As EMC Struggles, Actifio One Targets $580 Billion Market
February 10, 2015
Talk of unicorns — private companies valued at more than $1 billion — abounds these days. And the unicorns matter to public companies because they are taking away customers from them in big markets.
Among the biggest unicorns in Massachusetts is Waltham-based, Actifio — a maker of appliances that help companies save money on data storage. If companies buy Actifio, there’s a chance that companies like EMC that sell data storage hardware will suffer. (January 30, EMC announced layoffs that would result in a charge between $130 million and $150 million).
In 2012, Actifio — valued at $1.1 billion when it raised $100 million in March 2014 — thought it would be going public in 2014. But that has not happened.
After talking with Actifio CEO Ash Ashutosh on February 2, it has become clearer why the company did not go public last year and what it plans to do to get there. My sense is that in the last few years Actifio has been heavily dependent on large accounts — making its revenues and profits rather lumpy and thus not as appealing to public company investors.
To remedy the lumpiness, Actifio wants to provide a service to small and medium-sized businesses that it hopes will smooth out its financial results — presumably by adding lots of much smaller accounts that pay regularly and more predictably.
Before getting into this, here is my understanding of why companies buy Actifio’s products. In a nutshell, companies waste a lot of money making and saving copies — as many as 12 per company for uses like backup and application testing — of their data.
Actifio saves companies money by letting them do all those things with a single “golden copy.” This saves them money — for every dollar a company invests in Actifio’s product, customers save as much as $15.
Last June Actifio was going for growth from big companies. “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,” Ashutosh said.
But today, Actifio announced that it will target small and medium sized businesses — a market amounting to $580 billion worth of IT spending — by launching Actifio One, a “business resiliency cloud” service that enables small and medium-sized businesses to store and retrieve their applications.
Until now, Actifio has been selling an appliance that combines commodity hardware and its own software that it called Actifio CDS. A few months ago, Actifio launched Actifio Sky — what it refers to as ”the next generation of our technology that required no third party hardware and ran on a virtual machine.”
Actifio’s new strategy will require an investment in marketing and a simpler user interface. According to Ashutosh, ”The go-to-market model is different, that’s been the real investment here. This is a lower average order value, higher velocity, more channel-friendly offering. We’re also making investments to simplify the software user interface and better enable customers to support themselves.”
To be sure, Actifio sees itself as helping to solve customer problems rather than trying to take customers from EMC. “That erosion will continue, sure. But we don’t really focus on winning share from the old guard. It’s all about solving customer problems for us, and [Actifio One] will most certainly do that,” noted Ashutosh.
Actifio does not expect the new service to generate significant revenue in the short run. But it does expect Actifio One to help it tell a better story to public market investors. “As we begin telling our story to institutional investors in the public market, we recognize the importance of our business being both high growth and highly predictable, and we think offerings like this will play an important part.”