Interview: With Cohesity acquiring much of the Veritas data protection business, the residual company will already be highly profitable, taking half a billion dollars a year, employing more than 1,500 people, and determined to grow.
Cohesity is buying Veritas’s NetBackup business but not its Backup Exec (BE), data compliance, and InfoScale storage management operations. These will be combined in a spun-off corporation, code named DataCo, to be led by Lawrence Wong, Veritas chief strategy officer and SVP for Products and Strategy.
B&F talked with CEO in waiting Lawrence Wong, and heard about DataCo’s organization and plans. The interview has been lightly edited for brevity.
B&F: Give me the headline overview of DataCo.
Lawrence Wong: It’s a supercharged startup with around $500 million in revenues and 1,500 employees. It is certainly a good cohort to be in. There’s many, many, many companies of similar size and scope in the software industry. Certainly as we embark on our life as a standalone company, you would imagine that we would intend to pursue growth. And we will do that through continued investment. We believe that there’s a tremendous amount of potential for us to thrive as an independent company.
B&F: Are you profitable at the moment?
Lawrence Wong: Yes, we are actually very profitable. That is one of the advantages that we have that, let’s say, perhaps a traditional startup would not have.
We’re starting off essentially with three businesses with a significant set of blue chip customers. These are the Fortune 500, Fortune 100 customers. In fact, for both InfoScale, and for Data Compliance, we have over 21 percent of the Fortune 500 as customers. These are the largest of the largest banks, largest financial institutions; the most enviable and difficult and most demanding customers, as you would imagine. We’re very lucky and fortunate to have them as customers.
And similarly, with BE, we’ve got thousands of customers already established. So it’s not a issue of whether these products are relevant in the market, or whether there’s a product market fit that you would normally be going through as a traditional startup.
The analogy I actually use internally with our people is that we’re sort of adult children who have left the parents’ house, and now we’re going to stick out on our own. And while normally, you might have a little bit of trepidation doing that, going off to college or something like that, as a young adult, there’s nothing for us to worry about here.
Because we’re established adults with essentially solid credit profiles and solid financial profiles. And what we really have is an opportunity to build, rebuild the company, and do everything the way that we believe it should be done. With every company there’s opportunity to improve, right? So there’s an opportunity for us to use this as a catalyst to actually do that. And that’s exactly what we’re doing.
B&F: Take me through how you describe the three separate business units that you’re going to be setting up.
Lawrence Wong: First the businesses themselves will all have their own customer-facing teams, they will have their own product teams. And what they will share across all three is traditional head office functions. So they’ll share executive management, they’ll share finance; that gives them the ability to thrive, because they will be moving at their pace for their market. Each one of these businesses solve different problems for the enterprise customer; they have different buyers. And they also also have different stages of where they are in the industry. So I’ll go through each one of these.
With InfoScale, this has been a business that’s been part of Veritas from the beginning. It’s actually one of their core offerings. It continues to be very relevant, very sticky with our customers.
I was just on a call with one of the largest financial institutions in the world, inquiring about what we plan to do. I was unequivocal about sharing with him that we are going to be continuing to invest. We’re going to be continuing to maintain the relevancy of this product, we’re actually going to be investing and taking it to the future.
A product like InfoScale, allows them actually to very easily come into and out of the public clouds. So there’s a forward gear and a reverse gear, like I always like to describe it, and gives them a reverse gear. And they’re very pleased with that.
And of course, the next generation of architectures, when you talk about disaggregated architectures, as well as traditional architectures; that’s where InfoScale was. It’s evolving to being able to support that resiliency across both disaggregated architectures and traditional architecture. We’re working with our customers to think through what that intended future state looks like as they evolve. We will evolve with them. So we’re very relevant, and they’re very excited to hear that we’re going to continue to invest. So that’s the first product. It’s about $3 billion TAM (total addressable market) with very steady 5-6 percent growth.
B&F: And the second business unit?
Lawrence Wong: The second business is our Data Compliance business. That sits in a $10 billion TAM, which is actually growing quite significantly at over 11 percent.
Data compliance used to be about back room, regulatory things. Those guys over there in the closet who were risk managers have now moved to the forefront of board level conversations around data, provenance, regulatory compliance, and data privacy. And that has thrust this space now into our minds as the next big potential growth area for DataCo, principally because the environment around us, particularly with the rise of generative AI.
The hype cycle that we’re in with generative AI has really thrust all of these issues to the forefront.
The European Union and the United States are thinking about what sort of governmental regulations need to be there. How do we think about privacy? What sort of liability is there, particularly if you’ve got a machines making decisions? How do you test and ensure the provenance of the data that goes into that GenAI model.
That’s exactly what our software does. Our software allows you to track provenance, allows you to understand what sort of Personally Identifiable Information (PII) you have in your data, where that PII is located. It is all of a sudden, just like how cybersecurity has made backup software exciting and sexy.
I’m thrilled that the rise of AI has brought sexy back to data compliance. We intend that to be a growth vector for DataCo.
It is a highly profitable business today; roughly several $100 million ARR a year and we’ve got over 20 customers today that pay us over a million dollars in ARR. We’ve grown that, by the way, from a handful of customers, less than ten, to over 20 in the last 18 months. We see that potential, and we’re going to continue to invest here. We’re assured that this would be one of the areas in which we see tremendous progress.
B&F: And the third business unit?
Lawrence Wong: BE is one of the original data protection products that were out there for Veritas¹. And then Veritas acquired NetBackup, many, many years ago. BE continues to be a very relevant product for our SMB base now, where we see a huge opportunity today, going forward. It’s roughly a $50 million ARR year business. It is highly profitable. We’ve continued to invest in its roadmap and evolve it. We have a very loyal and enthusiastic customer base.
BE is focused on the SMB; it does not compete in the enterprise space. But we believe very strongly that the SMBs are the backbones of every major economy out there, right from the emerging market to the to the mature markets. They deserve phenomenal data resilience and backup capabilities the same way that a large enterprise would.
Large enterprises experience cyberattacks. They’ve got IT practitioners and CISOs and security experts to help mitigate all this. But I always go back to the SMB; what do they have? We have a mission to help them essentially get that same cyber-resilience that these large enterprise companies have, because they are also going to experience the same attacks.
I think there is a tremendous opportunity to provide something that’s easy, simple to use, and consume and purchase, and bring these folks the same degree, if not better, protection for their data and their systems that we historically provided … to the enterprise. Of course, there’s many folks in this space, but I think it’s a big ocean. And there’s lots of opportunity out there.
And I would say, message to Veeam, is that we are back. We know Veeam has grown off the back of BE. There’s no secret. The industry knows that Veeam had always attacked our base. We’re going to be fighting back now, we’re going to be attacking back.
B&F: You’re stable, you’re well funded, you have an existing experienced team, you have a loyal customer base. It’s not like you’re in trouble, far from it.
Lawrence Wong: In fact, I always say it’s our opportunity to really build on all of this firm, great foundation that we have to thrive as DataCo because all three of these businesses; they’re all data businesses in the sense that they all sit within the secular trends that will only continue to grow and become more important.
We all talk about data as the new oil. Well, all three of these businesses sit right in that secular tailwind. So I think having that wind in our back, having the established capabilities that we have, having the stability that we have, as an established player in the space, I think those are a lot of wonderful attributes to start off with, as this new-age startup. Because a traditional startup would never have that. We have that advantage. And we should be using that. And building off of that.
B&F: Do you have a date for when you achieve independence?
Lawrence Wong: Right now, we are in the throes of our separation activities. And as you would imagine, there are some other activities around getting our financing and regulatory pieces in order. Right now the thinking is the end of the year is when we would close the transaction.
Upon transaction closed, that’s when we would be independent as DataCo. We’re working on our name as well. We’ve engaged an agency to help us think of a new name.
Coming back to the transaction, as part of the transaction, the NetBackup data protection business, the appliances business, and everything associated with that, as well as the Veritas name goes to Cohesity. That’s why we lose our name.
It’s a bit disconcerting to lose your name, but I think we’ll deal with it. I also see it as an opportunity again. Since we are leaving our parents’ house, if you will, we have an opportunity to forge a new identity for ourselves.
And that’s exactly what we’re in right now; an opportunity to look at what a new name could be to help recognize all the goodness of our history, but also with a nod to the future of where we intend to go. And why we believe that we are going to thrive in the future. So those are all sort of the pieces that we’re trying to pull together right now.
Comment
DataCo, whatever its name will be by the end of the year, looks set to hit the ground running as an established business with three profitable operating units marketing their wares in markets with growth TAM characteristics. There is a high energy level in DataCo and a determination to claim what it sees as its rightful place in the world, out from under, if we could put it like this, Veritas and NetBackup’s shadow.
It’s not a left behind, unwanted remnant, but a thriving and profitable trio of businesses that are benefiting from a secular rise in the importance and safeguarding of data for businesses large and small.
Bootnote
¹Veritas acquired the small and medium business-focused Backup Exec, first developed by Maynard Electronics in 1982, when it bought Seagate’s Network and Storage Management Group in 1999. Veritas bought OpenVision Technologies in 1997 and so obtained the enterprise-focused NetBackup product.
