Zantaz Makes Compliance Buy

Zantaz Inc. put a chunk of the $20 million funding it received last month to use today when it acquired Educom TS, a Canadian-based email archiving software company with, apparently, more sales than name recognition (see Zantaz Buys Educom).

Zantaz isnt saying how much it paid for Educom, but Zantaz director of product marketing David Greene says both companies have been profitable and the transaction will be accretive "immediately." Greene also says Zantaz will do all it can to raise Educom's profile.

Hang on: It's not as if Zantaz itself is exactly an industry household word. But one thing Zantaz does have that Educom doesn't is money for marketing. When they announced their latest round of funding, Zantaz executives said they would use the money to expand this year (see Zantaz Zips Up $20M ).

Zantaz also has a plan. It sees Educom’s email archiving software as a good fit for its hosted compliance solution. Educom's product gives Zantaz another weapon in its battle with rival Iron Mountain Inc. and bigger players looking to cash in on storage requirements brought about from regulations such as Sarbanes-Oxley, the Health Insurance Portability and Accountability Act (HIPAA), and several new SEC rules. (See The Real Cost of Compliance, IBM Chases Compliance Dollars, EMC Makes Centera Compliant, and HP Buys Archive Guys.)

Zantaz and Educom have traveled different paths until now. While Zantaz raised $70 million over five rounds of funding, Educom founder Andy Moffat sought no VC funding since starting the company in 1995, and the company kept a much lower profile than competitors KVS Inc., Legato Systems Inc. (Nasdaq: LGTO), and IXOS.Zantaz sells directly and through partnerships; Educom sold exclusively through resellers and distributors, with no direct sales. Educom also concentrated on the government, legal, and energy markets, where Zantaz was not strong. Despite the profitability claimed for it by Zantaz, however, Educom reached a point where it couldn’t make it any more on its own.

“It had to get bigger, get venture funding of its own, or do something,” Greene says.

So it got acquired. Educom will become Zantaz Canada, and its 40 employees will remain at the company’s Ottawa offices. The acquisition swells Zantaz’s headcount to 200. Greene says Zantaz will beef up marketing for Educom’s Exchange Archive Solution and sell it directly.

— Dave Raffo, Senior Editor, Byte and Switch