Data Domain after the bidding war

Earlier this year, data deduplication vendor Data Domain sparked a bidding war between NetApp and EMC that culminated in the latter successfully offering $2.1 billion in cash.

“It was a very exciting time,” recalls Phil Turner, Data Domain’s UK managing director. “Apart from anything else, it absolutely validated how unbelievably important ‘dedupe’ really is, and rubber-stamped Data Domain at the forefront
of it.”

Prior to the acquisition, Data Domain appeared completely unscathed by the recession: the 900-strong company never ceased hiring and its bullishness was validated in its results. Revenues for the three months to 31 March this year were $79 million, a 50% increase on the same quarter in 2008.

But Data Domain’s success and eventual acquisition is no mystery. Its appliance-based technology, which ensures that only new or changed data reaches a storage server or tape system, is one of only a few to offer significant protection from the ‘information explosion’ of recent times.  

Beyond reducing the need for new storage media, the technology reduces reliance on dated tape storage solutions, and can allow a global-spanning enterprise to run a single disaster recovery site.

The popularity of virtualisation has also been a key factor in Data Domain’s success. “If you look at VMware [virtual machine] images there’s a lot of replication in there, so we get fantastic deduplication ratios across VMware backups, typically 40 to 60 times [smaller],” explains Turner.

The question is what EMC now plans to do with the company. Data Domain’s own board appeared to favour EMC’s rival during the bidding process by publicly backing NetApp’s bid.

Turner now dismisses this: “I’m an ex-NetApp employee; others in the company used to work for EMC,” he explains. “Overall, EMC was the favourite, because if you’re going to be acquired, you want to be acquired by the market leader. We were happy that EMC won.”

He also believes that Data Domain can continue its high levels of innovation despite becoming part of a corporate behemoth. “We have more funds to play with, and the expertise of a bigger organisation to bounce ideas off,” he says. “From an engineering perspective, it’s all good, and we’ve also seen a fantastic upsurge in demand and an oiling of the wheels when moving into large accounts.”

As for the integration process and long-term plans for the company, “I would love to be able to answer, but I would be speculating as much as you are,” he says. “A lot of the integration is going on in the US but I’m not privy to that.”
Still, Turner believes EMC will retain Data Domain’s appliance focus, because “our value-add is absolutely around the software, but also control of the hardware, as with any appliance.”

And despite appearances, Turner believes Data Domain’s technology is “absolutely complementary” to EMC’s existing dedupe, which it acquired through its purchase of Avamar in late 2006 for $165 million.

Given Data Domain’s premium price tag, it is likely that EMC has big plans for the technology beyond its current sweet spot in backup storage arrays.

“Our focus now is growing the backup market, and we are moving to archiving,” says Turner. “Dedupe as a technology has many more uses and it will ultimately march towards higher tiers of storage.”

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