If the deal comes off, it would be a second acquisition of an Israeli storage company for IBM, which acquired grid storage systems startup XIV Ltd.
The Israeli website Globes reported this week that IBM and Diligent are in "advanced talks" for IBM to acquire Diligent for around $200 million. Several industry sources confirmed they had heard about the deal.
Storage insiders said the pairing seems likely. "It would fit with IBM's absolute silence regarding their relationship with FalconStor and what they were going to do with dedupe," said Curtis Preston, vice president of data protection services for consulting firm GlassHouse Technologies Inc.
The VTL dedupe question has been hanging over the major OEMs of FalconStor Software Inc.'s VTL software, none of which have qualified FalconStor's Single Instance Repository (SIR) data deduplication features. Earlier this week, SearchStorage.com reported that EMC is planning to use Quantum Corp.'s data deduplication in its EMC disk library VTLs.
Taneja Group founder Arun Taneja said the large storage vendors are looking for ways to differentiate their data deduplication offerings. "All of these OEMs are saying to themselves, 'FalconStor has the same deal with five other guys,' " he said. "Data deduplication is going to be integral to storage in the future. Going forward, no big company is going to be without it, and it needs to be something they own, since it may be headed for primary storage also."
With Quantum in cahoots with EMC, and Data Domain Inc. too expensive to buy as a public company, Taneja said the field of available "dance partners" quickly narrows to two: Sepaton Inc. and Diligent. Sepaton Inc. has a partnership with Hewlett-Packard Co. and Hitachi Data Systems (HDS) resells Diligent's ProtecTier software.
"None of these situations is totally clean" when it comes to creating partner conflict, Taneja said. But given the other connections with Diligent, it seems the most likely candidate.
From a technical standpoint, Diligent seems like it would be the best match for IBM, according to Evaluator Group analyst Tom Trainer. "It wouldn't surprise me at all, given the success Diligent had in the open and planned mainframe space," he said. "They're a prime target for takeover by the big players like EMC or IBM."
If this deal goes through, it could put HDS and FalconStor at a disadvantage, at least temporarily. "If the acquisition happens, it's a big slam for FalconStor's dedupe, unfortunately," Preston said.
IBM's Israeli connection may not end with Diligent. There are whispers that IBM is also considering gobbling up data protection software company FilesX Inc., which has Israel-based venture capitalist funding.