An interesting—albeit predictable—dynamic is taking place in the storage market: The number of start-ups are dwindling rapidly, while the number of acquisitions are skyrocketing. An edition of StorageNewsletter from earlier this year put this trend into perspective. (For more information about this international publication, visit www.storagenewsletter.com.)
From an astounding 92 start-ups launched in the heady heyday of 2000, only two fledglings were hatched last year. And while 61 storage vendors were acquired internationally in 2000, a whopping 100 were bought in 2006. In fact, the number of storage acquisitions in 2006 was up 43% over 2005 (see figure).
The dearth of start-ups does not equate to a paucity of innovation, however; it’s just the result of a normal industry maturation process and tight VC funding. For better or worse, the innovation mantle has to a significant degree been passed from plucky start-ups to the plodding stalwarts that have acquired them-or will in the near future. And that’s a double-edged sword: Larger vendors are better at delivering and marketing newer technologies to end users but, on the other hand, those technologies and products often disappear-or at least get delayed-in the large vendors’ R&D labyrinths.
If you break out the storage acquisitions in 2006 by sector and/or technology, it’s interesting to note that 17% of the acquisitions involved the purchase of distributors, integrators, or VARs. In other words, many of the acquisitions were channel- and not technology-related. In fact, channel-related acquisitions topped any single technology.
In terms of technology-specific acquisitions, M&A activity was all over the map, but data reduction technologies such as continuous data protection (CDP), wide area file services (WAFS), and data de-duplication ranked second only to channel-related acquisitions. For example, 9% of last year’s acquisitions were primarily about data reduction technologies. Examples include EMC-Avamar and ADIC-Rocksoft, with ADIC being subsequently swallowed by Quantum.
Not surprisingly, EMC was the hungriest last year, racking up 13 acquisitions, followed by Iron Mountain with four and LSI with three. More fun facts from StorageNewsletter editor Jean-Jacques Maleval: Since 1998, EMC has acquired 38 companies, followed by Veritas (16), Adaptec (13), Bell Micro (11), LSI (11), Sun (10), and Quantum (8).
The overall pace of storage acquisitions will undoubtedly slow this year, with the possible exception of very small software start-ups and regional VARs/integrators.