After strong 2017, Veeam CEO says acquisitions, new partnerships being considered in 2018

Peter McKay also emphasized that Veeam has developed a much better sense of a long-term strategy than it had had before, and that steps along this path will be visible in 2018.

Peter McKay, Veeam’s co-CEO and president

This week, Veeam Software announced their 2017 financials – and since Veeam is a private company that does not have to report them, you know they did well. They posted record annual earnings for 2017, with $827 million in total bookings revenue. That’s an increase of 36 per cent year over year, and gets the company closer its stated goal of being a billion dollar a year company by the end of 2018. They also closed the year with their best quarter ever, $299 million in Q4.

Increasing their enterprise sales and their cloud business have been Veeam’s top two priorities for several years, and they did well in both areas in 2017. They closed more deals of $500,000 or more in 2017 than in the past six years combined, and had a 62 percent year-over-year increase in large enterprise deals. The cloud business saw a 50 per cent year-over-year growth in 2017, an increase of 57 per cent year-over-year in cloud bookings for Q4, and continuation of its status of being the fastest growing segment of Veeam’s business, which has been the case  for the past nine  quarters.

“The enterprise and the cloud remain our top two priorities,” said Peter McKay, Veeam’s co-CEO and president. “We continue to invest heavily in the enterprise. There’s a tremendous amount of white space where there’s a lot of dissatisfaction with the legacy providers. Cloud remains in full force as a priority, and has been a growth area for us.”

A third strategic priority for 2018 is continuing new product adoption.

“2017 was really about new product, as we rolled out Veeam Backup for Office 365, and it worked very well for us in 2017,” McKay said. “We also added agent technology for physical servers, to provide virtual cloud and physical backup together. That was a major push for us. New product adoption would now be our third priority.”

McKay said that a key to the continued strong growth in 2017, which he anticipates continuing in 2018, was the ability to take away business from legacy providers. While the industry has commissioned surveys for over a decade showing ample customer willingness to change their backup vendor, that willingness to look seldom translated into actually buying – until now.

“In Q4 we grew 48 per cent while the market grew between 5 and 10 per cent,” McKay said. Where is all the rest coming from? We get our fair share of new deployments, but are also getting a lot from legacy vendors. Over the last two years, there has been a sizable shift in customers’ attitudes to that legacy backup.  They are transforming to digital, and that costs money, and they only have so much, If they have backup that is three years old or older, maintenance is expensive. The cost has come down dramatically since then and the quality is so much better. They can now replace Veritas or Avamar or Commvault because Veeam new costs less than the cost of their existing maintenance. That’s been the biggest driver of why we have been so successful in the conversion of legacy vendors. For customers, it shifts us from being a ‘nice to have’ to a ‘must-have.’ This is especially the case because today, you can’t be down. That forces companies to look the strengths of every application, and every service, with data being more importance than ever before.”

McKay said that areas still exist where significant improvement can be made in 2018.

“There are definitely some markets around the world where we could be doing better,” he said. “In the major markets in EMEA and the Americas and APJ, we are good. We have done well in Tier One and a lot of the Tier Two, but there are some areas in Tier Two where we could do better. We have invested more in a lot of these emerging markets, and expect to be more impactful then in 2018 and 2019.”

While contrary to some media speculation, HPE did not acquire Veeam last year – and is unlikely to in 2018 – Veeam may get more aggressive itself on the acquisition front itself this year. The company has avoided acquisition in the past – with just one acquisition ten years ago that provided them with an enabling technology.

“We definitely had discussions [about acquiring other data protection companies] but they have been short conversations,” McKay said. “We’ve done very well organically, and that has been our primary focus. We’ve done very well by focusing. Why should we acquire a struggling company? We are getting their customers anyway, so why buy them?”

However, while Veeam has no plans to buy competitors, that does not mean that acquisitions are not on the horizon.

“There are ways to extend our platform in new ways, and expand our TAM, by bringing in assets that would be logical extensions of what we are doing now – areas that would be logical extensions for us,” McKay said. “This is something in our plans, but would be adjacencies.”

McKay said that extending their platform with other technologies isn’t just limited to acquisitions.

“It can take many forms,” he said. “We would be inclined to try to start with a partnership, to get things going. We have also done investments in many companies, and we will continue to do that. So acquisitions, and investments and more third party partnerships where we can do integration work are on the table, more so now than before. 2018 will be see more activity from this corporate development perspective.”

McKay also noted that compared to past years, Veeam has developed a clearer understanding of their longer-term needs and strategy.

“We have a better sense of our longer-term version of where we are going,” he said “We spent a lot of time in the last six months looking at these long-term trends, and validated them with our more advanced customers. For the first time, we have a better sense of where we are going and how we will get there. It involves a mixture of organic and inorganic growth, leveraging more of the ecosystem, and  partnerships becoming a bigger part of our future. Today, the major players need to collaborate more on building a cohesive future, and have us work on this, instead of customers having to pull all the pieces together.”