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VMware Intends to Acquire Datrium

To provide DraaS for hybrid cloud environments

Hybrid cloud has emerged as the most common cloud strategy for our customers. With organizations sometimes having thousands of applications – both existing legacy apps and new cloud microservices – securing and maintaining those apps in hybrid cloud environments is critical to success for many of our customers.

With this in mind, VMware, Inc. has announced its intent to acquire Datrium, Inc. to expand the current VMware Site Recovery disaster recovery as a service (DRaaS) offering with Datrium’s cost-optimized DRaaS solution.

This is a move forward to help customers build hybrid clouds by combining the infrastructure and operations of VMware Cloud with Datrium DRaaS to reduce the cost and complexity of business continuity.

VMware Cloud is helping customers with its fast, secure path to cloud with an ecosystem of cloud partners, including AWS, Azure, Google Cloud, IBM Cloud, Oracle Cloud and more than 170 VMware Cloud Verified partners.

DRaaS is the fastest growing segment for data protection use cases with a $4.5 billion market growing at 15% CAGR according to IDC’s Worldwide Data Protection as a Service Forecast for 2019–2023.

DRaaS is suited to the hybrid cloud model where cloud economics and flexibility match the infrequent but unpredictable characteristics of disaster scenarios.

After the deal closes, the Datrium DR service will expand on the existing performance-optimized VMware Site Recovery DRaaS solution with a cost-optimized option. The solution delivers an end-to-end cloud driven user experience in VMware Cloud on AWS today. The cost-optimized approach leverages native cloud services, and provides forever incremental point-in-time copies that are encrypted, de-duped, and stored efficiently in AWS S3.

Datrium will bring to VMware a team of engineers with experience in storage, virtualization, data protection, and cloud technologies. It is already a VMware partner offering an end-to-end DR service with VMware Cloud on AWS.

After the deal closes, Datrium’s team and IP in cloud storage and end-to-end DR services will broaden the VMware Cloud vision to include DRaaS where customers can experience a consistent operating model across the hybrid cloud during DR instances. VMware look forward to integrating the Datrium product into its Cloud portfolio to offer an operator-friendly architecture consistent with cloud user expectations.

Comments

Datrium acquisition is a surprise for the market but business climate also accelerates changes and many companies' situation. More M&As are expected soon as we anticipated since January. With Covid-19, fragile companies hit a wall, normal ones became fragile and growth ones became normal, we see lots of these changes.

Datrium and VMware published very short blog posts on their respective website and none of them issued an press release. On the VMware side, it can be interpreted as a small acquisition, essentially as a feature, even a core one, but not a significant company move. One the Datrium side, it represents the end of a story, a very compelling journey in fact with several inventions fueled by a talented engineering team, that finally will be exposed via VMware vehicle.

And again what a surprise to read Tim Page's words: "Data protection and cost-effective cloud-native disaster recovery is core to our mission at Datrium" in the company blog post, as Datrium was about something else especially for the original project. It illustrated the changes the company did.

Datrium, and similar companies, had decisions to make and also received pressure from the market and investors. Only 3 choices were possible for Datrium: 1/ continuing same model but  needing to raise a new round but it never took off so is it reasonable, 2/ do an IPO but you open your books and the next step could be a ridiculous merge, or 3/ be acquired rapidly at a reasonable price - lower than the team expected, lower than the market could think - but finally the safer route.
Last 4th option with bankruptcy always on the side.

Total of $170 million raised in 5 rounds:

Date Series Amount raised* Investors (underlined VC is the lead investor)
4/2012 Seed 5  
10/2012 A 10  
12/2013 B 40  
12/2016 C 55 New Enterprise Associates (NEA), Lightspeed Venture Partners (LSVP)
9/2018 D 60 Samsung Catalyst Fund, NEA, LSVP, Icon Ventures

* in $ million

There are also angel investors Edouard Bugnion, Diane Greene, Kai Li, Phillip Liu, Frank Slootman and Mendel Rosenblum.

With Brian Biles and Hugh Patterson as founders of Datrium, it was expected a radical new storage approach as they did with Data Domain. Other founders came form VMware.

The first industry article on the start-up in 2015 about their solution and innovation (in fact there was one in 2013) there were some details Datrium but a minimum information were available at that time). The initial project was to deliver a kind of primary storage for VMs. The idea was to promote the end of SAN and even anticipate NVMe being transported over various network layers but with a proprietary approach. Datrium DVX introduced software coupled with SSDs on distinct hosts in a stateless mode, all connected to shared backend appliance for durable data. At that time, the company was a storage offering exposing NFS so pretty easy to integrate with vSphere via a NFS datastore.

Performance was very good as it is delivered as a local flash service. But beyond technology, Datrium didn't meet its users, adoption was weak, even if the design of the product was original with real innovations but new confirmation that technology was not enough.

In 2017, the team released Replication to offer DR, and will continue to iterate on the topic.

In 2018, it had demonstrated some NVMe-oF design towards JBOF and composable infrastructure approaches.

The company invented the disaggregated HCI before others even thought about it.

Among several innovations, we noticed de-dupe, compression, blanket encryption, content addressed log-structured file system as the internal data layout format, wide erasure coding, snapshot and replication, so a very rich features set now in the VMware basket.

This desire to create a new category finally failed and a new era was necessary as the growth was not the one expected.

A new phase started with the arrival in June 2018 of Tim Page as CEO, coming from VCE, triggering Brian Biles move to chief product officer role.

Again being alone in a category is not good as users can't compare offering. Creating a blue ocean is not always the right path to success and the effort to set a new category requires lots of efforts and above all dedicated money to sustain that inception. It has been decided to reposition the product as HCI for enterprises shifting from the previous model, and again with difficulties ,a new direction was taken with data management and especially CloudDR, replication and finally DR-as-a-Service. What a change since the original mission!

So to summarize the journey of Datrium, there were 3 phases:

  1. Primary storage for VMs i.e a storage offering
  2. HCI for enterprises with integrated data protection and cloud mobility promoted as compute plus storage
  3. DRaaS with VMware Cloud on AWS support with CloudShift and Automatrix 

For Datrium, this acquisition validates what the team developed as technology and features for many years but also means that as an independent company this approach failed. I was difficult to understand the next step for Datrium and this acquisition is probably the best event the team could expect.

For VMware, advanced design and key functions for high-end HCI and storage are now available to boost VMware Cloud and other native vSphere infrastructure. We'll see how it will be coupled with VMware's Kubernetes effort.

This story confirms that HCI is not storage or, if it's storage, it's also compute and network. We never see a HCI solution chosen as a block array or file server. It doesn't mean block and file storage solutions don't use virtualization or even container-based architecture, good examples of that are Cohesity or Vast Data. HCI implicitly means that applications can run directly on the server itself. Some developments are made in that direction and we see some selected applications integrated at this level.

This story confirms that HCI is driven by gorillas and the life outside of VMware, Nutanix, Dell EMC and other anecdotal HPE, Cisco or NetApp, is almost impossible. Remember GridStore morphed into HyperGrid or Atlantis Computing, Stratoscale, Springpath as well Maxta. Pivot3 made a recent layoff. One exception, Scale Computing, seems to have found its niche.

Editor's comment:
Amount of the deal was not revealed. More recently, Coldago Research adds most recently Datrium as storage unicorn, meaning a minimum $1 billion valuation. But, for sure, VMware didn't pay as much as that and even probably less that half of that.

For VMware, Datrium is historically its first acquisition of a dedicated storage company.

For the VM leader, another acquisition would be much more interesting, Veeam Software, the king of VM backup and replication, a domain in which VMware is especially weak. But here the price will be much higher, much more than $1 billion. This drop is an example of impact of Covid-19.

Read also:
Exclusive Interview With Tim Page, CEO, Datrium
Emerging leader in enterprise HCI
by Philippe Nicolas | January 22, 2019 | News
Exclusive Interview With Brian Biles, CEO and Co-Founder, Datrium
Came from Data Domain and EMC.
by Philippe Nicolas | October 19, 2017 | News
Start-Up Profile: Datrium
Converged storage and compute in new way, Open Convergence, to simplify webscale and tier 1 private cloud infrastructure deployments.
by Jean Jacques Maleval | April 7, 2017 | News

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