>> From the SiliconANGLE Media office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. >> Hello everyone, and welcome to this week's episode of theCUBE insights, powered by ETR. In this breaking analysis, I'm going to provide a little detail on the recent announcement that Insight Partners was acquiring Veeam for five billion dollars. There was a lot of information on the announcement in press releases and in news articles, so what I really want to focus on is what it means for the industry generally, and for the data protection community specifically. So, very briefly this was a five billion dollar exit for Veeam on top of a five hundred million dollar investment lead by the same Insight Partners last year. I think it had earlier investments, kind of a rent, with an option to buy. New management is being promoted from within, which I think is significant, to replace the two founders. Andrei Baronov and Ratmir Timashev are going to step down after the transition and give up their board seats. Veeam is a fascinating company. It started in the 2006, 2007 time frame, after the two founders, who met in college, formed and sold Aleta software to Quest. Then they started a company called AMUST Software, from which they created Veeam. You never hear about AMUST, but I believe it's the engineering and development arm of Veeam. Now the new CEO of Veeam, Bill Largent told theCUBE that AMUST is now a wholly owned subsidiary of Veeam and it won't effect any of the engineering assets that exist in Prague and in Russia. So this I the thing about Veeam, it's a very closely held company controlled by it's two founders, with a domicile in Switzerland. My understanding is Baronov is, well he's the technical guru, and he's a resident of that country in Switzerland, and the HQ there is very lean, the sizable engineering teams, as they say, is in Russia and Prague. Timashev resides in the US, and he's a marketing genius, who helped create this company, and it's always punched above it's weight class with, epic parties, and great products. Now interestingly, Veeam's rise, it coincided with the ascendancy of VMware. Veeam became the standard backup software for small to medium size companies within VMware shops. Their products are renowned for being simple, and working as advertised, and their customer support is outstanding by all accounts. But the US business lagged, despite the fact that most of VMware's business is in the Americas. You'd think you think if they super glued themself to VMware their Americas business would be higher. So a few years ago they decided to really go hard after the enterprise and they brought in Peter Mckay, from VMware, and he began to build up a US presence. But the enterprise business, it requires a lot of things that were kind of antithetical to Veeam. So think about long sales cycles, expensive sales people, belly to belly selling, with the expectations of, road maps, and clarity around enterprise feature sets. Now McKay was named CEO with Baronov, who continued to run engineering. So it was a bit of a culture clash. You got the sales oriented leader wanting the engineering team to turn on a dime and help close large deals, and satiate partners like HPE and Sysco, and you've got this genius co-leader, slash engineer, with an incredible track record of delivering features that the customer loves. So it really didn't work out and then Veeam scaled back on it's ambitions some what. At it's annual user conference in Miami last year, Ratmir came on theCUBE, and he talked about how Veeam's act one was all about dominance in virtualized environment. Let's listen to what he said about act two and then we'll come back and talk about it >> That was act one, we dominated it, we grew from zero to one billion within 10, 12 years. We added three hundred fifty thousand customers over that time frame, and now it's act two. What is act two? Act two is the, again, the new major industry transformation to a hybrid cloud. What are the similarities? Again, Veeam is in a great position because we're at the right time at the right place with a brilliant product. >> Now what we know is that act two is about a few things, one, as Ratmir said, hybrid cloud, multi cloud management, etcetera. But it's also about an awesome exit for it's two founders. Wow five billion dollars, five x revenue multiple, handing over the reigns is really the third thing this is about and creating more traditional governance structure for Veeam. Now they're moving from a governance structure that was closely held and opaque to one that is still going to be closely held, but ideally somewhat less opaque. Which brings me to inside partners. In the money world, you basically have a spectrum of investors. On the one side you've got banks, who are the most conservative. On the other side you've got VCs, now they're the most aggressive, of course. Now somewhere in the middle, you have private equity firms. Now they traditionally invest in companies, and they squeeze them for EBITDA, and they suck money out. But inside is more of a hybrid. They invest in a number of companies as VCs, they take a portion of the ownership. And to me they're more of a rule of forty PE, meaning it's not just about EBITDA, it's about growth plus EBITDA. So a rule of thirty or a rule of forty PE company, they can dial down EBITDA and go for growth, or dial up EBIT and moderate growth. So it's a great model. So I would expect Insight to bring structure and leadership to Veeam, with the goal of taking the company public at some point, because they like to sell to companies for all cash, I don't see a logical buyer at these kind of price points for this company in this market. It's growing market but it's still not a giant market. All right let's shift gears a little bit and get into some of the ETR data. Here's a narrative they put out recently that, to me, sums it up well. ETR said Veeam is one of the few vendors growing share among customers vs previous surveys in the storage sector. And that said, spending intentions are decelerating and continue to look poor in the largest sectors and Veeam trails Rubrik and Cohesity, although on a larger user base. So you can see by this statement that Veeam is of course doing well, but there are some cracks in the enterprise armor that I want to talk about and drill into a little bit. Now this now this Arline customer quote also, to me, sums up one of the reasons for Veeam's success. What this person said is if I want to do a Veeam back up to the cloud, it's basically point and click, very easy to use. Now I've talked to dozens, if not hundreds of Veeam customers, and they all say the same thing, it just works, that's kind of their motto. So this is the big reason why Veeam has steadily gained gained share over time. Now take a look at this chart, which shows the progression over time of Veeam's progress in terms of what ETR calls market share. Now remember, market share is a measure of pervasiveness in the ETR data set. And you can see, in the data, that Veeam has had a steady rise since ETR started tracking them at critical mass back in 2014. And you can see the steady decline in the survey for Veritas and Commvault and what appears to be, rapid momentum building for Rubrik and Cohesity, two companies that I said in my 2020 predictions breaking analysis that would continue to do well this year. Now notice I had to black out the January 2020 survey, which is ending shortly, so stay tuned for those results. But let's drill into Veeam's performance a little bit more. What this chart shows is a candlestick of net score and market share across all the respondents in the ETR survey for Veeam. Remember net score is a measure of spending momentum that subtracts customers that are spending less, the red, from those spending more, the greens. And it's represented over time by this blue line that you see. You can see that this blue line, it bounces around but it holds steady in the past couple of years pretty generally, and really in that thirty to forty percent range which you see on the left hand axis. Now that yellow line, is market share or pervasiveness, it also continues to climb steadily as I showed you in the previous chart. Now again this is amongst all respondents. Let's now take a look at this chart which isolates Veeam's performance in the largest companies, that enterprise push. Notice the pictures is somewhat choppier. Market share is okay, although unlike the previous chart, it's not steady. This is stunning. Peter McKay left in October 2018, and that's when Veeam really pulled back on it's big enterprise push, and you can see, there's a noticeable and steady drop there based on ETR data. So what's happening here is we are entering a new chapter for Veeam, act two so to speak. With new leadership and new governance. Danny Allen is taking over CTO, he previously ran strategy, Bill Largent is going to be CEO, the HQ is moving into the US. So in my opinon, Veeam's issues in the US have been more execution related than anything else. Veeam is a leader. So partnerships with Nutanix, Sysco, HPE, NetApp, should continue to improve and be somewhat productive, actually largely productive. Let's talk a little bit about Veeam's architecture, and a point of discussion that you often hear in the community. Veeam's a Window's based architecture. Now is that a blessing or is that a curse? Well the pros are that the Veeam team came out of a Windows world, and they know the platform very well. They are amazingly good at adding function, without screwing up performance somewhere else. You saw this a couple years back when they were making a big push on the enterprise and they increased the file sizes, and the number of objects that they could support. Another example is when Veeam added cloud back up, it was a really good product, version one. Unlink many products, when they first tried to port to the cloud, that wasn't the case. Recovery from the cloud is very tricky. Things are out of sync, you got a metadata challenge, and generally Veeam was able to achieve consistent levels of performance with it's cloud product. Now flip side of this, is that if you look at most, if not all, modern architectures today, are based on Linux. And once you start getting into mulit cloud, and cross cloud management, you're going to bump into and be interfacing with lots of Linux based systems. So Veeam is going to have migrate code, and maintaining consistent performance is going to be tougher. But as David Fourier, my colleague points out, there are many many ways to skin a cat, and Veeam's engineering team has really, based on it's track record, has proven that it can solve tough problems, and really deliver a great product consistently. I think the bigger issue and challenge for Veeam again, is execution in the US, and of course the enterprise. Customers in EBC's executive briefing centers, they want to see road maps, and enterprise features, and specials. And so we'll see, if that's something that Veeam has an appetite for. If they do, and I'm one of the incumbents, I'd be worried that Veeam could do a land and expand. Where Veeam isn't as strong in large enterprises, big companies they buy from Veeam. Maybe it's a smaller division, or remote location, but it's not like they don't do business in large accounts, they do. So in a way, they've already landed and they have an opportunity to expand, so that's something to pay attention to. If I'm an enterprise customer, I would be pressing Veeam on it's roadmap, and having them clarify their vision around hybrid and multi cloud management. Will Veeam be more transparent and willing to do specials for the enterprise, and their big partners, who expect them, when they say jump, they expect Veeam to say how high. How will Veeam's culture change, is the other thing I want to focus on. As the two founders step down, are they going to be able to main their engineering ethos, and customer loyalty, and can they figure out the enterprise. I'm a big fan of founder lead companies, when founders leave cultures often change. When founders stay, they're intensely committed, even beyond great CEOs who aren't founders. Look at Michael Dell. He went to the mat to keep his company against the great icon, now look at Dell technologies, after the EMC acquisition, it was completely transformed. Look at Oracle, look at the lengths that Larry Ellison goes to win. Compare that to a great CEO Joe Tucci, when he was at EMC, but you know when he was done, he was done, it was over. It wasn't his baby. So my point is how will this effect Veeam's culture and prospects in the long term. For me the bottom line is the big opportunity's in the US. And that's about execution. And I expect with the move to US HQ, new management, I expect they're going to see consistent market share gains, that's going to continue. The enterprise however, that's going to take longer, it's going to require more patience and more money. And with Veeam transitioning from essentially the two founder's lifestyle business into a company that's really built for an exit, they're going to have more money to invest, greater transparency, I hope, and a path to really build on their past successes. So this Dave Vellante signing out from the latest episode of theCUBE insights, powered by ETR. Thanks for watching everybody and we'll see you next time. (upbeat music)

>> Announcer: Live from Las Vegas, it's the Cube, covering InterConnect 2017, brought to you by IBM. >> Okay, welcome back everyone. We are live in Mandalay Bay in Las Vegas for Day Three coverage of IBM InterConnect 2017. This is the Cube's exclusive coverage of IBM's Cloud Show and their Watson Data, IoT and more. I'm John Furrier, my co-host Dave Vellante. Our next two guests are Matt Kalmenson, VP of North American Sales and Cloud Service Providers at Veeam and Andy Vandeveld, VP of Global Strategic Alliances at Veeam. Guys, welcome to the Cube. >> Andy: Thank you. >> Matt: Thank you for having us. >> Andy, I want you to just set the table. We are familiar with Veeam. We're going to do your event. You've got a big event coming up in New Orleans. The Cube will be there. We've been watching you guys for many, many years. The Cube is on its eighth season. I think Season One, 2010 at VMworld. You've been very, very successful. But you're not a public company, but yet you guys act like a public company. You release your revenue and earnings. Set the table about what Veeam is, where you guys are at, and the current status. >> Sure. We're a company that's been around for 10 years, founded by our founders, Andrei Baronov and Ratmir Timashev. The company has grown significantly in the data availability space over the 10 years. We just announced our earnings, or our revenue, for the first time just last quarter. Last year we did $607 million in total revenue. And that's at a 28% growth. So we're a very high-growth company, even though we're at significant run rate of revenue. We've got 2,500 employees worldwide. We'll grow that substantially this year. We've got 240,000 customers worldwide. We're growing 4,000 new customers a month. So we're really a growth company. But we're a privately-held company. We like it that way. It allows us to do things that public companies might not be able to do because of their quarterly reporting requirements. We can make investments where we think investments need to be made for the future, as opposed to having to always watch the profitability. >> Yeah, the 30-day shot clock, as they say, or the quarterly shot clock, 90-day shot clock I mean. So you guys are very successful. Congratulations. And that's, by the way, a great story that you guys kind of act like a public company without being public. So it's like the best of both worlds. You guys are doing well. Congratulations. What's the secret sauce for you guys? Just for the sound bite. We'll get into some of the questions. We have some specific questions about IBM InterConnect. But why is Veeam winning? What's happening? Because you guys are really moving the needle. Quickly explain the secret formula of why Veeam is so successful. >> Well, I think it cuts across a couple of different dimensions. One is, we have a really great culture within the company. And so we have a culture of innovation. People feel like they're invested in the success of the company. And everybody is joining in that. And I think that really helps. We have great technology. We used to have an "It Just Works" tagline. Customers love that, particularly when we talk about their backup and data-protection solutions. They don't want to have to have people monitoring it on a regular basis. It just works. So I think customers love the technology. We have a great employee base, great executive team, and we have great partnerships, like the one here with IBM. And I think those are all key to the success. >> So I want to go back a little bit and sort of set the table on some of the big mega-trends that led to Veeam's ascendancy. When you go back to the early days of virtualization, you had this situation where you had underutilized servers. And then VMware essentially allowed us to consolidate those servers and dramatically increase the utilization, 'cause applications running on these servers, the servers were highly underutilized. The one application that needed all that sort of dedicated server power was backup. So when virtualization went from nothing to whatever, 60, 70% of the market, backup got choked. And it needed an answer. And one of those answers was Veeam. And it shot up and exploded as a company. You've done very, very well. There's more to it than that, distribution channels and so forth. Now we enter the Cloud era. And people now talk beyond backup, about availability. So what can we learn from the virtualization era? What's similar, what's different now? And why is the discussion shifting from one of backup to one of sort of always-on availability? >> So, it's a really good question. And if you think about the trends that we've seen, we've gone through this trend to a completely virtualized world. Yet when we still talk to CIOs, and Veeam's gone out and done studies where we've talked to CIOs, and when we talk to them, we hear that they still have the same challenges that they've had in the past. And that is, over 90% of them are still saying that their most critical needs are application uptime and their access to data. So when we go out and talk to hundreds and thousands of CIOs, they say, "We still have these needs: "access to our applications and access to data." Yet when we talk to them about how those needs are being met, over 80% of them say there's this gap. There's this gap, and while they still have those needs, those needs are not being met. And we call that the availability gap. And Andy and I were talking this morning over a cup of coffee, and he said, "You know what the availability gap is? He said, "Think about it like this." Think about when you're using your cell phone, and that cell phone is going down to 10%, 9%, 8% and 1%. And you get that feeling inside that "I'm about to lose service." And we all know that feeling when you lose connectivity on your cell phone. Now think about that as the CIO or someone who's relying upon that data. That's the availability gap that we see in the marketplace. And that's the gap that Veeam bridges. We bridge that availability gap. So we've addressed that from a virtualization perspective and, now, moving into the physical world too. But now as we move forward, we're seeing another dynamic change in the marketplace, of course. And that's Cloud. Now consumers want to think about different ways to consume technology. They want it on-prem. They want a managed solution. They want in a public cloud. They want it in a private cloud. And the way Veeam addresses that solution is essentially by saying, "However you want to consume your technology, "that's okay by us." If you want to consume your virtualized environment and have it backed up on premises, fantastic. If you want it backed up and managed by a managed service provider, that's okay too. If you want to have that data and information and back it up in a public cloud, great. Or in a private cloud. Or move it between those environments. We'll have the solutions to meet those needs. So we're going to meet this need of having uptime of applications, uptime of data, and availability of data, minimizing that availability gap that these CIOs are facing and allow them to manage and run data and applications and have it available to them no matter what scenario or platform they're running it in. So that's a vision that's more than just selling backup insurance. >> Matt: Absolutely. >> I mean, you just kind of answered it, but I'll ask it generally. How do you guys communicate your vision to CIOs? >> Well, I think we communicate it just like Matt said. When you talk about backup, that is sort of a yesterday story. It's really about making sure that those customers can get access to their data and that they can keep their applications, and, frankly, their businesses up and running. So when we go in and have a conversation with a CIO, we can delineate for them the specific business impacts of not having a robust availability platform. And that takes on different dimensions from a product perspective. So it's not just backup and recovery anymore. It's backup and recovery, but it's availability. It's, how do you orchestrate data across platforms? These are the source of new issues that Veeam has been addressing for the past few years. And I think it's what gives us an advantage in the data protection space. >> Now, it's a very competitive market. A lot of legacy vendors, of which IBM is one of them. But yet you're here at InterConnect as a major IBM partner. Help us understand what the relationship is with IBM, where it fits in the organization. Is it just Cloud? Is it across the entire organization? Fill us in. >> Yeah, so it is a strategic partnership for us. It's not just a single business-unit partnership. We're across the business units inside of IBM. And sure, there's IBM Spectrum Protect, which is a competitive product. But there are so many more opportunities for Veeam and IBM to win together that we're not going to worry about the few areas where there's some overlap. We just announced a few months ago that we're integrating, doing snapshot integration, for IBM Storwize and SAN Volume Controller, which we'll provide in our next version, version 10. It's coming out later this year. And that's a big thing. We don't do storage integration, snapshot integration, with all storage vendors. So when we can make a commitment like that, it's a meaningful commitment to the partnership. And so we have this great relationship on the storage side and other parts, but the genesis of the partnership actually started in the Cloud area with Matt's team and some guys on Matt's team that really drove hard to get a foothold in the relationship. So I'll let Matt talk about the Cloud relationship. >> Thanks Andy, and it's been a great relationship, because, while Andy focuses on the global alliances, I have a little bit more of a narrow focus around the Cloud, which really isn't so narrow. So we tend to team up together very well. And what really got our relationship kicked off was having the VMware Cloud Foundation, which runs on the IBM Cloud, where Veeam is the essential backup product that runs the management components of that platform. So, anything on the VMware Cloud Foundation, which sits on the IBM Cloud platform, is backed up and managed by Veeam. So that's now available. And that was really the genesis of the relationship from a Cloud perspective, so that was very, very exciting. >> And Bluemix, they're in the mix? >> Bluemix is in the mix. And that VMware Cloud Foundation actually leverages the Bluemix platform. And then there's several layers of the Bluemix Cloud platform. And now we're going to be in the Bluemix catalog, what is called the IMS catalog, which will be for everyone who's looking to provision a cloud service, can go ahead and pull down and choose to provision VMware and some infrastructure and other services and have it backed up by Veeam. >> So that deal between IBM and VMware was a real catalyst for your relationship? >> Matt: A real catalyst for us. >> Now, of course, VMware's done other deals. They just did one with Amazon recently. But my understanding is the IBM relationship-- >> Well, Pat's been clear. It's a multi-cloud world. So the thing that's clear from this show is, multicloud is what's happening. So that's-- >> Well, what this has given us the ability to do is say, no matter what your customer looks like, there's an opportunity for us to partner and work together. So if you think about the VCF, the VMware Cloud Foundation, might be some organizations that are enterprise in scope, that have a large, on-premises type of deployment. So we're looking for large automation platforms that are looking to automate moving to the Cloud or maybe move back from the Cloud to on-prem, but nevertheless have these very high-end availability needs and business continuity needs. Now, if you think about the IMS platform in Bluemix, which might be a traditional hit-the-keyboard and looking for some infrastructure that you might spin up in a born-in-the-cloud company, from day one, we'll have some services available there for you as well. So you can go from a small SMB company that might be born in the Cloud to a legacy Fortune 100 company that has some kind of cloud foundation needs. And between the partnerships of our organizations we have solutions to meet those needs. >> One of the interesting things to me about Veeam is when you started out, when you were in your eating glass mode, you were going to VMUGs and doing all that sort of hard work with the hardcore VMware practitioners. Now you're on your way to a billion dollars. And you're striking partnerships with companies like IBM. How have the conversations changed in terms of who you sell to, who you're interacting with. Obviously more CIOs are probably paying attention to the investments that they're making. How has that changed? >> Well, just from the Veeam perspective, these partnerships are extremely important. Companies like IBM have relationships with enterprises that go back decades. And, for us, that's an opportunity for us to leverage their trusted advisor status with those decision makers in the enterprise. Our business started, and we have a very robust small and medium-size business. We have a strong and growing enterprise business. And we're looking for the enterprise as our growth vehicle to get to a billion dollars. So partnering with enterprise-class partners like IBM is really a key force. >> I mean, you guys can bring your value proposition pretty much to any environment. To your cell phone analogy about the battery power, which we've all seen. But, you know, Dave's on Verizon. I'm on AT&T. So this is the same dynamic in the Cloud. This is where you guys are looking for the growth. Am I getting that right? >> Yeah, I think that's a pretty good analogy. And the way I kind of think of it is, we have the best solutions in the marketplace for availability needs, regardless of the size of the organization, the end-user needs, regardless of the go-to-market strategy and regardless of the platform. So by building, and as we continue to move up market and aggressively build partnerships like the ones with IBM, it allows to address the business needs no matter what those business needs are. And partnerships like the ones with IBM allow us to scale to great lengths. >> Matt and Andy, I want to ask you a question for the folks watching, 'cause here at IBM InterConnect, the IBM relationship that you guys outlined, what's the major to-do for Veeam this year? I mean, in terms of, as you accelerate. You've got 600 million in revenue. What's the core message that you're sending the marketplace in terms of where that growth's going to come from? And what's the tag, what's the bumper sticker for Veeam right now? >> I think it's around the Cloud. I think that's an area where we're putting a heavy investment. We're hiring great people. And for us, we see that data protection is going to have to span the Cloud environment. Now, it's going to be on-prem, it's going to be in the Cloud, it's going to be a hybrid. But from our perspective >> Matt: It's everywhere. >> Yeah, becoming much more robust in the Cloud is really going to be a focus area for us this year. >> Yeah, I would agree. I would tack onto that continuing to scale into the enterprises very aggressively. We've built out a large enterprise organization strictly focused on the enterprise. We've had the technology to address the enterprise needs, but now we've dedicated sales teams and organizational structures just to address the enterprise. And continuing to bring out our Cloud sales organizations and make sure that everyone within our organizations also has a benefit by not only understanding the Cloud business, but our sales teams are compensated to sell Cloud solutions. So it's not like we have a stovepipe organization that just goes sell Cloud, and then somebody else who goes out and sells an on-prem solution. We have teams that are focused on compensation that works together so that our teams can go out and send the message of, "consumption's your decision". We want to help you make the right business decision. We want to help make the right technological decisions. But how you consume, that's up to you. And we're here to help you coach, here to help guide, here to help show some maps on how you can do that. We know we have the right availability solution no matter what needs or what consumption model of what path you want to go down. >> And the enterprise has certainly changed. And you guys understand the enterprise readiness. And you've got product leadership. So that seems to me to be the magic. >> And also the relationship with an organization like IBM because that helps us bridge those gaps. >> Well, congratulations guys, for great success and a good relationship with IBM. Great story. Love the story of being private with this kind of transparency. It's rare, and so congratulations Andy, Matt. >> Thank you. >> Thanks for joining the Cube. More live coverage. Stay with us all day, Day Three of exclusive coverage of IBM InterConnect 2017. I'm John Furrier with Dave Vellante. Stay with us. More after this short break.