Storage industry weighs EMC's, NetApp's bidding war for Data Domain Inc.

As a bidding war begins between EMC Corp. and NetApp for Data Domain Inc., users are leaning toward NetApp but worried about decreased competition with market consolidation.

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Storage administrators are keeping a close eye on EMC Corp.'s and NetApp's bidding war for Data Domain Inc. and wondering how the fate of the data deduplication backup specialist will impact their shops and the storage industry in general.

While customers generally see Data Domain fitting better with NetApp than EMC, they are nervous about the competitive aspects of the industry's consolidation. Nasser Mirzai, vice president of technology at San Mateo, Calif.-based TradeBeam Inc., has products from EMC, NetApp and Data Domain. He pointed out that Data Domain's product line is more similar to NetApp's than EMC's. NetApp and Data Domain have core software they use across different hardware designs suited to different sized businesses. EMC is also perceived as more of a large enterprise company, according to Mirzai, while NetApp and Data Domain have broader appeal to midrange organizations.

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"I think NetApp could keep the same energy and momentum and bring that concept to its full potential of taking a similar approach across different sizes of product," he said. "If the perception is that this is a big monster EMC product and users can't afford it, it may slow down growth and impact adoption [of Data Domain devices]."

Mirzai also said EMC has more potential conflicts of interest with Data Domain customers because of its broad product portfolio. EMC CEO Joe Tucci has already pledged that his company will cooperate with all backup software vendors if it acquires Data Domain, but Mirzai isn't sure.

"What if this means that [EMC] NetWorker support for Data Domain would be better going forward than, say, [Symantec Corp.'s] Backup Exec?" he asked. Added Mirzai: "Data Domain management has already accepted the NetApp offer. I think NetApp has a stronger chance. Then again, money talks."

Storage administrators also suspect gamesmanship in EMC's tender offer to Data Domain shareholders rather than genuine plans for the company's data deduplication backup technology. "I don't think that they [EMC] are really interested in Data Domain," said NetApp customer Reinoud Reynders, IT manager at the University Hospitals Leuven in Belgium. "NetApp has a real advantage in dedupe of online storage." That said, Reynders said he doesn't expect NetApp to break the bank for Data Domain. "I'm very confident that the board of NetApp will only buy it for a fair price," he said.

Even some EMC customers said they worry about the competitive implications of EMC cornering the market on data deduplication with IP from both Avamar Technologies Inc. (which EMC acquired in 2006) and Data Domain. Sean O'Mahoney, vice president and senior manager of technology services at Republic Bank in Louisville, Ky., considered Data Domain but picked EMC's Avamar, NetWorker and DL3D virtual tape library (VTL) based on a partnership with Quantum Corp.

"Data Domain did have some features we liked – it would be positive for us if EMC picks it up," O'Mahoney said. "But if NetApp gets Data Domain, the consumer wins as it's a more competitive environment."

Another EMC customer, David Grant, data center manager at Kanata, Ontario-based Mitel Networks Corp., wrote in an email to SearchStorage.com, "If I had my 'druthers' I think that I'd rather see the young guy win…I have less trust in EMC's intentions, or in [its] ability to successfully add in Data Domain's technology to their existing product lines without losing something along the way. EMC [is] maybe just too big and set in [its] ways for me to feel good about [it] being the winning bidder here."

Not every EMC customer feels that way, however. "Obviously, with our investment in mostly EMC equipment and being a Data Domain customer, it probably makes better business sense for us [for EMC to win]," said Michael Passe, storage architect at Boston-based Beth Israel Deaconess Medical Center. "Generally, EMC doesn't have the strictly à la carte pricing model that NetApp follows on its NAS [network-attached storage] equipment."

But some NetApp customers find the consolidation just as worrying no matter who wins. Jim Krochmal, manager of IT at cement plant designer Polysius in Atlanta, wrote in an email to SearchStorage.com, "I prefer NetApp so I can stay in the same 'product family.' It just seems we have to declare allegiance to 'corporate families/gangs/partners' these days," he wrote. "[That means] fewer choices and less compatibility at full functionality."

Added Stan Horowitz, data management engineer at Philadelphia-based Temple University, "My concern is that the playing field in the area of data deduplication will be narrowed because both NetApp and EMC already offer competing solutions to what Data Domain offers."

Who will win the EMC, NetApp bidding war for Data Domain?

While customers consider how Data Domain's acquisition will affect them, industry analysts are debating who will win EMC Corp.'s and NetApp's bidding war for Data Domain Inc.

"Here is how this plays out," said Brian Babineau, a senior analyst at Milford, Mass.-based Enterprise Strategy Group. "NetApp counters with a richer offer, and EMC doesn't because it was just doing this to raise the price and they bow out." After a year or so spent squarely in the sights of EMC in a bitterly competitive market, Babineau said he doubts Data Domain employees would want to be integrated into EMC. "They are OK with NetApp," he said.

Backup expert W. Curtis Preston is just as certain EMC will prevail, writing in his blog, "There's no way NetApp's going to outbid EMC here. Everyone already thought that [$]1.5 [billion] was too much for NetApp to pay, given their track record with acquisitions. How are they going to outbid a [$]1.8 ALL CASH bid? …Methinks they're back to square one."

One customer who uses EMC and NetApp has a good idea who the ultimate winner will be.

"More than likely, the only clear winners will be the lawyers," said Tom Becchetti, who works with a Fortune 200 company that he requested not be identified because of corporate policy forbidding him to use its name publicly. "Data Domain stockholders won't be doing bad either."

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