IBM’s acquisition today of Diligent Technologies not only gives it an established player in the emerging hot-spot of data deduplication, it may help Big Blue reap additional benefits in market and channel opportunities.
The acquisition also puts IBM (NYSE: IBM) shoulder-to-shoulder with EMC, Sun and Hitachi Data Systems (HDS) — all top-tier players boasting “de-dupe” solutions, which enable businesses to compress their stored data, saving resources and money.
The purchase presents IBM with some unique reseller opportunities, given Diligent’s OEM relationships with Sun, HDS and Overland.
Ironically, HDS also has gained traction as a formidable Diligent OEM partner — a fact that may cause some problems for both parties.
“IBM had no deduplication story before, but now it has something it owns,” David Russell, a vice president at Gartner, told InternetNews.com. “Hitachi is going to have to assess what it wants to do now, given the amount of money and resources they’ve dedicated to the Diligent relationship.”
“They obviously value it but now it’s no longer a differentiator between HDS and IBM,” he said.
Six-year-old Diligent, a spin-off of an EMC research and development unit, ignited interest well before it launched its first product in early 2006.
The vendor said its ProtecTIER enterprise data deduplication platform has since been deployed in a hundred Fortune 1000 datacenter environments — including major telecoms, and global auto manufacturer, financial institutions and healthcare players.
While terms of the purchase were not disclosed, research firm Robert W. Baird & Co. estimates that IBM paid about $200 million for the company. IBM said Diligent will be folded into the System Storage unit of its Systems and Technology Group.
“We’ve got a great technology with Diligent and one that fits well for the midrange enterprise and even the smaller business organization that’s looking for a tape-less backup system,” said David Messina, manager for business development at IBM System Storage.
Messina told InternetNews.com that IBM hopes to use its channel partnerships to expand into new market bases. The company has not yet decided whether it will rebrand Diligent’s offerings, however.
“We are very happy about the acquisition and we’ve only heard positive feedback from customers and partners,” Doron Kempel, Diligent’s chairman and CEO, told InternetNews.com. “Everyone’s comfortable with the IBM name and knows that Diligent is in the hands of a reputable company.”
Kempel added that the IBM roadmap for Diligent is “quite extensive” and will include a new storage appliance offering in the near future.
“This is reflective of the fact that we’ve been doing something right, and it’s significant that IBM chose us,” Kempel said.
He was also confident that current partners, such as HDS, would continue to sell the product.
“The first year will be about keeping the momentum going,” Kempel said. “Hitachi and IBM will remain partners with Hitachi having access to the same technology.
However, Hitachi is not the only IBM rival who doing business with Diligent. Sun is another reseller, although Gartner’s Russell said the company is likely to continue its partnership, which is centered within Sun’s services group.
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IBM also expressed hopes of retaining Diligent’s extensive OEM roster.
“We aim to keep all those relationships intact, in particular the Hitachi arrangement,” Messina said.
Still, it’s unclear whether it will be smooth sailing for IBM, despite such assurances.
“For Diligent, this is a good move as it’s now got a stable parent company — but big parent companies also can bring some challenges,” Russell said. “It will require a good support transition for IBM to come into those channels in the next year or so.”
The Diligent buy marks the third storage-related acquisition for IBM this year. It purchased Israeli-based XIV in January, and announced last week its intention to buy FilesX, a maker of continuous data protection software.
IBM’s Diligent buy reflects a storage industry trend that’s gaining momentum this year, Russell said.
EMC is soon expected to announce a reseller deal with deduplication provider Quantum. According to Robert W. Baird & Co., the expectation is that EMC will couple the vendor’s de-dupe technology with one of its own mid-range CLARiiON storage chassis for large-scale deduplication.
There have also been rampant rumors that EMC will acquire Quantum.
“At the star of the year, some of these two-letter vendors weren’t even OEMing a deduplication technology — much less owning one,” Russell said. “I expect that by the end of this year, lots of them will have at least one solution, possibly two deduplication tools to offer.”
The series of deals also means that all of the major players in high-end storage now have deduplication offerings.
“They all have their dancing cards filled and most have placed bets on which partner to bring in,” said Diligent’s Kempel, adding that while some vendors will offer more than one de-dupe solution, a majority of enterprises tend to want a single platform.
“It remains to be seen if other technology can play in datacenters, but deduplication is a complex domain and the opportunity is huge,” he said.
That opportunity is tied not just into deduplication’s promise of reducing storage needs, but also the fact that enterprises are feeling more secure about the technology now that it has thousands of deployments under its belt.
“It’s catching on as it’s becoming too compelling to ignore,” Russell said. “The increasing number of adopters has reduced the risk some enterprises were worried about. The ability to save such money is dramatic.”
A recent study of Fortune 1000 enterprises by researcher TheInfoPro reports that 56 percent of those surveyed spent more on data deduplication in 2007 than in 2006.
“The technology has not peaked, by any means,” Russell added.