IBM today acquired one of the leading independent managed storage service providers, Arsenal Digital Solutions USA Inc., continuing the push of large storage vendors into the Storage as a Service (SaaS) market.
Arsenal Digital will join IBM's Business Continuity and Resiliency Services (BCRS) business unit, which is part of the IBM Global Technology Services division, when the deal closes, probably in the first quarter of 2008. Arsenal claims to have more than 20 PB of data under management. It sells services directly to customers, but also provides the technology that AT&T and other telecommunications companies rebrand as their service offerings. Arsenal claims more than 3,400 customers in 12 countries.
Seagate acquires e-discovery vendor
Also today, Seagate technology added to its services portfolio by acquiring e-discovery software vendor MetaLincs. MetaLincs will become part of Seagate's services group, and some of its features will integrate with EVault, a services provider and Arsenal competitor that Seagate bought for $185 million last January. Neither IBM nor Seagate disclosed the price of their acquisitions.
Service providers have been a hot target for acquisition-minded storage vendors this year. The deals began with Seagate's purchase of EVault and included EMC Corp.'s $76 million pickup of Berkeley Data Systems Inc., Autonomy Corp.'s $375 million acquisition of email archiving service provider Zantaz Inc., and a slew of Iron Mountain Corp. deals in e-discovery and records management, including a $158 million grab of e-discovery services firm Stratify Inc..
Mike Riegel, IBM's vice president of information protection services, said IBM evaluated several service providers but picked Arsenal mainly because its services are aimed at midsized and large companies, and because its architecture scales across a range of backup technologies. Arsenal's main services are ViaRemote, which is used to back up all of a company's data; ViaBack, for backing up mission-critical data; and ViaManage, for managing storage at the customer's site.
Forrester Research analyst Stephanie Balaouras said Arsenal is valuable for IBM because Arsenal offers customers the option to back up all their data to an offsite data center or back up locally to disk, and vault a second copy to the provider.
"They are a major player because they are both service provider and enabler," Balaouras said. "They have many of their own clients but a lot of telco players rebrand and resell Arsenal online backup services. I think their real value is that they know how to deliver SaaS – they can do multi-tenancy, billing, reporting and so on."
Balaouras also said the move was at least in part a reaction to EMC's acquiring Berkeley Data's Mozy online backup service. "I think [IBM] felt they probably needed to make an acquisition in this space in response to EMC's acquisition and also to get a footing in a critical market," she said. "Most SMBs will turn to online backup services and even large enterprises are very interested in online backup for PCs, and for remote office PCs and servers."
Riegel played down the comparison of Arsenal Digital's services to Mozy. "There's a real difference between offering somebody the ability to back up pictures and personal PCs, and protecting a company's critical information", he said.
Mozy does have a corporate backup service that includes General Electric Co. as a customer, however, and EMC has disclosed plans to offer SaaS and prepackaged versions of all its software.
Arsenal executive vice president Brian Reagan said he considers Seagate Evault and Iron Mountain Live Vault his major competitors. Riegel said Arsenal's 100 employees will join IBM, and Arsenal CEO Frank Brick will head the data continuity business in the information protection services group.
Arsenal Digital raised $86 million in equity and debt funding since it was founded in 1998, with its last funding round coming in 2003. Reagan said the company is profitable.
Seagate's latest target is a smaller, less mature company. MetaLincs has 50 employees and fewer than 25 customers, according to Seagate Services Group senior vice president and general manager Mark Grace. Seagate will continue to offer MetaLincs as a licensed product but is looking to turn its technology into a services offering. Some of the e-discovery capabilities will be integrated into EVault's Pro Mail product, Grace said.
Grace heads the services company that Seagate operates as an independent unit inside the disk drive company. He said the division sprung up because Seagate sees a huge opportunity in SaaS, and will continue to shop.
"Seagate has mustered quite a bit of corporate dollars to put a stake in the ground here," Grace said. "We've made big bets and the growth we want to do will require some inorganic stuff, as well as organic growth too. We will be out there looking for the best building blocks."