Arcserve Spins Out to Growth

Newly Independent Backup Vendor Now Hunting for Acquisitions

A lot of what is nowadays called the “cloud revolution” has little to do with the cloud, but instead is all about the move to simple-to-manage products with intuitive software, in place of the old-school large-scale technology projects based on specialist software languages and requiring hundreds of consulting person-hours to design, configure, and deploy. Arcserve used to be part of CA Technologies (NYSE:CA), a $4 billion firm that grew large consulting on big, complex IT projects. In 2014, Arcserve was carved out of CA because its simple, cost-effective backup technology sold best to small and mid-sized business (SMB), whereas most of CA’s business was with large enterprise customers. While CA continues to struggle, with revenue down 6% in the 2015 fiscal year, Arcserve is growing nicely, thanks to its independence and a new line of products launched last year, the UDP appliances. Arcserve won’t disclose exact figures, but executives told the Daily Cloud that its revenue last year was above $100 million.

“We are independent and becoming innovation-driven,” says Arcserve VP of Product Marketing Christophe Bertrand (right, in the photo above). “Our objective is to grow to $400 million to $500 million in revenue.”

The backup market is growing significantly faster than the overall storage market, worth about $5 billion a year with an annual revenue growth rate of some 7-9%, as digital data takes over in every corner of business life and more data needs to get backed up to protect against outages or other failures. Even smaller companies need to back up significant volumes of data today. “Backup is moving downmarket,” says Bertrand. For smaller companies, price and simplicity of operation are key factors in choosing a backup system.

The San Mateo Credit Union serves 80,000 members with seven branches in the San Francisco Bay Area. It has assets of just under $1 billion and 160 employees. Last year, Senior Programmer Analyst Mark Mueller was charged with choosing a new backup system to replace the credit union’s outdated tape-based system. He was looking at some of the best-known backup systems in the market, such as those from market leader EMC when a colleague suggested he look into Arcserve. He’d never heard of the brand, but they offered a free trial of the software, so he downloaded it from the website to try it out. “I backed up a server, and did a restore, and it was simple,” he says. “I was blown away by how easy it was.” Once he met with the Arcserve salesperson, he was impressed by the price. At just over $20,000, it was, he says, “half the price of its nearest competitor.”

Mueller had 12 terabytes (Tb) of data on a total of 78 servers (both physical servers and virtual servers running VMware virtualization) to back up. Arcserve recommended Mueller buy a UDP 7300 appliance with 8 Tb of capacity. Mueller was initially concerned about whether his data would fit on that appliance. Like all backup systems, Arcserve uses data deduplication to compress the data as it’s being backed up and economize on storage. Mueller was impressed with Arcserve’s dedupe capabilities. “We have two physical Microsoft Exchange servers with 2 Tb of data. I backed up the first machine. Then I backed up the second machine [which is a failover machine with a lot of similar data to the first]. On the second machine, the compression rate was 99%! I was astounded.” Compression rates vary enormously but by the time he was all done, he had a compression rate of around 80% and his UDP appliance was less than half full.

“We have the best dedupe technology in the industry,” claims Bertrand.

Since Marlin Equity Partners bought Arcserve, the company has been hiring new people, expanding sales and marketing, and building the U.S. presence. Rick Parker, who joined as Chief Marketing Officer a year ago, says Marlin is playing a key role supporting Arcserve’s growth strategy.

“Being independent is wonderful. Marlin has made a significant investment to grow the business organically and launch a critical new product,” says Parker (at left in photo). While some private equity firms acquire tech companies to squeeze out cost and drive up cash flow, Marlin takes a different approach, Parker says. While Marlin has many bankers on its executive team, it also has seasoned technology operating executives, such as Robin Pedersen, formerly COO of SaaS software company Infor, and Shaygan Kheradpir, former CEO of Juniper Networks. “This growth would have been impossible without that strong investor in the background,” he says.

The growing importance of backing up to the cloud is another market opportunity, and the company has products that enable customers to back up to a public cloud, to an Arcserve cloud, or to another private cloud. Arcserve’s next major move could well be an acquisition. “After 15 years as a division of a large company, we had to create a lot of processes,” Parker said. “We’ve been very busy standing ourselves up as an independent company and now we’re eager to acquire other companies. We are looking for key technologies.” He’s optimistic they’ll find some good targets, in part because the difficulty for enterprise tech companies to go public in the current climate makes it easier to acquire. “There’s plenty of reasonable value out there,” he says.

Mark Mueller of the San Mateo Credit Union points out that Arcserve still has some work to do to improve its marketing and brand awareness in the U.S. market. “When I was looking for a product, I did some Google searches on data backup, and Arcserve was on the second or third page, if that,” he says. “They need to spend some money on buying Google clicks.” However, Mueller remains a big fan of Arcserve’s solutions.

“When the product arrived, I installed it, and we were up and running in an hour. This is really cool stuff.”