EMC is a $23 billion giant in data storage so why should it care if a tiny start-up is growing so fast that it recently raised $100 million at a $1.1 billion valuation? EMC — in which I have no financial interest — did not respond to a request for comment.
The answer is that this start-up, 400-employee data appliance maker, Actifio , is beginning to win business with the world’s largest companies. And after starting off selling to smaller companies, the bigger ones are willing to risk their operations on a start-up because they see themselves missing out on huge economic advantages.
Moreover, as Actifio uses its so-called customer success operation to make sure that its customers are happy with its service, Actifio is expecting to take a bigger chunk of those customers’ data management budgets.
As I wrote last December, in 2009, Actifio introduced the idea of Copy Data Management (CDM) to the business world. As Gartner Group analyst Dave Russell explained, “Companies keep 30 to 40 copies of their business data and managing those different copies is expensive and complicated. The reason they do it is because the data is used for different purposes: backing it up to satisfy regulators, letting the business recover from a fire or flood, testing and developing new applications, and analyzing the data to find meaningful business insights. Actifio introduced CDM – the idea of keeping one golden copy of the data and making it available to a company without needing to store a separate copy for each use.”
After Actifio spent years selling the CDM concept, in November 2013, EMC reorganized in what Actifio characterized as an effort to convince customers that it was also working on CDM. That’s when EMC Chief Operating Officer, David Goulden, announced that EMC would combine its “VMAX enterprise storage development team and VNX midrange storage development team as part of a new division called the Enterprise and Midrange Systems Division. [And EMC’s software organization would combine EMC’s] VPLEX, RecoverPoint, and Backup & Recovery Systems teams into a new Data Protection & Availability Division.”
The fuss is about a huge market — growing slowly at 5.4% a year through 2016. In 2013, IDC estimated that businesses would spend roughly $44 billion on copy data – “consuming more than 150,000 petabytes of it — in which over 90PB would be on tape.”
Actifio has raised $207.5 million in capital — its most recent round in March 2014 hauled in $100 million and valued the company at $1.1 billion. That month, it had “more than 300 customers in more than 30 countries and was growing at triple-digits,” according to CEO Ash Ashutosh’s interview with theWall Street Journal.
Actifio may go public but does not appear to be in a huge hurry to do so. As Ashutosh told me in a June 27 interview, “An IPO is a milestone in a journey. The legal departments of some of our big customers would like to see an IPO to increase our transparency. And our patient investors will expect liquidity.”
Actifio’s urgent mission is now growth. “We keep reaching for bigger numbers. And we are executing — coming in every day and closing new business. We used to focus on Global 2000 companies, then Fortune 500. Now we are going to the Fortune 5. The transformation that we bring is so large that we are having an impact in the biggest companies,” said Ashutosh.
Winning business from big companies means overcoming the perception that doing business with a start-up is risky. “Big companies ask whether it is safe to do business with us — CIOs say, ‘I love you but will you survive?’ We are taking advantage of three big trends: democratization of IT, commoditization of core infrastructure and virtualization of services,” argued Ashutosh.
These trends are changing the way companies buy IT. As Ashutosh explained, “Companies used to buy based on relationships [between sales people and corporate executives.] But now they are buying based on outcomes — how much money is being saved. And we offer superior outcomes — we can recover data faster from any point in time, we have the simplest user interface, and we provide all that at 10x lower cost.”
Actifio helps companies save lots of money. According to Ashutosh, “The savings are in the several hundreds of millions of dollars. They come from not having to buy 60% of the storage, 80% of the computing equipment, and 65% of the software licenses. And the savings are bigger for the bigger companies. We move cost out and make their systems work faster.”
Actifio does not see a serious competitive threat from start-ups or big companies. Noted Ashutosh, “The big companies will lose revenue if they copy our product because of our economic advantages to customers. And the problem we solved is difficult. Even if they allocate R&D to try to copy it, they lack our deep domain expertise.”
Actifio has built a strong team that is attracted to the opportunity its fast growth presents. “We have hired eight former CEOs. 20% of my compensation depends on a high Net Promoter Score [that measures customer’s willingness to recommend us to others.] We recently hired an executive from Cisco Systems to run our customer success organization — which exists to make sure that our customers are happy with Actifio so they will recommend us to others. Our initial sale represents between 1% and 20% of total opportunity with that customer.”
If Actifio gets the other 80% of that opportunity, EMC may be one of the losers.