Now that EMC has purchased deduplication technology leader Data Domain, its reseller agreements with the likes of FalconStor Software Inc. and Quantum Corp. for the same type of single-instancing technology could be in jeopardy. Quantum resells both its tape libraries and dedupe software through EMC, sales that amount to less than 10 per cent of its revenue.
EMC sells two virtual tape libraries -- the DL3D 3000 and DL4000 -- that use rebranded deduplication software from Quantum and FalconStor and a disk-based backup appliance -- the Disk Library 3D 1500 -- that uses Quantum's software. During the Data Domain acquisition process, EMC CEO Joe Tucci said the other deduplication products would be complementary to Data Domain's. But Quantum CEO Rick Belluzzo said in an interview with Computerworld this week that he expects his company's reseller agreement with EMC to begin its decline over the next year or so.
Excerpts from that interview follow:
Has Joe Tucci talked to you about what EMC's relationship with Quantum will be in the future?
He has not been totally clear, because, frankly, he hasn't really known how this would all sort out. There was a lot of internal debate within EMC about what we offer as opposed to what Data Domain offers. I think they need to sort that out.
We believe Data Domain and [Quantum] have been moving toward the same place, and because of that, over time our technologies can't be complementary. They may be complementary in the short term, because of our enterprise focus with our VTL [virtual tape library] strength and Data Domain's midrange NAS focus. But we've been moving down stream and they've been moving up. It's a collision course.
It's important to note that EMC resells our tape archive system ... and he [Tucci] indicated that it will continue as an important part of their focus.
So how will the loss of that part of your reseller business with EMC affect Quantum?
The EMC-Data Domain thing is a wild card and certainly changes a lot of things. We expect that revenue [recognized from selling deduplication technology to EMC] to be flat. We also recognize that EMC will be focused more on their Data Domain technology very aggressively over the next year and that that opportunity will diminish for us over the next year.
Our mission is to build on top of that [lost revenue] with our new DXi backup disk array line opportunity. This is a very exciting space. The market is going to triple over next few years. It's got a lot of potential and we're pleased to be where we are as a company. But we have a lot of work to do and now's the time to do with that revenue stream what we've done with the rest of the business and that's to make the transition that will make us a systems company.
A lot of companies are using that term 'systems company' these days, but that can mean different things to different people. What does being a systems company mean to you?
It means we're going to sell systems in the backup, recovery and archive space that includes software -- versus hardware, which is traditionally where we've been as a company. And it means we will have a business model that reflects that, such as higher gross margins [and] more investment in R&D in those areas. So our intention is to take our tape systems and move to disk-based systems with a richer software stack around products such as our DXi and StorNext [data management software].
Are you considering any mergers with larger storage vendors?
Our strategy is to do one thing and that's to build our disk systems and software business. That is what's going to make us more valuable. We don't comment on M&As. This space is hot, and this action by EMC has raised the profile of deduplication. So we tend to focus more on what our partnerships are, rather than M&As; We've always felt that's out of our control. The only thing we can do is make the company more valuable, build more paths to market with other players, and if an acquisition is what's best for our shareholders, then we'll consider that.
So where does the future lie for Quantum?
Our intention is to move more into the midrange with a new platform and enhanced software and better NAS functionality. That's where we're headed. Our big focus has been on building our disk systems and software business. That's the area we feel is the big opportunity for the company. We developed that strategy a couple years ago. We are behind plan in building that business and we talked a lot [in our earnings call] about how to address that, given the fact that our relationship with EMC has changed.
To make a long story short, we really believe over the next several quarters it's important to grow sequential revenue momentum and show the growth and promise in this business. We'll do that through new products and changes in our sales and marketing organizations. Our company is very much focused toward this transition over the next several quarters as we move forward.