MSI Rolls Into Europe

Backup storage service provider (SSP) ManagedStorage International Inc. (MSI) is racking up customers at such a clip in North America that it's pushing ahead with plans to deploy the same services in major cities in Europe and the greater London area, the company says.

With almost 700 customers under its belt in the U.S., of which 200 come from its recent acquisition of Sanrise, MSI appears to be defying the languid economy by buying other companies, expanding into new regions, and building its channel (see MSI Springs on $22M).

And it expects another 100 customers on its books soon, by way of a deal with StorageNetworks Inc. (Nasdaq: STOR). The former SSP, now a storage management software company, has named MSI its "preferred supplier" to take over its storage services contracts as it winds up its operations. Troubled StorageNetworks has engaged the services of several investment banking firms to find a buyer (see StorageNetworks Seeks Buyer and StorageNetworks Hacks Self in Half).

Ironically, StorageNetworks abandoned the services model in the belief that storage software would be the more lucrative business, while MSI stuck to its niche in the backup services space, which looked shaky for a while as many SSPs were going bankrupt (see SSPs: RIP).

The bet appears to be paying off for MSI, as it announced this week an agent sales program and MicroCorp as its first master reseller. MicroCorp has underneath it 1,300 sub-agent organizations that sell bundled telecom services, including Internet access, local dial tone, and long distance services. These agents can now add MSI's data protection services to their bag of goodies, if they wish (see MSI Debuts Reseller Program).MSI collocates its services in 38 hosting centers around the world, primarily in North America, but also has facilities in Tokyo and London. It expects to make announcements about new facilities in several European cities in the coming months, but executives declined to give details at this stage. Service providers currently offering its remote backup to tape services include Cable & Wireless (NYSE: CWP), Equinix, InterNap, Qwest Communications International Inc. (NYSE: Q), and ViaWest.

What exactly is driving this growth, then, when the rest of market is in the doldrums?

Cyber-terrorism, particularly email viruses, is one factor driving remote backup services, MSI says. But a general increase in awareness [ed. note: or paranoia?] around data protection and data security is helping to boost the company's business, it claims.

Financial institutions and government agencies especially are being compelled by new regulations to evaluate their email and data retention systems (see Storage Admins Fear Regs). Interestingly, however, a recent Osterman Research and Legato Systems Inc. (Nasdaq: LGTO) survey of domestic IT professionals indicates that while 80 percent of businesses rely on email for confirmations and approvals, 56 percent of businesses have no email archiving policy in place.

Firms like MSI -- which include Arsenal Digital Solutions Worldwide Inc., Connected Corp., EVault Inc., and LiveVault Corp.-- are jumping on this opportunity (see Arsenal Restocks Its Coffers, Connected Lands in Japan, LiveVault Locks in $10M Series B, and EVault Raises $6M Series C).Small to midsize businesses with anything from 20 Gbytes to 300 Gbytes of data are apparently the major adopters of MSI's services. "These companies maybe perform backups once a week and never try to restore data until they lose it," says Kevin Thomas, director of marketing at MSI. "They are basically driving without a spare tire."

In general, the IT organizations at these firms are strapped for cash, yet they have two guys fiddling around doing backups instead of helping to carry out more valuable tasks, Thomas adds. "Backup operations are not capital-generating," he says. "This job is often likened to taking out the garbage."

MSI has decided to put a stake in the ground and stay on the tape side of the house: Unlike rival EVault, it believes this is a much less expensive option than disk. "Like an expensive car, disk depreciates over time as the cost point declines so much," says Thomas.

Also, he notes, with a remote backup service the limiting factor is not the speed of the disk but how fast the pipe is. It might take a customer one hour to transfer data between sites and then, say, two minutes longer to mount to tape rather than disk. "Is that two minutes worth six times the price?" he asks rhetorically.

MSI has invested in new software from CommVault Systems Inc. for a feature called Synthetic Fold Capability, which enables it to perform one full backup of a customer's data and then to do as many incremental backups as needed. "This allows us to protect three times as much data over the same bandwidth, as we don't have to keep doing complete backups," says Molly Crandall, engineering manager at MSI.CommVault's tight integration with Microsoft Corp. (Nasdaq: MSFT) Exchange is also proving useful to MSI customers looking to perform remote backup of Exchange email. "It's enormously faster than the same product from Veritas and can also take folder-level and file-level backups, which is very efficient," says Crandall. Microsoft is an investor in CommVault and has integrated Exchange code with the startup (see CommVault OK'd for Win2K and CommVault Joins Microsoft Program).

Barring a total crash of the economy, MSI looks to be in good shape going forward. Watch this space.

Jo Maitland, Senior Editor, Byte and Switch