Data Domain Turns De-Dupe Into Dollars

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If last week’s earnings reports are any indicator, data de-duplicationis the storage industry’s technology of the moment. That’s despite debate over where de-dupe works best in a storage infrastructure and vendors’ various sales approaches (see Ocarina Wants to De-Dupe Primary Data and De-Dupe: It’s Not Just for Backup Anymore).

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

Analyst firm R.W. 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 de-dupe 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 de-dupe technology play,” said Baird analyst Jayson Noland.

IBM is the latest one to buy in, gobbling up Diligent two weeks ago. It’s now playing in the sandbox with Sun, HDS and EMC, which already has Avamar and is also reportedly working with and perhaps even trying to acquire Quantum.

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

Healthy is a tame descriptor given Data Domain’s first-quarter revenue of $52.6 million — a jump of 160 percent from the same quarter a year ago, giving the company its first quarterly profit.

In last week’s earnings call, CEO Frank Slootman said 285 new customers had come aboard since January, bringing customer count to 1,800 worldwide.

Slootman said his company is aggressively hiring sales people. On one hand, it reflects expected expansion, yet it may also be tied to the fact that Data Domain refuses to enter the OEM realm. The Santa, Clara-based company hired 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 on the call.

“Data Domain is positioning de-duplication 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. It’s also planning to start a new operations center in North Carolina that will be home to its growing engineering, customer support and inside sales.

Data Domain competitor and VTL specialist FalconStor experienced a 33 percent bump up in revenues in the first quarter compared, hitting $21.8 million, compared to $16.3 million a yea ago. It’s clear the Melville, N.Y.-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. Yet so far its own de-dupe product has met with slow acceptance from OEMs, with Sun the biggest customer to date.

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

As de-dupe 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 de-duplication horizon.

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

Article courtesy of

Judy Mottl
Judy Mottl
Judy Mottl is an experienced technology journalist who has served as a senior editor, reporter, writer, and blogger for InformationWeek, Investors Business Daily, CNET, and Information Security Magazine, as well as other media outlets.

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