Commentary: EMC's jump start

By Anders Lofgren

Following closely on the heels of the BMC Software reseller agreement and Patrol Storage Manager acquisition, EMC has announced the acquisition of Legato Systems for $1.3 billion in stock.

This acquisition, which had been widely rumored for the last year, will have a significant impact on customers, competitors, partners and the storage management market. Overall, this is a positive development for EMC and customers. The combination of EMC's market position and resources with Legato's current Xtender product set and technology positions it as the most likely vendor to develop a complete management toolset for the data life cycle.

The acquisition positions EMC as one of the top five backup/recovery vendors with a large installed base of customers. For current Legato customers, EMC offers greater stability than in the past. Current NetWorker and OTG customers should stay the course with their products, although we recognize that a small percentage of Legato customers already had a predisposition toward migrating to another vendor and this acquisition just provides the catalyst.

Current Legato customers, however, may view this acquisition in a different light. Foremost, EMC inherits a significantly large base (31,000 customers, according to EMC) of customers. These are primarily NetWorker customers that catapult EMC into one of the top five backup/recovery vendors.

EMC's practice has been to integrate technologies into existing products or develop new products. Legato will be run as a software division of EMC. Therefore, we believe it is unlikely that Networker customers will be abandoned, although they can expect further integration into EMC products. However, customers that were already considering migrating from NetWorker to any of the other competing products or customers engaging in selective consolidation of packages should view this as an excellent opportunity.

Legato's major backup/recovery competitors will view this event as a window to pursue these customers, and it is likely they will offer special incentives to do so. Interestingly, EMC already had a backup/recovery product in Enterprise Data Manager (EDM), although it had not been as successful as Legato. EMC's current strategy is to support EDM customers and migrate them to a future integrated backup/recovery product. Assuming EMC is able to offer the same deep integrated functionality with EMC hardware as it does with EDM, this should be viewed as a plus for EDM customers.

The story is similar with the OTG products. EMC fills a gap in its product portfolio with the OTG products ? application-specific HSM/archiving, including e-mail archiving. More importantly, it provides the basis for its information life-cycle management strategy, which we believe is an important development that will play out in the next 24 months.

Since we believe the OTG products are the crown jewels, we expect that the current products and development paths will be maintained during the next 12 to 18 months. In addition, jumping ship at this point

		Related story EMC to buy software firm for $1.3 billion Broadening its reach in the storage software sector, the hardware maker says it plans to acquire Legato Systems.

Legato also had a number of partners for its products that may not be comfortable with reselling EMC products. For example, Sun Microsystems has a manufacturing relationship with Legato for NetWorker. StorageTek has an manufacturing relationship with Legato for the e-mail archiving product. Neither of the companies has stated a direction in regard to the future of the relationships.

This is a step in the right direction for EMC (albeit at a high price). The OTG products will form the basis of EMC's data life-cycle management strategy and will catalyze other vendors to develop their own data life-cycle management plays faster. In the longer term, we believe that EMC wants to position itself as a data center management software company (with a strong base in storage management) and that future acquisitions will support this effort.

© 2003, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.