 From the SiliconANGLE Media office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. I want to welcome to this week's episode of theCUBE Insights, powered by ETR. In this breaking analysis, I'm going to provide a little detail in the recent announcement that Insight Partners was acquiring Veeam for $5 billion. You know, there's a lot of information on the announcement in press releases and in news articles. So what I really want to focus on is what it means for the industry generally and for the data protection of community specifically. So very briefly, this was a $5 billion exit for Veeam on top of a $500 million investment led by the same Insight Partners last year. And I think of that earlier investment as kind of a rent with an option to buy. New management is being promoted from within, which I think is significant, to replace the two founders. And Andre Baranov and Ratmir Temishev are going to step down after the transition and give up their board seats. And Veeam is a fascinating company. It started in the 2006, 2007 timeframe after the two founders who met in college formed and sold Alita software to Quest. And then they started a company called Amust Software, which they created, from which they created Veeam. You never hear about Amust, but I believe it's the engineering and development arm of Veeam. Now the new CEO of Veeam, Bill Largent, told theCUBE that Amust is now a wholly owned subsidiary of Veeam and it won't affect any of the engineering assets that exist in Prague and in Russia. So this is the thing about Veeam. It's a very closely held company controlled by its two founders with a domicile in Switzerland. And my understanding is Baranov is, well, he's the technical guru and he's a resident of that country in Switzerland. And the HQ there is very lean with the sizable engineering teams as they say in Russia and Prague. Now Temishev resides in the U.S. and he's a marketing genius to help create this company. And it's always the punched above its weight class with epic parties and great products. Now interestingly, Veeam's rise, it coincided with the ascendancy of Veeamware and Veeam became the standard backup software for small to medium sized companies within Veeamware shops. Their products are renowned for being simple and working as advertised and their customer support is outstanding by all accounts. But the U.S. business lagged despite the fact that most of Veeamware's business is in the Americans. You think if they super glue themselves to Veeamware their Americans business would be higher. But so a few years ago, they decided to really go hard after the enterprise and they brought in Peter McKay from Veeamware and he began to build up a U.S. presence. But the enterprise business requires a lot of things that were kind of antithetical to Veeam. So think about long sales cycles, expensive sales people, belly to belly selling with the expectations of roadmaps and clarity around enterprise feature sets. Now McKay was named CEO with Baradoff who continued to run engineering. So it was a bit of a culture clash. You got the sales oriented leader wanting engineering team to turn on a dime and help close large deals and satiate partners like HPE and Cisco. And you got this genius co-leader slash engineer with an incredible track record of delivering features that customer loved. So it really didn't work out and then Veeam scaled back on its ambition somewhat. At its annual user conference in Miami last year, Ratmare came on theCUBE and he talked about how Veeam's Act One was all about dominance in virtualized environment. Let's listen to what he said about Act Two and then we'll come back and talk about it. That was Act One. We dominated it. We grew from zero to one billion within 10, 12 years. We added 350,000 customers over that timeframe and now it's Act Two. What is Act Two? Act Two is again the new major industry transformation to a hybrid cloud. What are the similarities? Again, Veeam is in great position because again, we had the right time at the right place with the brilliant product. Now what we know is that Act Two was about a few things. One, as Ratmare said, hybrid cloud, multi-cloud management, et cetera. But it's also about an awesome exit for its two founders. Wow, $5 billion, 5x revenue multiple. Handing over the reins is really the third thing that this is about and creating more traditional governance structure for Veeam. Now, they're moving from a governance structure that was closely held and opaque to one that is still going to be closely held but ideally somewhat less opaque, which brings me to Insight Partners. You know, in the money world, you basically have a spectrum of investors. On one side, you got banks who are the most conservative and the other side, you got VCs. Now they're the most aggressive, of course. Now somewhere in the middle, you have private equity firms. Now they traditionally invest in companies and they squeeze them for EBITDA and they suck money out. You know, but Insight is more of a hybrid. They invest in a number of companies as VCs. They take a portion of the ownership. And to me, they're more of a sort of rule of 40 PE, meaning it's not just about EBITDA, it's about growth plus EBITDA. So a rule of 30 or a rule of 40 PE company, they can dial down EBITDA and go for growth or dial up EBIT and moderate growth. So it's a great model. So I would expect Insight to bring structure and leadership to Veeam with the goal of taking the company public at some point, because while they like to sell to companies for all cash, I don't see a logical buyer at these kind of price points for this company in this market, which is growing market, but it's still not a giant market. All right, let's shift gears a little bit and get into some of the ETR data. Here's a narrative they put out recently that to me sums it up well. ETR said Veeam is one of the few vendors growing share among customers versus previous surveys in the storage sector. And that said, spending intentions are decelerating and continue to look poor in the largest sectors in Veeam trails, rubric and Cohesity, although on a larger user base. So you can see by this statement that Veeam is of course doing well, but there are some cracks in the enterprise armor that I want to talk about and drill into a little bit. Now this airline customer quote also to me sums up one of the reasons for Veeam's success. What this person said is, if I want to do a Veeam backup to the cloud, it's basically point and click, very easy to use. Now, I've talked to dozens, if not hundreds of Veeam customers and they all say the same thing, it just works, that's kind of their motto. So this is a big reason why Veeam has steadily gained share over time. Now take a look at this chart, which shows the progression over time of Veeam's progress in terms of what ETR calls market share. Now remember, market share is a measure of pervasiveness in the ETR data set. And you can see in the data that Veeam's has had a steady rise since ETR started tracking them at critical mass back in 2014. And you can see the steady decline in the survey for Veritas and Commvault and what appears to be rapid momentum building for rubric and Cohesity to companies that I said in my 2020 predictions breaking analysis that would continue to do well this year. Now, notice I have to black out the January 2020 survey which is ending shortly, so stay tuned for those results. But let's drill into Veeam's performance a little bit more. What this chart shows is a candlestick of net score and market share across all the respondents in the ETR survey for Veeam. Now remember, net score is a measure of spending momentum that subtracts customers that are spending less, the red, from those spending more, the greens. And it's represented over time by this blue line that you see. You can see this blue line bounces around but it holds steady in the past couple of years, you know, pretty generally and really in that 30 to 40% range which you see in the left hand access. Now that yellow line is market share or pervasiveness. It also continues to climb steadily as I showed you in the previous chart. Now again, this is amongst all respondents. Let's now take a look at this chart which isolates Veeam's performance in the largest companies, you know, that enterprise push. Notice the picture is somewhat choppier. Market share is okay, although unlike the previous chart it's not steady and this is stunning. Peter McKay left in October 2018 and that's when Veeam really pulled back on its big enterprise push and you can see is a noticeable and steady drop there based on the ETR data. So what's happening here is we are entering a new chapter for Veeam, act two so to speak, with new leadership and new governance. Danny Allen is taking over as CTO, he previously ran strategy, Bill Largent is going to be CEO, the HQ is moving into the US. So in my opinion, Veeam's issues in the US have been more execution related than anything else. Veeam is a leader, so partnerships with Nutanix, Cisco, HPE and NetApp should continue to improve and be somewhat productive, actually largely productive. Now let's talk a little bit about Veeam's architecture and a point of discussion that you often hear in the community. Veeam's a Windows based architecture. Now is that a blessing or a curse? Well the pros are that the Veeam team came out of a Windows world and they know the platform very well. They are amazingly good at adding function without screwing up performance somewhere else. You saw this a couple years back when they were making a big push in the enterprise and they increased the file sizes and the number of objects that they could support. Another example is when Veeam added cloud backup it was a really good product right out the version one. Unlike many products when they first tried to port to the cloud, that wasn't the case. Recovery from the cloud is very tricky. Things are out of sync, you got a metadata challenge and generally Veeam was able to achieve consistent levels of performance with its cloud product. Now the flip side of this is that if you look at it most if not all modern architectures today are based on Linux and once you start getting into multi-cloud and cross-cloud management you're going to bump into and be interfacing with lots of Linux based systems. So Veeam is going to have to migrate code and maintaining consistent performance is going to be tougher. But as David Floyer my colleague points out there are many many ways to skin a cat and Veeam's engineering team has really, I mean based on its track record has proven that it can solve tough problems and really deliver a great product consistently. I think the bigger issue and challenge for Veeam again is execution in the U.S. and of course the enterprise. Customers in EBC's executive briefing centers they want to see roadmaps and enterprise features and specials and so we'll see if that's something that Veeam has an appetite for. If they do and I'm one of the incumbents I'd be worried that Veeamware could do a land that expand. You know while VMware isn't as strong in large enterprises big companies they buy from Veeam. Maybe it's in a smaller division or remote location but it's not like they don't do business in large accounts they do. So in a way they've already landed and they have an opportunity to expand so that's something to pay attention to. If I'm an enterprise customer I would be pressing Veeam on its roadmap and having them clarify their vision around hybrid and multi-cloud management. Will Veeam be more transparent and willing to do specials for the enterprise and their big partners who expect them you know when they say jump they expect Veeam to say hi. How will Veeam's culture change is the other thing I want to focus on as the two founders step down. Are they going to be able to main their engineering ethos and customer loyalty and then can they figure out the enterprise. Like I'm a big fan of founder led companies. When founders leave cultures often change. When founders stay they're intensely committed even beyond great CEOs who aren't founders. I mean look at Michael Dell. He went to the mat to keep his company against the great icon and now look at Dell Technologies after the EMC acquisition is completely transformed. Look at Oracle look at the lengths that Larry Ellison goes to win. Compare that to a great CEO in Joe Tucci when he was at EMC but you know when he was done it was over it wasn't his baby. So my point is how will this affect Veeam's culture and prospects in the long term. From me the bottom line is the big opportunity is in the US and that's about execution and I expect with the move to the US HQ new management I expect they're going to see consistent market share gains that's going to continue. The enterprise however is going to take longer it's going to require more patience and more money and with Veeam transitioning from essentially the two founders lifestyle business into a company that's really built for an exit they're going to have more money to invest greater transparency I hope and a path to really build on their path successes. So this is Dave Vellante signing out from the latest episode of theCUBE Insights powered by ETR. Thanks for watching everybody and we'll see you next time.