Business Continuity and Compliance Drive Recent Acquisitions

IBM’s acquisition of Arsenal Digital Solutions is the latest transaction driven by the growing concern among businesses of all sizes that they have to do more to protect their electronic files in order to safeguard against natural disasters and satisfy escalating regulations.

What makes this trend even more interesting is that it has brought greater attention to the fundamental advantages of using a “hosted”, managed service to respond to these business concerns. This has made a widening array of storage, e-discovery and other managed service providers (MSPs) very attractive acquisition targets for an expanding assortment of potential buyers.

Here are a few of the acquisitions which preceeded IBM’s announcement,

  • Seagate $185 million purchase of EVault
  • EMC’s $76 million acquisition of Berkeley Data Systems Inc.’s Mozy storage service
  • Autonomy’s $375 million acquisition of email archiving service provider Zantaz Inc.
  • A series of acquisitions by Iron Mountain, including the $158 million purchase of Stratify, Inc., an e-discovery services firm.

Even Google’s acquisition of Postini was driven, in part, by the need to provide greater archiving capabilities within Gmail if it is to be accepted by mid- to large-scale businesses.

The explosion of digital files, ranging from email to patients’ records, is forcing businesses of all sizes to reevaluate their storage strategies and archival systems. Intense media coverage of the latest natural disasters has made everyone more sensitive to the risks associated with failing to properly back-up and store valuable computer files.

What began as a simple consumer craze with services like Flickr to handle personal pictures, has quickly morphed into a potentially lucrative managed service opportunity.

As consumers move from personal worlds into their professional workplaces, they are becoming equally aware of the need to better protect their corporate documents and records. And having enjoyed the ease-of-use and economic advantages of a back-up and retrieval service for their personal needs, they are seeking a similar solution for their business requirements.

So, it shouldn’t be surprising that storage vendors like Seagate, EMC and now IBM are adding these services to their corporate portfolios via acquisitions. Telcos, ISPs and hosting companies are already leveraging their communications infrastructure and server facilities to offer similar managed storage, back-up and disaster recovery services. Even Microsoft and Dell are offering inexpensive storage services to their customers. Expect HP and others to follow suit.

This trend represents a challenge and opportunity for traditional business continuity and disaster recovery service providers, such as Sungard. The challenge is that they must rearchitect their services to compete with the more focused and less expensive managed services of today. The opportunity is that if they succeed in their restructuring efforts, they will have a far larger market opportunity to attack.

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