11 Jan 2007

January 10, 2008
By Drew Robb

After years of unfulfilled promise and false starts, online backup has become one of the hottest segments of the storage market, fueling startups and sending the biggest storage vendors on an acquisition spree.

“Online backup is a very nascent market that is fragmented in terms of the kinds of players,” said Doug Chandler, an analyst with International Data Corp. (IDC). “There are about a couple of dozen standalone vendors in this field, many of them very small.”

Perhaps as a consequence of this startup dynamic, the online backup field reveals a surprising trend. Rather than relying on tape libraries to hold millions of customer files, most of these vendors appear to prefer disk as a medium.

“We feel tape is a legacy technology that really should have no place in data protection today, given advances that disk offers,” said Scott Bush, director of marketing at AmeriVault Corp. of Waltham, Mass.

AmeriVault is tape free. So are DS3 DataVaulting of Fairfax, Va., ElephantDrive Inc. of Los Angeles, Remote Backup Systems of Memphis, and many others. Their tape-less inclination could be a sign of things to come in the broader storage market.

“Many of the established companies started with tape, but some of the newer ones back up to disk,” said Chandler. “As a result, we are seeing a move away from tape, with tape becoming more of a medium for long-term retention.”

Nascent Market

Online backup hasn’t merited much attention from analysts up till now. That is about to be remedied, though, as IDC has just released a research report on this branch of the market.

Chandler said the market remains relatively small but is expanding rapidly. IDC expects 33 percent compound annual growth through 2011, reaching $715 million in annual revenues.

While mature markets typically have the top few companies accounting for 60 to 80 percent of the pie, that isn’t the case with online backup — although consolidation is already setting in. According to IDC, the biggest players are Iron Mountain (acquired online backup providers Connected and LiveVault), EMC (acquired Mozy), Seagate (acquired Evault) and IBM (acquired Arsenal Digital). Nine-year-old Arsenal survived both the dot-com storage service provider era and the first wave of online backup consolidation that began a few years ago before finally succumbing to IBM’s offer. Mozy, on the other hand, has a large customer base but a small revenue stream so far, said Chandler.

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