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WD wolfs down Arkeia, gets bellyful of SMB storage

Backup + disk offering = trouble for vendor rivals

Disk drive manufacturer Western Digital, which has angling for a while to muscle into the SMB market, is buying privately owned backup software company Arkeia Software for its backup software and appliances. The myriad other suppliers in the fractured SMB data protection market now face having to compete with a giant. The obvious possibility for WD, of course, would be to link and combine NAS and data protection.

This puts WD on near par with Seagate, which has its EVault backup business unit, but we won't call Arkeia "WD Vault".

WD has a small business/medium business (SMB) unit, part of its branded business as distinct from its OEM business, which puts out WD's small biz NAS box. The Sentinel DX4000 is its current iteration. Jim Welsh, exec veep and general manager of WD’s Branded and Consumer Electronics products, said: “Our ... network-attached storage (NAS) appliance, WD Sentinel, provides backup and storage centralisation capabilities for small businesses and workgroups, while Arkeia’s network backup software provides a more feature-rich data-protection solution for larger SMB customers.”

Tom Gallivan, WD's VP for the small biz unit, said WD is expanding into an adjacent market with this Arkeia buy.

Arkeia's story

Arkeia was founded in 1996 in San Jose to provide backup software for the Linux market. Originally the company was called Knox Software, then Arkeia, and finally Arkeia Software under current CEO Bill Evans' tenure. Knox Software was started up by three French engineers: Michel Colzi, Nordine Kherif and Arnaud Spicht together with the then-CEO Philippe Roussel.

Colzi and Kherif are went on to found Tipi Software, with its TudZu P2P backup product for end users and SOHO (small office, home office) users, after leaving Arkeia in 2006.

The Network Backup product that WD was so keen to acquire supports a claimed 200 platforms, from AIX to vSphere, Windows and Xen Server. It has application support for mainstream applications such as Exchange, Domino, Oracle and SQL Server, and support for both physical and virtual servers. Arkeia sells primarily to mid-market customers, is headquartered in San Diego and has more than 7,000 customers in 70 countries.

Arkeia's technological edge is its acquired Kadena deduplication software, used in its Network Backup product, which features a sliding window process and is, Arkeia says, great for backing up data to the cloud. Kadena is claimed to be the best deduplication process available, twice as good as Symantec's Backup Exec 2010.

Arkeia's chief architect is Timor Ram who came in with the Kadena acquisition in 2009 and was a co-founder of Kadena. Like all backup suppliers, Arkeia is facing disruption as cloud computing and storage grow in popularity, and also as snapshot and replication technology provide alternatives to backup software.

Arkeia funding

Arkeia scored $4m venture funding in August 2004 from two French investment banks, when Roussel was the CEO. The company at that point re-incorporated in France. Arkeia received $3m B-round funding in July 2007 from the same two French banks when Alain Pechon was its CEO. It received more funds, effectively a C-Round, from a syndicate of private equity investors in California in November 2008. The amount was kept private and the CEO became Bill Evans.

An Industry Advisory Board was set up in January 2012 to advise Arkeia's execs in the areas of business development, market trends and operations. A Technical Advisory Board with two members was set up in April 2012. Neither board will be needed now.

The pattern is one of the company's financial backers becoming impatient because it was not growing fast enough for it to be acquired or go public, and putting in more money with a fresh CEO. It now looks as if Bill Evans has delivered the goods and enabled the funders to make an exit. We asked how much WD paid and Bill Evans said: "Not enough!"

The acquisition was completed through a merger transaction, including all Arkeia's employees, technology and products. Arkeia will be integrated into WD’s Branded Products SMB unit and the products initially will retain the Arkeia name. WD will support all Arkeia customers on current maintenance and plans to retain both Arkeia’s software and appliance product lines.

WD's Gallivan said WD and Arkeia were not disclosing the acquisition amount. El Reg would estimate total Arkeia funding at somewhere in the area of $12m, and a 5X multiple of that - $60m - would have made the investors happy.

Hopefully the three founders still have shares and will now have their own payday reward for starting up the company.

WD strategy

What is WD's strategy? WD makes and sells disk drives. Arkeia writes and sells backup software and builds appliances to run that software and store backup data on disk and tape drives and in the cloud, and so do a hundred or more other companies; it really is a fractured market. There is no basic synergy here, you might think... but you would be wrong.

Arkeia's appliance uses WD drives. Bill Evans said Arkeia is seeing a shift from backing up to tape to backing up to disk, for all the well-known reasons, such as increasing backup speed, shortening the backup window and providing faster file and folder restoration. Tape and costly off-site storage is on its way out as the small biz backup medium.

WD is convinced that SMBs will want to retain their protected data on disk in their premises, in a private cloud at first, and then move to a hybrid cloud, with private and public aspects to it. The Arkeia appliance is the private cloud backup data appliance and it can replicate data to a second appliance for further protection, disaster recovery for example, and then send it on to the public cloud when needed. Having the Kadena dedupe maximises the appliance's capacity, minimises replication bandwidth and aids sending data to the public cloud as well.

Evans suggested WD/Arkeia could sell backup appliances two at a time; one for a primary site and the other for replication in a second site. He said he was convinced that the backup tide for SMB is moving away from software towards appliances, physical and virtual. He says Arkeia is now on its third generation of appliances and offers PXE ability to boot over the network from the appliance itself.

Arkeia Network Backup 10.0

Concurrent with the acquisition Arkeia/WD has announced general availability of v10.0 of the Network Backup product. It features simpler and easier installation and operational procedures and a public cloud seed and feed feature using removable drives and a delivery company like FedEx. Gallivan said 10TB of data delivered overnight in this way was equivalent to having a 1Gbit/sec bandwidth link for 24 hours, with very poor latency.

Version 10.0 also has a new source volume-based licensing scheme. Historically Arkeia software was licensed on a per-server basis and hasn't used a per-CPU scheme. Data recovery that can use portable disks is required and v10.0 offers replication tunnelling.

WD and Arkeia fit

All Arkeia staff will be joining WD. Evans said: "We think the cultural fit is excellent." Evans becomes senior director of WD worldwide software marketing. Frederic Renard, Arkeia's general manager for EMEA, becomes head of WD's EMEA software marketing. WD's channel partners will have a new product capability to sell; ditto Arkeia's channel partners. Gallivan said WD was committed to investing in Arkeia's software and "our global footprint and support will be in there".

So WD is entering the backup market, Evans confirmed: "We think we can give WD a healthy head-start when it comes to the backup space."

Cloud, as Evans sees it, "is off-site disk," and thus WD sees SMB backup as an opportunity to sell more disk, which is wrapped up in an appliance with software and sold at much greater margin than raw disk. Add in Hitachi GST's helium gas-filled dives in the future, with 6TB or more capacity, and the backup appliances should be able to keep pace with SMB backup data growth.

Both WD and Arkeia execs are excited about their union. El Reg would imagine they are looking at making money off the back of the fractured and splintered world of SMB backup and data protection and start consolidating the market. There is a huge amount of competition, not least from Seagate's EVault unit with its own backup appliance. Any consolidation will take years but there should be scope for WD to give a substantial uplift to Arkeia sales and Arkeia's channel to sell more WD SMB NAS boxes. That'll keep both sides happy. ®

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