Now, you do hear people say that about CA."

Still, there are some indications that Veritas needs to pay attention to its core technologies in order to become a storage-management heavyweight. Pilafas is a 10-year user of Veritas software. But late last year, Pilafas rejected Veritas' SANPoint Control product in favor of CreekPath's Application Intelligent Management (AIM) suite to manage the e-commerce company's 25-TB SAN. After testing out the product, Pilafas found that part of SANPoint Control was still in-band, meaning it did not talk through the API layer. "I thought, 'Great, I can implement your product and then have a single point-of-failure in my $3.5 million SAN. I would have introduced a single point of failure into something that was very redundant," he recalled.

Veritas has spent a good part of 2002 building up the number of application platforms that products such as NetBackup, the leading independent backup Unix package, and Backup Exec, an NT backup tool, run on. But Pilafas says Veritas needs to further develop SANPoint Control. "It needs the focus Veritas has been trying to give it," Pilafas says. "In my opinion, going unilaterally across different vendor platforms and the OEM agreements the company has signed have taken priority over the SPC offering."

At the end of the day, Veritas' strength is that it's a hardware-agnostic organization. "Customers dictate that things have to interoperate," says Mark Friedman, former chairman of Computer Measurement Group and now an employee at BMC Software. "You go to a big customer and they have everything. The money to be made is in managing a mess."