IBM Acquires Its Own Online Storage Provider

Based in Cary, N.C., Arsenal Digital and all 100 employees will become part of IBM Global Technology Services, based in nearby Raleigh, N.C. IBM Global Technology services, at $32 billion in annual revenue, is IBM's largest business unit. Financial terms of the transaction were not disclosed.

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Arsenal Digital, which has about 3,400 customers, serves mostly small and midsize businesses that want data protection and easy online access in response to increasing regulatory requirements and fast data growth. IBM had partnered with Arsenal for several years on specific orders.

The move by IBM closely follows that of storage competitor EMC, which acquired online backup provider Berkeley Data Systems and its Mozy and Mozy Pro services line in September for $76 million. IBM's move adds an online option for customers who tell IBM their data is growing at 40 to 50 percent per year and opens IBM to a market opportunity that is growing 30 to 40 percent every year, said Mike Riegel, IBM's vice president of information protection services.

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More than that, IBM sees the acquisition in broader terms than the addition of online storage alone, Riegel said.

"We see this as a convergence of storage, business continuity and disaster recovery," Riegel said. "We think that will be the differentiator for IBM. We are now going to be able to go to new and existing customers and say, 'Not only can we help you with your disaster recovery, but since we have your data, we can help you protect your data in a way that links to your business continuity plans.'"

Arsenal brings production-tested capabilities in the online data protection market that will complement IBM Tivoli's flagship data protection offerings and IBM System Storage software, Riegel said.

Click here to read more about Google's online storage plans.

IBM has acquired 60 companies in the last five years and is moving its global services business from a traditional labor-based model to one that increasingly uses automated services like those of Arsenal Digital.

"We're really energized by this," Brian Reagan, chief marketing officer for Arsenal Digital, told eWEEK. "As we looked at potential partners that could help us accelerate our growth, the idea of joining the worldwide leader in [IT] services was kind of a no-brainer for us. Our visions are aligned perfectly; it's great for our employees, our customers and our partners. We feel like this is a home run."

This likely will not be the last such acquisition in this market, analysts say. Other online storage providers, such as Carbonite, AmeriVault and CommVault, must be considered takeover candidates, while companies such as Dell, Hewlett-Packard and Network Appliance might be in the market.

"There is a great deal of activity in the backup services market," Dave Russell, Gartner vice president of storage technologies, told eWEEK.

"Just less than 12 months ago [in December 2006], Seagate [Technology] acquired EVault. EMC acquired Berkeley Data Systems in October 2007 and Symantec is preparing to launch their Symantec Protection Network in the near future.

"This market is attractive because it has a nice combination of growth, unmet needs, and is a recognized purchasing area—making it enticing for vendors to expand in to," Russell said.

Amazon.com and Verizon already offer online storage services for businesses and consumers. Google has said it is considering expanding its own service.

The acquisition is scheduled to be completed in the first quarter of 2008, an IBM spokesperson said.

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