Analysis

posted on 27 April 2008 09:14

Data Domain is extending its de-duplicating offer into all nearline (tier 2) storage so it can leave competitors confined in their de-duping backup data niche.

In the earnings call transcript for Data Domain's Q1 fy08 quarter  CEO Frank Slootman made several remarks about Data Domain's strategy and the general de-duplication market. 

The company sees itself as providing de-duping product for more than just a backup-to-disk target niche, with Slootman saying: "Data Domain’s ability to apply the deduplication technology to nearline storage application continues to be a differentiator for us in the marketplace. We continue to position deduplication as a new tier of data center storage for data that customers do not want on tape for performance reasons and do not want on primary storage for cost reasons. As our storage platform expands in scale and scope, we plan to further deepen and broaden this growing position in the data center."

Slootman said: "We added more customers in nearline in Q1 than we did in Q4. ... the vast majority of the people that are coming on board in nearline are actually nearline only and you would expect that the low hanging fruit would be people combining backup with archive and things like that but there is actually good activity happening around nearline-only applications and that’s promising."

This is beneficial, Slootman thinks, in regard to Data Domain's de-dupe competition: "... from a positioning standpoint for customers to know that our systems are capable of doing other things that they can view as a class of storage rather than a point solution relative to data protection is very, very important. It’s highly differentiating in competitive situations. So this will become more important going forward against the vast majority of competition out there that is very, very specific to data protection applications only."

As Data Domain is transitioning to being a nearline, meaning all disk storage between performance-centric frontline or tier one applications and the archival storage applications like MAID and tape, then it has to compete with CLARiiONs, EVAs and all the other mid-tier disk product ranges that feature in this market. That means it has to have the capacity and performance and data protection category boxes ticked. The performance has to be good; as an in-line de-dupe user Data Domain nearline arrays can't afford to be sluggards compared to the competition.

Slootman said Data Domain will be extending its product's capabilities: "We have a new software release coming out this quarter that’s going to introduce some very significant content for nearline applications. So we are going to be chipping away at this opportunity every quarter."

The percentage of pure nearline customers is very low but Data Domain sees a vastly larger market here than in the data protection niche.

De-dupe consolidation

Slootman said: "It’s really interesting to see a company like IBM deciding that they have to own the technology as opposed to some of the OEM-type companies like HP, IBM, et cetera, and Sun ... normally OEM-ing their technology and basically taking the time deciding whether they need to own it or not, I think IBM has created a big signal here for the sector overall that maybe it is time to transition from OEM-ing to buying which of course can set up a bit of a scramble because there's only so many players to go around."

The big three potential buyers are HDS, HP and Sun. Dell might be an outsider here.

Possibly FalconStor would be a most attractive de-dupe vendor for one of these companies to acquire because of the wide-spread use of its technology and its coupling with virtual tape library (VTL) software and more. Sun for example has a close relationship with FalconStor but it has recently tended to prefer concentrating acquisitions on open source companiers such as MySQL. HP has an existing arrangement with Sepaton, based on VTL functionality.

De-dupe competition

Slootman said that he didn't meet competition from IBM, Data Domain not operating in that true-blue area of the market. So the Diligent acquisition by IBM wouldn't affect Data Domain much; it will probably affect HDS more, which OEMs the Diligent ProtecTIER product, as it is a closer competitor to IBM in this area.

He thought that the IBM-Diligent deal could prompt more de-dupe vendor purchases by system vendors as they see a need to own rather than OEM the technology.

The EMC-Quantum de-dupe licensing deal was becoming an almost open secret. He thought it was possible we might see EMC hardware running Quantum de-dupe. This might mean a CLARiiON Disk Library running that software or perhaps a wider application of the de-dupe facility across the CLARiiON product line.

Data Domain didn't meet competition from software-only de-dupe vendors he said, mentioning Symantec, EMC-Avamar and CommVault. Slootman thought they went after different customers: "We are not really seeing the vast majority of pressure and competitive activity from that group of vendors there. They are really operating in a different part of the market place. They tend to pursue highly fragmented environments and I mean it’s not an insignificant market. It’s a different market than where Data Domain is active where we are dealing with much more concentrated data sets than what they are going after."

Outlook

As all the nearline storage vendors add de-dupe functionality to their products and de-dupe does become 'just a feature' then Data Domain's potential competion pool widens to embrace all nearline storage vendors - whom we might categorise as anyone offering SATA-based drive arrays: EMC, HDS, HP, IBM, NetApp, 3PAR (nearline for online), Pillar, FSC, etc.

The competitive aspect to its deals is going to get stronger and Data Domain has to differentiate its products. We can look forward to an exciting ride over the next few quarters as Data Domain develops its storage arrays so as to keep them differentiated and so it can go near(line) to go far.

^{[Chris Mellor.]}