StorageSwiss Take on the HDS Acquisition of Sepaton

Yesterday, Hitachi Data Systems (HDS) announced they had acquired Massachusetts-based Sepaton, an established manufacturer of purpose built backup appliances (PBBAs) that use advanced de-duplication to shorten backup times and minimize backup appliance “sprawl”. The company will become a wholly-owned subsidiary of Hitachi Data Systems, which is a division of Hitachi Ltd, of Japan.

Who is Sepaton?

Founded in 2001, Sepaton was one of the early entrants into the disk-based, de-duplication backup market and originally focused on replacing tape-based backup systems (Sepaton’s name is actually “No Tapes” spelled backwards). But as disk backup and de-deduplication became more mainstream, Sepaton rightly shifted their focus to the advantages of their data reduction technology, building a base of some 3000 customers.

Leveraging their ‘DeltaScale’ technology, Sepaton’s PBBAs deliver some of the fastest backup and recovery performance on the market (up to 80TB per hour) in a modular, scalable, architecture. Using byte-level de-duplication Sepaton’s systems provide some of the highest, most consistent data reduction ratios regardless of data type, enabling multiple-PB, single-system capacities.

Did Sepaton need to do this?

Sepaton participates in the fiercely competitive purpose-built backup appliance market. They have had the advantage of focusing on enterprise-level customers with a highly scalable, high performance feature set that typically appeals to that market. Their challenge, similar to any startup or small company selling to the enterprise, is building the credibility to effectively compete. While they may have had a product that some considered better suited to the enterprise, they were at a distinct disadvantage when going up against the likes of EMC.

They also faced the reality that many of their partners eventually became competitors. For example, HP was an early advocate and OEM of Sepaton’s, but now competes directly with their StoreOnce technology. The advantage of being part of HDS is that Sepaton gets instant credibility in the market and access to HDS’s resources, channel and sales organization.

Why did HDS do this?

For their part, HDS had no serious offering in the disk backup appliance market while most of their competitors did; including HP, IBM, EMC, Dell and even Oracle. HDS does have an enterprise sales organization and providing them with a quality disk backup appliance that is differentiated from their competition should be an immediate benefit. And Sepaton does create some synergies with HDS’s existing product line. HDS has also been providing the hardware platform for Sepaton’s S2100, with their AMS2100 SAS RAID-6 based storage system.

What should HDS do with Sepaton?

The first step should be to follow the EMC model and “do no harm”. Sepaton is an excellent product and HDS would do well to simply integrate it into their sales organization and let them run with it. Going forward, it would make sense to leverage HDS’ economies of scale and migrate the Sepaton software into HDS hardware, something that should be easy to do since HDS is already supplying storage hardware. Sepaton has already demonstrated an ability to abstract their software from their hardware during the HP OEM agreement.

It might also make sense for HDS to go forward with the long rumored purchase of CommVault. This would put them on equal footing with the companies mentioned above as each have both backup hardware and software. HDS, at this point only has hardware.

The Rest of the Industry

There is really not much for the rest of the industry to do. Most of the large players have already made moves in this space. The only remaining disk backup appliance supplier not associated with a large vendor is ExaGrid. Given their incredibly tight relationship with Veeam, it would be interesting to see either Veeam buy ExaGrid or ExaGrid buy Veeam but that is a blog for a different day.

StorageSwiss Take

All in all this is a good acquisition for HDS. It causes almost no conflict with their existing product offerings and enhances their track record of bringing technology products to the enterprise. With this deal, HDS is also showing an interesting pattern to their acquisition strategy. They buy mature companies with strong technology products that are under-represented in the marketplace. They did this with BlueArc a couple years ago as well. This strategy supports HDS’s technology priority, fits with their conservative style and probably gets them a good price.

by StorageSwiss Analysts George Crump and Eric Slack

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Twelve years ago George Crump founded Storage Switzerland with one simple goal; to educate IT professionals about all aspects of data center storage. He is the primary contributor to Storage Switzerland and is a heavily sought after public speaker. With over 25 years of experience designing storage solutions for data centers across the US, he has seen the birth of such technologies as RAID, NAS and SAN, Virtualization, Cloud and Enterprise Flash. Prior to founding Storage Switzerland he was CTO at one of the nation's largest storage integrators where he was in charge of technology testing, integration and product selection.

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