Dedupe Demand Not Waning Anytime Soon

If this week’s earnings reports are any indicator, data deduplication is the storage industry’s belle of the ball. That’s despite debate over where dedupe works best in a storage infrastructure and vendors’ various sales approaches.

What’s not in dispute is the technology’s compelling return on investment, and that the fact that dedupe has yet to even scratch its potential market base.

Analyst firm RW Baird expects the optimized disk-to-disk storage market to grow from $250 million this year to about $1 billion by 2009, thanks to spiking demand for high data availability, and the enterprise desire to replace tape.

No wonder the dedupe industry is filling up fast with both startups and storage titans wanting in on the action.

“Every solid storage player will have to have a dedupe technology play,” Baird analyst Jayson Noland told

IBM (NYSE: IBM) is the latest one to grab it, gobbling up Diligent just last week. It’s now playing in the sandbox with EMC, which is supposedly aiming to acquire Quantum, as well as Sun and Hitachi Data Systems (HDS).

In assessing market leadership, Noland pointed to Data Domain as the current “golden child,” stating the vendor’s financial statements “indicate a healthy market overall.”

Healthy is a tame descriptor given Data Domain’s (NASDAQ: DDUP) first quarter revenue of $52.6 million — a jump of 160 percent from 2007’s first quarter.

CEO Frank Slootman repeatedly mentioned that 285 new customers had come aboard since January during yesterday’s earnings call, bringing customer count to 1,800 worldwide.

Slootman mentioned repeatedly that his company is aggressively hiring sales people. In one aspect, it accounts for expected expansion, yet it may also be tied to the act that Data Domain refuses to enter the OEM realm. The Santa, Clara-based company hired on 92 new sales and marketing staff in the past three months, and said the hiring momentum will continue throughout the year.

“We have our pedal to the floor,” Slootman said in the call. “Data Domain is positioning deduplication storage as a new tier for data that customers don’t want on tape for performance reasons and don’t want on primary storage for cost reasons,” he said in a statement.

Data Domain debuted a DD120 appliance for remote offices, an OpenStorage software product and established a new North American distribution agreement with Ingram, a top tier technology distributor in March. It’s also planning to start a new operations center in North Carolina that will be hone to its growing engineering, customer support and inside sales.

Dedupe competitor Falconstor (NASDAQ: FALC) experienced a 33 percent bump up in revenues in the first quarter compared to first quarter 2007, hitting $21.8 million, compared to $16.3 million last year. It’s clear the Melville, NY-based vendor is optimistic as it anticipates revenues to hit between $100 million and $150 million by year’s end.

Named by Forbes as number five in its list of America´s Fastest-Growing Technology Companies, FalconStor is a busy OEM player, partnering with IBM, EMC, Sun, Acer, Brocade, COPAN Systems, H3C, MPC, and Pillar Data Systems. It claims a customer base of thousands.

“We will continue to leverage our market recognition and channel partnerships to drive revenue growth by cross-selling complementary solutions through the enterprise channel, and by empowering our mid-range partners to deliver competitively packaged/priced storage appliances,” CEO ReiJane Huai, stated in a press release.

Today’s dedupe vendors, according to experts, are in a unique product and market position that few technology innovations can boast.

As dedupe saves storage costs, and vendors provide more than a few deployment options in hardware and software, there are few challenges in deployment. Given its strong return on investment, it’s also not viewed as a luxury tech tool that would likely get cut from tightening budgets in an economic crunch.

As one vendor said, there isn’t a dark cloud on the deduplication horizon.

“Right now the market is 100 percent green fields,” Diamond Lauffin, product strategist for FalconStor, told “It’s not been matured yet but it’s clear it will be a cornerstone of storage forever.”

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