R.I.P. Data Domain

Wow. Did anyone see this coming? I mean besides the two Dutchmen and their respective M&A teams? (Well, the Data Domain M&A team was probably one guy with a role that chiefly consisted of repeating: "Somebody, anybody, buy us. Please. Pretty Please. With a cherry on top." Complete with the ritual lighting of prayer sticks and any other shamanistic practice remotely likely to speed that outcome.)

So now that it is done--barring, I assume, the obligatory shareholder vote--what is my take on the NetApp acquisition of Data Domain?

1. That is a lot of money to pay for a feature you already had and were giving away for free...
2. I expect the respective sales and technical folks to get along about as well as a bunch of hungry speed crazed wolverines fighting over a meal. Not pretty. They have each spent the last two years calling each other every hateful and almost slanderous name in the book. How can they possibly turn around and kiss and make up? And how can the sales people do a complete 180 in front of a customer and say that what was complete junk a day ago is now great technology?
3. The NearStore VTL will meet a demise faster than you can say guaranteed data loss. Secondary prediction: it won't be missed.
4. NetApp will struggle to make this pay, technically or financially. Their track record of acquisitions is dismal: Alacritus failed to produce any significant positive result (they sure didn't sell very many VTLs, and see point #3 above); the Spinnaker acquisition happened 3+ years ago and they still don't really have anything to show for it; Topio a couple years back, at $160m, and NetApp just pulled the plug on the product line; Decru can't have paid for itself--that was $272m with virtually no payback. How will the Data Domain buy be any different?
5. NetApp gets a company with virtually no backup experience. That may sound like an odd claim, but in my experience, DD field personnel really didn't understand backup at all. They were really good at selling small boxes to small customers out of the trunk of their car. Coincidentally the customers happened to deploy them for backup, but darned if DD could ever really figure out how they did that. Their lack of knowledge on backup, SLAs, disaster recovery, backup windows, and all the operational nuances of backup penetrated virtually to the top of their marketing and sales organization from what I could see. So... see point #6.
6. NetApp still has a critical case of multiple personality disorder, and if anything, it just got worse. They still can't figure out if backup is good or bad. They still don't know whether to say that backups are unnecessary (just use snaps) or if backup is good and snaps are bad. And if snaps are good and backups are bad (which is the message the traditional sales force has been comfortable with for years, even if it is dead wrong) how is acquiring Data Domain going to get them to change their minds or their story?
7. So now the company with a "unified storage" product line has no less than 3 backup platforms. Each with a different OS.
8. Data Domain was never a company to let reality stand in the way of a good story. On the contrary, they were particularly prone to irrational exuberance when spewing FUD, misdirection, and bizarrely incorrect "facts" (nobody can scale a deduplication appliance past 30 TB? really? c'mon, really?). Will NetApp rein in that sort of behavior? We can all only hope.

Final score: anybody that held DD shares prior to yesterdays announcement - 1, NetApp - 0.

Comments

[Peter Elliman]

I think you forgot to mention the large number of NetApp engineers at DD. They don't really hate each other, that's just marketing and sales hype (kinda like what you do). Everybody competes on the field - even your company.

I respect some of your posts, but to state that the DD guys don't get backup is simply laughable. It actually does you more discredit than them.

As for other claims about DD and NetApp, I don't have time to address them. It will be interesting to see if this post makes it up into comments...

[Scott Waterhouse]

Why wouldn't it? My policy is to approve anything that isn't an ad hominem attack (not just on me, on anybody) or that isn't spam.

If the engineers get along, that is great. In the field they clearly don't. (DD seems to have hired a lot from both NetApp and EMC sales/pre-sales--given the fierce competition, many of those folks might not receive a very nice welcome back?) Just my $0.02. My sample size may not be big enough to be valid either, so take it for what it is worth.

And sorry, but I never saw anything but the most rudimentary understanding of backup from them. They never thought through SLAs, in-line vs. post-process, disaster recovery, or backup architectures in any meaningful way. Not that I saw, in any event. Again, maybe that is just the field folks I saw, but their corporate messaging didn't seem to be much different. Again, just my opinion.

[Laurence Davenport]

I concur with most of what you posted about in connection with DD and Netapp. The whole process is a little shocking and seems slightly badly thought through (on the surface anyway). It must surely mean the end to the previous chuckle worthy VTL effort from Netapp.

It seems from the this register article http://www.theregister.co.uk/2009/05/21/netapp_data_domain/page2.html that they are going to run DD as a company within Netapp. Confusion, Confusion and more random oddness. One of the neat things about netapp is that you can do all the crazy storage stuff on any box coz it all uses the same OS. This kinda ruins it.

oh well i am sure they know what they are doing.

[Scott Waterhouse]

Well, in no way should anybody mistake the original post or this comment as anything beyond my opinion, but I think there was one other motivation on NetApp's part: fear. I think what they really did was buy up their most feared competitor. (And yes, I know most people would say that is EMC. But if I understand what DD whas up to--and it wasn't backup--I can see why NetApp thought they should fear them. We shall see!)

[Kevin in BRK]

Okay, so, what's EMC's motivation, and how do you break down today's news?

[NK]

Yeah, after today's news, how do you comment on..

1.You weren't giving dedupe away, but that's a lot of money to pay for something you already have (borrow/license from someone else).

2.Yes, you guys get along with DD just dandy. I can see that from your original post.

3. OK. Which one dies because neither EMC or DD's box scales particularly well.

I think points 4,5,6 are a little objective so I won't comment on them.

7. EMC would now have Falconstor, Quantum and DD (not to mention the Dedupe technology from Avamar). I think you were at too many cooks in the kitchen with just Falconstor and Quantum.

8. You tell me. You are the guys that want to buy them at a 20% premium. Something wrong with that Quantum box?

[Rob in Longview]

Ya, i can't wait to show your little comments to the DDUP guys in my town. They already are cringing at the possibility of working for EMC. If EMC does to DDUP sales teams the same as what they did to Avamar folks (kill all sales mgmt, tack on enormous quotas with huge geographies with no direct account control) then it is sure to be a match made in heaven. Who wouldn't love that environment? EMC's profits nothing from this acquisition beyond margin. Last I checked, there was no integration between LGTO and DDUP. Don't you know DDUP's biggest sales approach is riding on the coattails of NetBackup deals? EMC hates Symantec (and vv). Subtract those deals and DDUP is helpless.

[Scott Waterhouse]

NK and Rob;

I can't comment on anything to do with the acquisition. I can say that:

- Avamar has prospered hugely at EMC, experiencing high double to triple digit growth every year. It has been a match made in heaven.

- Our relationship with Symantec is very good, and our products tightly integrate in a number of areas. (We support OST on the DL line, and EV works very well with Centera, to name two.) Hate would be a completely inaccurate characterization, in my opinion.

- I think there is a very strong technical justification for Avamar and the DL line as it exists now. I don't think the technical logic changes with any potential acquisition.

[Robert Wilson]

I think its funny that you bashed DD for ever and then EMC buys them.

I think we all know that DD products simply work and the current EMC products dont.

I have heard of one large site in Canada ripping out EMC and replacing it with DD.

How do you like your crow?

[Scott Waterhouse]

NK... one more thing: you could at least identify yourself as a NetApp employee....

Robert... competitive replacements happen all the time. I know of sites in Canada that have replaced Data Domain with EMC. Healthy and honest competition is good for everybody (customers most of all).