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Backup reporting market to consolidate, experts say

Beth Pariseau

The companies themselves are keeping mum, but to industry insiders the writing is on the wall. Backup reporting is becoming a checklist feature for the major backup software players, and backup reporting startups are being eyed as acquisition targets by their current dance partners.

"Customers have a low willingness to use multiple tools or to write multiple checks to multiple vendors," said Andrew Reichman, analyst with Forrester Research Inc. "[These products] should be an add-in [to backup software]."

It's become clear recently that the big players are taking notice of this. Symantec Corp. recently announced the addition of a backup reporting feature within its NetBackup software. Hitachi Data Systems and Hewlett-Packard Co. (HP) have OEM deals with Aptare Inc.

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Now, IBM is reportedly looking at backup reporting software maker Bocada, Inc., which has had a partnership with its Global Services group since 2005. Insiders are also predicting a marriage between EMC Corp. and longtime backup reporting partner WysDM Software Inc.

Sources told SearchStorage.com that a recent reshuffle of personnel by Bocada's board of directors, including the ouster of CEO Mark Silverman in favor of former marketing vice president Drake Pruitt, as well as the hiring of Nancy Hurley as vice president of marketing and business development, in September signal a push from the company's investors to sell it off.

Meanwhile, even after promising to ease off the acquisitions last year, EMC went out and bought deduplication backup software maker Avamar Technologies Inc., indicating that it is still open to adding features to its backup products. And prior to its acquisition by EMC last October, Avamar was also a WysDM reseller.

"If IBM and Symantec up the ante with backup suites having built in reporting capabilities, then EMC may be in the position where they have to respond with a build or buy instead of just partnering," Reichman said. "If this is the case, and they do decide to buy, likely since their integration resources are busy with previous acquisitions, then WysDM is a natural choice given their existing EMC partnership."

The financial nitty-gritty

Bocada, which has around 55 employees, has a total of $20.5 million in funding, the last of which was $9.5 million received in early 2005. While Bocada has a long-standing relationship with IBM Global Services (IGS), it lacks any major OEM deals, a key source of sustenance to a software startup. WysDM, meanwhile, has only 35 employees, but doesn't have any venture capital funding at all -- the company relies on the channel, including EMC for sustenance.

Reached for comment, Pruitt himself would neither confirm nor deny the acquisition rumors, but said of the idea that he'd been brought in to steer the company through an acquisition, "My role is as an operator -- I think the company would go outside if they wanted to bring in an M&A pro." Pruitt also pointed to a "momentum announcement" at the end of 2006 that showed Bocada has 400 customers and growing.

For its part, WysDM said it closed 100 new customers last quarter, and that its channel is strong enough to sustain it.

"I can't say the discussion hasn't happened," said a spokeswoman for WsyDM of talks with EMC on an acquisition. However, she stopped short of saying a deal was in the works, only that WysDM would consider offers.

Analysts say despite the startups' talk of financial stability, at issue is not whether or not these companies have done well, but that they still may not be doing well enough. "Supporting a growing customer base on an ongoing basis requires a lot of cash," Reichman said. "It's difficult to keep turning out new revenues from software."

Meanwhile, IBM, at least, has made clear that it is in an acquisitive mood, particularly when it comes to its Global Services business, which is where it recently tucked in the acquisition of data migration software maker Softek Storage Solutions Corp, with which IBM had partnered in IGS engagements.

"IBM says it wants to buy companies," Reichman said. "And its services engineers would already be familiar with the [Bocada] tool."

EMC, meanwhile, is still focused on integrating all of last year's buys, but sources say such an acquisition could still happen as soon as this summer.

Other possible suitors: HP, CA

Easy as it is to read between the lines with IBM and Bocada, as well as WysDM and EMC, it's still theoretically possible either company could be snapped up instead by HP, which recently followed Symantec's lead in introducing encryption as a feature in its Data Protector backup software, or dark horse candidate CA, Inc. On this front, WysDM officials told SearchStorage that it is getting ready to announce another major OEM in the coming months.

Bocada, and WysDM in particular, could be a tasty target for any of these companies because of the fact that the software they offer will perform root-cause analysis, according to Arun Taneja, founder and analyst with the Taneja Group. "Not all products [in the backup reporting space] are created equal," Taneja said. "Our research shows those products that have sophisticated cross correlation engines and perform root-cause analysis, rather than simple reporting, will fare better over time."