Network Appliance Inc. (NetApp) announced that it has entered into a definitive agreement to acquire privately held heterogeneous replication startup Topio Inc., for $160 million, in an all-cash transaction.
According to a press release, NetApp intends to add heterogeneous replication capabilities to its disk-to-disk backup products, including the NearStore virtual tape library (VTL), Open Systems SnapVault for remote office backup and SnapVault for NetBackup, a product jointly engineered with Symantec Corp.
"We see three primary uses for this: test and development environments, disaster recovery, and data migration," said Patrick Rogers, VP of products and partners at NetApp.
Users can now mirror data from non-NetApp storage to a NetApp box and then use NetApp's FlexClone to create writeable snapshots, he said, rather than copying full volumes. This is something that in the long run could help reduce storage growth.
"That's probably the most powerful thing they're bringing to the table with this acquisition," Asaro said.
One NetApp user, Rich De Brino, chief information officer at Advances In Technology, a healthcare IT services provider, said he agreed with Asaro's assessment. "Backup strategies are really becoming an issue—you can have all the storage in the world, but if you're stuck with 20 copies, it's not going to work. This is actually an area we've been investigating on our own."
It's also an indication, Asaro said, that software has become the name of the game in storage. Already, NetApp's bitter rival EMC Corp., on an acquisition tear of late, has been integrating its own heterogeneous replication product into its portfolio following the acquisition of Kashya Inc. in May. (See EMC adds Kashya to Invista, May 9).
"It's interesting that in most of the acquisitions lately, we've seen a lot of similarities," Asaro said, referring especially to EMC's acquisition last week of deduplication software startup Avamar Technologies and LSI Logic Corp.'s acquisition of storage virtualization software maker StoreAge Networking Technologies. "They're software only and indicate a trend toward heterogeneous, commoditized hardware."
According to a recent report by IDC, the overall storage software market has grown to $2.5 billion, up 8.6% from last year. However, EMC, which has the largest share of the market and has bet the bank on moving into software, has seen revenue fall since 2004, according to the same IDC report, with software revenues dropping 3.2% from last year.
The acquisition is expected to close in December 2006, subject to customary closing conditions. Topio will be a new business unit within NetApp, and its research and development team will continue to operate in Haifa, Israel.
The transaction is one of dozens of mergers that have consolidated the storage industry considerably in the past year. Another similar merger was CA's acquisition of XOSoft in June, although XOSoft is traditionally a Windows-focused product, according to Arun Taneja, founder and analyst with the Taneja Group.
NetApp's competitors among the legacy vendors offer alternatives to this type of product for heterogeneous data migration—IBM performs replication from its SAN Volume Controller virtualization platform, and Hitachi Data Systems does heterogeneous data migration and management through its Tagmastore virtualization controller, which is also resold by HP.
But if any of those other companies are looking to get into standalone heterogeneous replication through acquisition, Taneja said, they might find the cupboards are bare.
"A company like Softek, which offers nondisruptive heterogeneous migration products, might become more interesting to a lot of companies, because there's not much left in the market," Taneja said.
Some analysts say that while one throat to choke, whether by design or acquisition, is usually viewed by users as a good thing, in the long run, consolidation and a lack of competition in the market could lead to pricing stabilization, or even price gouging if too few vendors control things. (See also, "When companies merge, who wins?", May 11).
But in this space, Taneja said, users relying on a replication project for disaster recovery might be more reluctant to buy from a startup than in other areas of their environment. "It's too strategic a technology to buy from a company that might go under," he said. "This puts the leading-edge technology in the hands of a large and stable company."