2020 started with a bang in the data protection space with the announcement of the acquisition of Veeam by Private Equity firm Insight Partners. Insight Partners is no stranger to the space, having invested in Acronis, as well. In this short blog, I am going to net out my views on this acquisition.
It's great news for the market! Let's be clear, the backup and recovery space is hot and growing, but it is yesterday's market. It is evolving into something else, which I have coined the data intelligence market, an evolution of backup and recovery that places data and data reuse at the heart of the enterprise. Whether enabling digital transformation or leveraging "dark" or dormant data, the idea is to leverage data assets. This acquisition is about the next stage of the market.
Veeam has truly become a more complete platform in the past few years, and this is the play here. Expanding and building on the Veeam platform, adding capabilities to address the growing needs of intelligent data management, will allow the next iteration of Veeam to address more adjacent markets. Expect both organic (investments in R&D) and non-organic (acquisitions) to happen. I could see this as early as the second half of 2020. Although I am not a betting man, I will actually place a bet that there is already a relatively clear plan that will be firmed up after the deal closes. Having a PE firm as your sponsor really helps with M&A! Add to the mix the many interesting portfolio companies in the Insight Partners quiver...who knows?....
It seems some customers are expressing frustrations on social media - it's understandable. In many cases acquisitions are about cleaning up balance sheets, squeezing margin out of the business, and bolting other companies on (sometimes with more of a financial logic dictating the M&A). In contrast, I believe this one is about growth with an IPO as the exit. I actually believe that this is great news for customers and for partners who will in time benefit from a broader set of offerings/services. An acquisition by a competitor or a "strategic" investor (a vendor from the IT ecosystem) would not necessarily be such good news, in comparison. Also, most of the executive team is in place and from what I have seen and heard, they're not going anywhere...so the company is not really changing. Stability of leadership is a good thing.
Does this make Veeam a higher competitive threat to other vendors? No more and no less in the short term. However, all bets are off if the company executes with the same savvy that got them from nowhere to a billion in just 14 years. One area of particular interest is going to be the enterprise space. I will just say this: incumbents are ready for a fight. Some more than others, but ready nonetheless.
Here's what I will be keeping my eyes on:
- The stated objective of growth in NA is not going to be easy, and will require a continued frontal assault in the commercial space and the true penetration of the enterprise segment. Enterprise is a different animal and this is where I expect the evolution of the platform to help, with full leverage of partnerships and alliances--something Veeam does well. Expect major competitive pressures.
- Cloud and Channel: the risk of dis-intermediation of the channel by hyperscalers has created (not always by choice) a new breed of partners who now resell cloud offerings. In my opinion, Veeam has excelled in the delivery of their Cloud Service Provider program. Double or triple down! Also of note, Veeam's command of the "traditional" channel (if this term still exists) and its work with distributors (great work with Ingram, for example). Growth and success will be achieved in the channel.
- Marketing: Veeam is a marketing machine - with a very talented team in place. I expect more fuel and more "engine" in the months and quarters to come. Having had to compete against Veeam in a previous life, I can tell you that they don't make competitors' lives easy..
- Platform 1: I would recommend that Veeam revisit their views on appliances. Like it or not, people love appliances. It takes expertise in hardware to do so. Things are different with a new sponsor...Let's see what happens!
- Platform 2: Add more capabilities around data management (data reuse, data classification, compliance, test-dev use case, analytics). That's the next wave of the market. Data Labs is a good start.
- Platform 3: Keep building up the solution to meet more enterprise needs, but not trying to emulate incumbents. Looking ahead, it could take the shape of a fully native SaaS intelligent data management platform, and should address issues incumbents don't solve well today, like SaaS backup (beyond Office 365) and privacy compliance, to name a few hot but underserved topics.
- Platform 4: The obvious one: Cloud. Containers (Kubernetes), VMware Cloud: deliver the same capabilities in the cloud, to the cloud, and across clouds as what can be done on-premises. Do it in a way that embraces the ability for channel partners to expand their service capabilities.
In this next chapter, Veeam has to execute really well on every front, every quarter. This also means the culture of the company will likely change, not only because of its new financial sponsor, or new people joining the business as the company evolves, or the departure of its founders, but also because a new set of rules now applies to the business. Now it's getting to $2 billion and beyond (and this time it can't take 14 years).
As I said before, who said this market is boring?