Carbonite Nabs EVault to Build One-Stop DR Shop for SMB Masses
January 20, 2016 Alex Woodie
Carbonite is buying the EVault data protection business from Seagate for $14 million in cash, the companies announced last month. While the deal marks a nearly 10x decline in valuation for EVault, the folks at Carbonite are clearly happy to get their hands on EVault’s disaster recovery as a service (DRaaS) business, which it sees pairing up nicely with its existing products for small businesses and consumers.
EVault began developing its online data protection business way back at the dawn of the commercial Internet in 1997. By backing up its clients’ data over the Web to centrally located servers, the San Francisco-based company was a pioneer in the cloud. In fact, it was doing “cloud computing” long before anybody dreamt up that term.
While Windows and Linux account for the lion’s share of EVault customers, the company also protects many IBM i servers through a server-based agent that debuted in 2004. As the first major provider of online backup services, the company grew quickly, and in 2007, storage giant Seagate bought EVault for $185 million.
Over the years, the EVault division (which Seagate called i365 for a time before going back to the original name) evolved its strategy, and it eventually began selling disk-based backup appliances for those customers who didn’t want their precious data stored on somebody else’s servers. The company also entered into many OEM relationships with third-party managed service providers (MSPs) who used EVault’s software as the basis for their own cloud-backup businesses.
While other online backup products emerged over the years, EVault remained among the most highly regarded. That reputation for technical excellence and a network that included more than 500 partners made EVault a lucrative takeover target for Carbonite, the Boston, Massachusetts-based company that has become well known in the consumer backup space.
“The acquisition of EVault is an incredibly strategic fit,” Carbonite CEO and President Mohamad Ali said during a conference call in December following the announcement of the acquisition, which is expected to close early this year. “With this acquisition we are taking a big step forward in meeting the data protection and continuity needs of the entire SMB market.”
Carbonite, which reported revenues of $122 million in fiscal 2014, has been trying to expand from its consumer roots and sell backup services to businesses. But up to this point, the company has restricted its business-to-business services to the SOHO (small office, home office) market.
With the acquisition of EVault, Carbonite suddenly has a very compelling offering for entire midsize business market, which it defines as companies with 500 or fewer workers. All told, the market for backing up data of midsize companies is worth $7.2 billion annually, the company says, which is nearly 50 percent bigger than the SOHO backup biz.
“From cloud backup to appliances, the [EVault] product and technology is robust and offers features and functionality that positons Carbonite to answer the needs of midsize business with more complex environments,” Ali says.
The acquisition of EVault is especially important for Carbonite because it brings failover capability that the company has been working to develop. It also gets them 5,000 EVault customers, as well as 200 EVault employees.
“[We’ve] talked about how we plan to expand capabilities of our appliance, adding things like VMware [support] as well as cloud failover capability,” Ali says. “EVault brings all that immediately. As a matter of fact, EVault brings one of the most sophisticated cloud failover capabilities in the market. Businesses rely on EVault. EVault has been able to provide one-hour SLAs on cloud failover.”
It’s hard to find a downside to the deal for Carbonite, which will suddenly become a significant player in the IBM i cloud backup space by virtue of the acquisition. But news of the deal did raise some eyebrows among EVault’s cloud partners, who wonder why Seagate would sell such an industry-leading business for what amounts to a song.
“A brief seven years ago, Seagate purchased EVault for some $185 million. Now it is being sold for $14 million. Does anyone else find this astounding?” writes Jim Kandrac, president of United Computer Group, which uses EVault technology in its VAULT400 offering. “Did this really just happen?”
Kandrac has a hard time seeing why Seagate would take a $171 million hit on EVault, unless there’s an aspect of the deal that has not yet been made public, such as Carbonite paying Seagate a certain fee for a certain number of years. In any event, it’s business as usual for VAULT400 customers who rely on EVault technology to replicate and restore IBM i data across the network.
“While the industry waits for the dust to settle, here is my initial reaction,” Kandrac says. “It comes down to focus and execution, or lack thereof. Seagate’s EVault had an outstanding product line with very few holes. They support virtually all platforms and databases and are said to control up to 40 percent of the cloud backup market, either directly or through over 500 partners.
“What it appeared to lack is committed management, focus and execution,” Kandrac continues. “The hope for the industry and marketplace is that Carbonite takes a very legitimate suite of products, integrates it with a much better go-to-market strategy, and continues to solve client backup and DR business issues and pains.”
Carbonite says it plans to share its integration plans for EVault in the coming months.