Network Appliance Inc. (NetApp) 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.
According to Tony Asaro, analyst with the Enterprise Strategy
Group, the acquisition will be a boon to customers looking to
perform heterogeneous remote mirroring, "which a lot of people have
been pushing for," he said.
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."