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SunGard DR unit good for the taking?

Analysts weigh in on the pros and cons of a major vendor acquiring SunGard's independent disaster recovery unit.

Recent news that SunGard Data Systems Inc. is breaking off its disaster recovery unit as a separate business has raised speculation about whether or not a storage vendor will swoop in and buy it.

The disaster recovery market is exploding right now as businesses of all sizes protect their data against a catalogue of threats including natural disasters, hackers, viruses, terrorism and human error.

SunGard Availability Services provides records management, disaster recovery, managed hosting, storage and information security and earned the Wayne, Pa.-based company $1.2 billion in 2003. Although SunGard CEO Cristobal Conde will not comment about potential buyers, these types of spin-offs often lead to sales.

Storage giants EMC Corp., IBM Corp., Hitachi Data Systems and StorageTek Corp. all line up as likely candidates, according to Arun Taneja, founder of the Taneja Group, Hopkinton, Mass. With its Global Services unit, IBM already does disaster recovery, but it could make an acquisition to "consolidate their strength in that area," he said.

EMC needs to strengthen its services business and this could be a major stake in the ground.
Tony Asaro
senior analystEnterprise Strategy Group

The more probable buyers would be EMC or HDS, said Taneja. These vendors provide tools to create a disaster recovery infrastructure, but neither has a disaster recovery services business. "Data protection will be so hot for the next few years that each of these big gorillas will want to cover it from all aspects."

Tony Asaro, senior analyst, Enterprise Strategy Group (ESG), Milford, Mass., predicts that EMC -- based on its bold acquisitions of Documentum and VMWare -- will consider it. "EMC needs to strengthen its services business and this could be a major stake in the ground."

It's not only storage behemoths that might be in the running. Asaro pointed to records management company Iron Mountain as a candidate. "It would be interesting for them to expand their core business beyond tape vaulting with a substantial DR offering."

Curtis Preston, Vice President of Service Development, GlassHouse Technologies, Framingham, Mass. agreed that Iron Mountain and SunGard could be a good marriage, mainly because Iron Mountain is an independent services company. "It's better for the user if SunGard's business is bought by an independent services company or a group of investors, because I fear that an EMC would use the purchase as incentive to push their hardware."

Preston added that if such a merger or acquisition were to occur, SunGard would have to weigh whether it would take less money from someone who in return would not completely change their original vision.

And then there's always the chance that nothing could happen. "It's hard to tell," said Preston. "Who buys who lately never ceases to amaze me."

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