NovaBACKUP Security Blog

Backup Software Market Leaders Have Lost Touch with Small Business

What Football Teaches Us About Competition

I’m sitting here writing this article in the afterglow of this year’s World Cup Football tournament.  My adoptive home in the US didn’t make it quite as far as we had hoped this year, but that’s part of the beauty of being part of a global organization.  NovaStor’s core operations run out of two offices.  In the US, we work in Agoura Hills, CA, a beautiful area just north of Los Angeles that’s not far from the beaches of Malibu, while our other office is located in the picturesque city of Hamburg, Germany.  Congratulations to our German family and their home country for winning their fourth World Cup title after a 24 year break.  My boss, my business partner and friend Stefan Utzinger (NovaStor’s CEO) was just 25 years old the last time they won.  I’m imagining that he’s very excited, and basking in the glory of a Germany victory.

What Football teaches us about competition.Backup Software Market Leaders Have Lost Touch with Small Business.

What We can Learn About the Competitive Landscape

The final four teams this year counted for 11 of the total 20 World Cup Champions. Overall, only eight teams have won-which is not to say that there were not some surprises from teams who have never won along the way.  The landscape is changing and opening up potential for new teams to compete.  Look at the Netherlands, they took third place over the host Brazil. This was the first time since 1940 that Brazil lost two games back to back on their home soil.  And what about the excitement Costa Rica created?  Seeing this, I can’t help but compare against the similar patterns I’ve been witnessing in the small business backup market.  Market share is still being held by the same leaders as some time ago, but it’s safe to say that some new faces are starting to make their own mark.  It was not long ago that there was little question as to who the small business backup market leaders were.  People either used Symantec’s Backup Exec or ARCserver from CA (formerly Computer Associates).  Together, they made up more than 80% of the market share, leaving very little room for the other players in the industry.  In the past, contenders like NovaStor depended on risk takers or people so dissatisfied with the leading products, they had no choice but to venture out of the comfort of the “safe choice.”  NovaStor had to have a great solution to compete with these solutions even when they were experiencing bad times.  Every deal was ours to win and theirs to lose.  Customer service, quality product and local technical support were what kept us alive, and now they’re what is driving us forward.

Market Leaders Losing Touch with Small Businesses

Today, these market leaders have lost touch with many small businesses.  They have been forced by shareholders to perform year after year.   When you own such a large market share, you only have a few options available.  They chose to focus more up-market where the average selling prices are higher, and elected to cut corners when it came to smaller customers.  It’s not a surprise that these companies view small businesses to be 250+ employees.  The small businesses that I know, which built up this country’s reputation (where we’re known better for our success in business over football) are managed by companies that range in size from 1 to 100 employees, while the majority of small businesses would actually fall into the 1 to 25 employees range.  This mindset has had an effect on these two market leaders.

Why the Competition is Making its Move

Symantec has struggled for the past two years and are trying their hardest right now to fix their most recent list of missteps.  They’re spending record amounts in advertising to show how they’ve learned from their mistakes, but social networking from the end users has not demonstrated the same level of victory.  Apart from having Backup Exec moving up-market and expanding their gray zone to further confuse their market identity with Symantec’s other product NetBackup, they’ve lost touch with their customers and forgot what it was they originally liked about their solutions.  They released a product removing important features, but most of all, they removed trust.  Trust is not something that you can earn back too quickly in a market that protects critical data.  There is just no margin for error.  In an attempt to service the “real” small business market, they turned to lower costs by outsourcing support.  The frustration this introduced just added fuel to the fire, with Resellers who have used the product for the past 20 years  now being treated like beginners, and answering lists of questions from someone ten time zones away.  In the last annual report released by Symantec, they stated that Backup Exec had lost $80 Million in business from the previous year.  Heads rolled at all levels (even at the top), and emergency measures and campaigns were put in place to stop the fall.  The contenders, including NovaStor, have made their move and are continuing to fill in the spaces that they’ve allowed themselves to migrate from.  The competitive replacement programs are aggressive and plentiful - natural selection has begun.

Why Migration is Forthcoming

For CA ARCserver, their decline has been happening at a faster rate for a much longer time.  Although, just last week, it was announced that CA would be selling ARCserver to Marlin Equity Partners.  In talking to a few current and ex-CA colleagues over the last week, they’re not expecting great success - believing that the product is just too broken to bring any life back into it.  With many of the original engineers being out of the picture, Marlin will have a difficult time reeling this one in.  CA first jumped on the backup scene with the acquisition of Cheyenne and their ARCserve solution back in 1990.  Since taking this product over and dominating the market until Symantec usurped their throne, they were a backup powerhouse – marketing a product that wasn’t for real, small businesses. CA’s massive power struggles and executive changes are the things of legend.  With the multiple changes of power also came multiple changes in identity.

Over the years, ARCserver changed its name to Brightstor, and then back again.  They also started taking the focus off of backup, and like Symantec, they’re not a Backup company - they’re a security company.  Several of their other solutions carry the lion’s share of CA’s profits.  I’ve seen at least 6 product managers swing through this product line in the last 5 years, and it’s of little surprise to them that CA sold this business, as they’ve been trying to unload this product suite for the past 3 years.  With the news of the sale of ARCserver, NovaStor will be launching a campaign shortly to help companies migrate to an alternative solution since “Terms of the deal” don’t have any action happening until at least Q2 of 2015.  That’s a long time to ask any customer to wait and see how things develop, especially when their business depends on it.

Backup for the Rest of Us

So just like football that is still fresh in our minds, start looking towards the next few years where new companies are fighting for control - with dreams of being one of the next backup software market leaders, or that 800-pound Gorilla.  NovaStor intends to be in the thick of it and will not lose focus on the “real” small business market and will continue to offer Backup for the Rest of Us at a fair price with exceptional service.

Farewell until next time, when the “Rest of Us” meet again!