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ExaGrid expands in crowded backup appliance market

ExaGrid CEO says the vendor's revenue grew in double digits last year and he expects to become a public company within a few years.

Since it began selling deduplication backup appliances in 2008, ExaGrid has watched its competition expand in the form of large vendors such as EMC, Symantec, Dell, Hewlett-Packard and Hitachi Data Systems plus a plethora of smaller companies. Yet, ExaGrid continues to grow in the crowded backup appliance market while expanding the size of its appliances and tweaking its dedupe architecture.

ExaGrid claimed it grew revenue more than 10% and was profitable every quarter in 2014. The vendor also began replicating simultaneously while deduping, a process it calls adaptive deduplication. We recently talked to ExaGrid CEO Bill Andrews about the company's expansion, new technology and plans to become a public company within a few years.

In 2014, ExaGrid introduced its adaptive deduplication, which compresses and replicates data simultaneously. How much is that different than what you did before, and why is it necessary?

Bill AndrewsBill Andrews

Bill Andrews: Everybody else does inline dedupe -- the data is broken up, deduplicated and only the unique blocks get stored. It's a compute-intensive process to disk and slows the process down. To do restores, you have to wait until it rehydrates data.

They all have a scale-up model. As data grows, the amount of data processed and deduped grows. We have a grid architecture, so we will double, triple or quadruple the processor memory available as we scale. It allows you to bring extra compute. If the backup window is six hours for 25 terabytes, for us, it's also six hours for 80 terabytes.

How did you dedupe before going to adaptive dedupe?

Andrews: We were post-process before. You had to wait until all backups were done before you started replicating. Our copy at the DR point would've been behind our competitors timewise. Now, as soon as data is hitting disk, we start deduping immediately. We're deduplicating in parallel as backups are coming in.

You say your revenue increased by double digits in 2014, and you were cash-positive in each quarter. Where did you expand?

'We had our first cash-positive year [in 2014]. We finally got big enough where it's working out that we're making money.'
Bill AndrewsExaGrid CEO

Andrews: We've crossed over 2,000 unique customers, and we've surpassed 8,000 appliances sold. Our existing customers' data is growing every year, and they come back and buy appliances and add them to their grid. We also brought on a lot of new customers, larger customers. Our purchase-order size is going up. We have good growth in new customers, especially in the U.S. We're expanding more internationally now, hiring in Europe and in Asia-Pacific. We have a very high win rate when we're in a big deal. Our general direction is to continue to move up to bigger deals.

What constitutes a 'big deal' for ExaGrid?

Andrews: We're not chasing players like Goldman Sachs or State Farm Insurance. We have billion dollar-plus customers, but not Fortune 100 companies yet like Walmart. We'll always be in the midmarket.

In the last three months, we closed multiple six-figure deals. Sometime in 2016, we'll have a grid that supports over one petabyte of data. We're continuing to advance the product to make it bigger and stronger.

When I spoke to you last year, you said cloud backup has 'virtually disappeared' from your market. Has your take on cloud backup changed?

Andrews: We're seeing people put archive data into the cloud, and in the SMB end of the market, people are doing cloud backup. In the market we serve, it's a rare day when anybody brings up backing up to the cloud. No one has the amount of bandwidth to get data into the cloud. Archive data never changes, backup data changes every day. You have to move a lot of data every day for backups. Nobody has that bandwidth. A lot of our customers already have a second data center. It's cheaper for them to drop another system at that second data center than drop it in Amazon.

There will be a day when ExaGrid has the ability to replicate into Amazon for customers who have enough bandwidth. I don't expect a lot of people to use it. We're not under any pressure now to offer it.

Are you big enough now that you don't need more outside funding?

Andrews: We had our first cash-positive year [in 2014]. We finally got big enough where it's working out that we're making money. Our last venture funding was a couple of years ago.

Last year, you said your goal was to get to $80 million in annual revenue in two or three years, and then you would go public. Is that still the case?

Andrews: A couple of more years and we're there at the rate we're going. I've met with major bankers. We'll grow even faster this year. We're adding to our sales team at such a clip, and a lot of the sales additions will kick in over the next year. It takes six to nine months for a sales rep to really kick in and ramp.

In 2016, we'll grow faster yet. We started with 53% more salespeople this year than last year. And we expect to have 66% more sales reps in January 2016 than in January 2015.

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My favorite thing about working with ExaGrid is that they don't (or rarely) obsolete or sunset their products. Makes it much easier to integrate units.
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