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Backup and availability services market consolidating as demand grows

When the two largest players in a market combine, people take notice. The federal government takes notice, too.

When the two largest players in a market combine, people take notice. The federal government takes notice, too.

That's just what happened when SunGard swallowed troubled Comdisco's Availability Solutions business last year. Indeed, the Justice Department filed suit to block the merger but lost a court challenge by SunGard -- thus allowing the deal to be consummated in November.

Donna Scott, an analyst at Gartner Group, explains that while the two companies served the same market, they had been focusing on different ends of that market. Comdisco, for its part, focused mostly on the largest enterprises and did comparatively less with the mid-size firms. SunGard, on the other hand, had little presence at the largest enterprises but lots of involvement with midsize firms.

Before the merger, Comdisco had claimed about 40% of the backup and recovery business and SunGard had staked its claim to about 30%. But John Lindeman, SunGard's vice president for product marketing, says that the companies had many customers in common. He also estimates the companies combined probably control something more than half the business -- trailed at a distance by IBM.

In terms of their combined role as providers of storage resources, Gartner's Scott notes that the market has moved toward higher and higher levels of recovery requirements -- from several days to several hours. That's forcing ever tighter integration between customers and vendors and actual integration of infrastructure.

Lindeman says that in the case of SunGard, the company has gone from the model of "bring us your backup tape" to being part of their customers' SANs. "We can help recover customer SANs by having multiple ports into one storage fabric," he adds. Lindeman also notes, that kind of service level is in even greater demand since Sept. 11.

Scott says despite the merger, and the increased interest in backup/recovery and high availability, SunGard may not be able to ratchet prices up too much. "There is a natural limit in this business because it isn't that hard for customers to decide to simply invest in purchasing the technology themselves," she said.

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