Overland picks up Zetta for $9 million

Overland Storage has acquired data protection software startup Zetta Systems to build bundled hardware and software products.

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Overland Storage has acquired data protection startup Zetta Systems for $9 million with the intention of bundling the company's software in a new appliance expected in the next 90 days.

Historically a tape manufacturer, Overland has moved toward disk and software development for tiered storage. In the past year the company has been pushing the REO product line, a secondary storage box made possible by their acquisition of Okapi Software two years ago.

"(The Okapi acquisition) was very similar to what we're doing today, a small startup that provided the heart of our disk based storage offering," according to Overland CEO Christopher Calisi. "But the performance of the REO is not at the level of primary storage and has no failover capabilities."

"Our customers have been saying, 'why can't you give us a box we can put our day-to-day data on'?" said Overland CTO John Matze. "Right now we have the library business, which is tier 3, the REO business, which is tier 2, and this acquisition is our entry into the primary storage arena."

"We will not ship it as software but put a full solution together for the customer," said Matze. The as-yet unnamed storage appliance will consist of multiple 1U heads with Zetta's software inside performing snapshots and automation, while the disk is separate.

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The initial product that will include Zetta's software will provide replication to remote sites and snapshot capabilities, Matze said. Another iteration of the product will add active / active failover about 60 days after the first release.

Ultimately, Matze said he envisions a scenario where the new primary storage product will write to the virtual tape library already included in the REO, and in turn automatically write to Overland tape, a.k.a tiered storage.

"This acquisition helps them move upstream from being a simple storage device, it helps them get more account control, a bigger piece of the pie and avoid the trend towards storage commoditization," according to Greg Schultz, analyst with Evaluator Group.

Overland is probably also reeling from the recent demise of its OEM contact with HP, which accounted for about 59% of the company's revenues, according to Brian Babineau, analyst with Enterprise Strategy Group. "Losing HP as a customer meant they had to find something to replace that revenue," Babineau said. "And they need to make the REO Series more reliable."

Overland counters that it wasn't relying on HP's business indefinitely. "You don't carry OEM partners forever – we've been strategizing this for a while," Matze said. For us not to expect HP to walk away eventually -- you always have to plan for that." But, he admitted, "Does it accelerate our plans a little bit? Yes."

Another motivation for the deal according to Calisi is picking up a company for the right price. "We could have easily paid almost $300 million for this technology," he said, noting that Okapi, which now earns $25 million per year with a 35% annual growth rate, was purchased for $5 million.

"You have to get a company at the right point in time," he said. "Once a company takes enough VC money, the numbers you have to pay are just ridiculous. In another six to nine months, I probably wouldn't have been able to justify the purchase price."

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