2013 Storage Highlights

2013 M&A deal volume of 25 equals 2012 while total consideration jumps up to $9.5B, primarily driven by Avago’s Q4 purchase of LSI for $6.6B, representing 69% of the consideration for 2013.  In Q4 we also had Xyratex finding a home at Seagate for $374M and the “Hail Mary” merger of Tandberg and Overland. 

For the 25 transactions in 2013, the median deal size was $110M with a Price to Revenue Median of 5.0X.  There were 17 technology focused transactions with a median deal size of $98M and a Price to Revenue Multiple of 6.0X.  The remaining 8 transactions were business focused with a median deal size of $214M and a price to revenue multiple of 1.0X. 

In 2013 storage related venture funding was strong at $955M, a slight decline from 2012’s $978M.  The 43 rounds of funding had an average round size of $22.2M, similar to 2012’s $20.8M average round size for the 49 rounds.  2013 ended with two strong quarters of funding, $339M in Q3 and $249M in Q4, accounting for more than 60% of the year’s funding, which was driven by the Software and Systems segments. 

For the full report please contact John Rotchford, Managing Director, Strategic Advisory Services International, at john@sasillc.com.

Software-defined Everything

Software defined networking (SDN) made a big splash back in July of 2012 with VMware’s $1.26B acquisition of Nicera and again at The Gartner Data Center Summit and The 451 Storage Executive Event in Q4 2013.  Software defined storage (SDS) has become the hot marketing phrase with many start-ups claiming SDS market leadership. More recently, I have heard the terms software defined data center, software defined infrastructure and even software defined power. SDS has even made it onto the Gartner hype cycle for storage related technologies.

SASI Perspective on SDS:

The buzz around SDS is only matched by the confusion of what it is and what it offers IT users. The typical example given for SDS is some flavor of storage software with de-dupe, compression, a file system and various storage services all running on commodity hardware. There are actually a number of interesting companies thrown into the SDS space but I am unsure that using the SDS term really adds value and may even raise problems with market understanding and penetration. As an example, the value proposition of offering scale out storage software on commodity hardware that offers much lower cost than legacy systems resonated well at both events. Stated another way, end users like the notion of Amazon and Google scale and cost models for their own businesses. Adding a the new term “SDS” added little to the conversation and questions quickly turned back to who could provide this new storage software and how it could be integrated into their IT roadmaps. The software defined terms may be around for some time but I would rather hear more about real IT pain points being solved with great enabling technology and how, at the end of the day, it offers cost savings with possibly some analytics, which could even help the topline. Lastly, in terms of Gartner adding SDS to the storage hype cycle, they would be better served by focusing on core technologies like object storage and next generation distributed file systems.