Code 42: Who Are You?

Although Code 42 Software provides consumer-based backup software for desktops and laptops, its focus from a money-making perspective is providing that same capability to organizations with a software/hardware appliance or services. What is intriguing is that Code 42 is a self-proclaimed "most expensive" solution, yet continues to grow rapidly. How can that be?

Before we examine that question, what is Code 42 Software? As an industry analyst, I cover organizations from the very largest IT vendors to the smallest startups, as well as a lot of companies in between. Now, of course, the largest companies get the most attention over the course of the year as they tend to develop numerous products and make a lot of announcements that affect customers' lives. However, even though the smallest companies focus on single products, they may meet an immediate or unique need that can eventually reshape the industry.

Prior to talking with Code 42 Software, I had never heard of the company. (And, sorry, I couldn't resist the play on words in the title reminiscent of "Car 54: Where Are You?") The company provides free backup software (CrashPlan) for local use on a desktop or laptop, but I already use a similar product so I haven't focused great attention on that space. Even though Code 42 sells advanced capabilities to the enterprise for backing up and restoring employee laptops and desktops (CrashPlan Pro), it has not really marketed itself extensively.

Mobile workers as well as traditional office knowledge workers tend to access IT services and processes through their desktops or laptops. Now smartphones and tablet computers are growing in prominence, but they tend to work best for consuming information, whereas desktops and laptops support the creation of information--such as word processing documents, presentations, and spreadsheets--as well as the consumption of information. That information is typically shared with other employees, partners and customers (Who prepares a presentation for one's own exclusive use?) in some kind of collaborative or distributed manner.

Now, while this information may not be "mission-critical" in the traditional sense of key online transaction processing (OLTP) data, it may still be important. Theoretically, much of this information might be reproduced from scratch, but the time required might be prohibitive, especially if there is a freshness deadline that has to be met. For that and a number of other reasons (including legal compliance), enterprises of every size and kind realize that they need to protect knowledge workers' information against loss. Traditionally, however, a primary mission of IT has been to protect the information that its servers have access to with traditional business-class backup and recovery software protects. The data residing on desktops and laptops is typically harder for IT to access and control.As mentioned, Code 42 provides an individual-based backup software tool called CrashPlan. Using it, an individual consumer or worker can back up to an external disk or even to a friend's PC over the Internet. And, yes, a person can pay for a hosted version of CrashPlan at a Code 42 data center. But that is not where Code 42 makes most of its money. Its business model is to use its CrashPlan Pro capabilities to provide enterprise data protection for desktops and laptops.

An organization can choose to work with Code 42 in different ways. With CrashPlan Pro, IT can back up individual devices to its own datacenter storage and servers, and users can recover their files without IT involvement. With CrashPlan hardware, an IT organization can install a hardware appliance on its own site that Code 42 continuously monitors remotely. PRO Cloud is a software as a service (SaaS) offering in which Code 42 actually hosts the backup data. Overall, this range of choices makes the product very flexible and attractive for a
range of scenarios.

So Code 42 offers a flexible and robust set of products and services, but how can it get away with its claim that it is the "most expensive" solution"? That would seem to contradict IT customers' continuing focus on lowering overall costs. Yet Code 42 has been growing rapidly and may enjoy close to a $100 million in revenues this year. Moreover, it has an A-list of client references, including Apple, Cisco, Google and Oracle. Although these companies are financially sound, they don't like to pay extra more than anyone else. So what is it about Code 42 that allows it to charge a premium price?

Code 42 is by no means the first or only player in the game of enabling IT to backup enterprise desktops and laptops. A number of companies have had products in this space for a while, including at least a few large vendors. But if competitive products are merely "good enough," then customers will focus on those that have the best (that is, lowest) price. However, if Code 42 provides features or functions that an enterprise needs that others do not match, then the competition simply cannot do the job. Some of the capabilities that differentiate CrashPlan solutions include:

--Multiple destinations for increased configuration choices: IT can run on Code 42's hardware, IT's hardware, Code 42's public cloud or IT's private cloud. That may sound easy, but it is actually very difficult as I/O channels vary greatly. Code 42 solved this problem by engineering a solution that evenly shares storage I/O across all users; this gives IT flexibility to choose an internal or external solution or a hybrid and to change when needed.--Self-healing for increased uptime: A number of services offer a best-effort attempt to help clients recover from disasters, but there have been some notable failures in those offerings. Code 42 recognizes a simple fact of IT life--everything fails eventually. So its own approach is to engineer enough redundancy to significantly reduce the chance of failure (a "beyond RAID" approach). Yes, if a central site fails, the data may still exist at the individual device level, but it is not good business to rely upon that fact.

--Real-time policy enforcement: IT needs to ensure that policy changes are enforced quickly on all desktops and laptops for which it has backup responsibility. If IT makes a change (say, for even 10,000 computers), policies should take effect in what might be called near real-time (which means seconds for online devices and within seconds of those coming "on" from being offline). Code 42 is neither batch nor pull, as it provides an always on/always connected architecture.

--Deleted file retention: Code 42 defaults to "forever" in retaining deleted files whereas other solutions offer as little as 30 days. This is important in case something needs to be retrieved much later than 30 days. However, CrashPlan Pro also allows users to set policy-based points to permanently delete files.

--All version retention: This means that CrashPlan saves all changes to a file over time since the service backs up data nearly continuously (every 30 to 60 seconds is close enough to continuous for files in the vast majority of cases). This can be done efficiently through data deduplication (a popular buzzword today) at the block level. While not necessary for every case or customer, this feature is important for users who inadvertently deleted earlier versions of critical documents.

At a time when some vendors and their clients are nickel and diming IT to a fare-thee-well, it was refreshing to hear Code 42 state that it provides the most expensive solution for enterprise backup for desktops and laptops. That does not mean that Code 42 can charge any price it wants, but it does reflect the fact that every IT solution and deal does not necessarily have to compete on price alone. Rather, customers must consider competitive differentiators in feature and function to determine if the more expensive solutions offset cheaper products' delta difference in price.That point is also important as it forces IT vendors to think about what customers truly need and provide them with appropriate products. While customers remain budget-conscious, they still recognize and will pay for quality. Code 42 recognizes that point and the company's continued success bears out the value of this strategy.

At the time of publication, Code 42 Software is not a client of David Hill and the Mesabi Group.