Arcserve, StorageCraft emphasize regional, business model synergies in merger deal

The new company, which will be called Arcserve, brings together two 100% channel companies, with StorageCraft’s business being mainly in North America, and Arcserve’s being outside it, and StorageCraft being more focused on MSPs while Arcserve has mainly worked with VARs.

Arcserve CEO Tom Signorello

Two long-time data protection players, both of whom reinvented themselves for the cloud age, are merging. Arcserve and StorageCraft will come together as Arcserve, with the StorageCraft portfolio being branded as StorageCraft, an Arcserve Company. Current Arcserve CEO Tom Signorello will be CEO of the new Arcserve. Douglas Brockett, the current President of StorageCraft, will be President going forward after the transaction receives regulatory approval, which is expected to happen over the next two to three weeks. Shridar Subramanian, StorageCraft’s CMO, will be the new Arcserve CMO. Jock Breitweiser, also from the StorageCraft side, will lead communications.

At a high level, both StorageCraft and Arcserve are quite similar companies. Arcserve has been around since the beginning of the PC era, starting in 1983 as Cheyenne Software, before being acquired by Computer Associates and then spun out in 2014. StorageCraft is newer, starting in 2003, but is still a very mature company. Both started as on-prem solutions, and modernized them for the cloud. Both have their primary focus on the midmarket, although Arcserve extends into the enterprise, while StorageCraft extends more into the SMB. Yet the companies are emphatic that this is not just a deal which increases the merged companies’ market size – although it does do that. They assert that it provides real synergies, particularly around their strength in geos worldwide, and their comparative strength among different channel business models.

“What we have been looking for is geographical diversification, and channel diversification, with access to a large MSP ecosystem and to complementary solutions,” Signorello told ChannelBuzz. “We have a very strong global footprint. We are big in Asia Pacific, Japan and EMEA but our business in North America has been relatively small, even after growing it over the last 18 months, StorageCraft is about 80% in North America. We are about 20% North America. There are strong synergies there.”

Signorello also emphasized that the partner bases of the two companies have been quite different.

“They have a large MSP base, while we have a large traditional VAR and LAR base,” he said. “We are also midmarket and enterprise, while they are midmarket and SMB.”

Douglas Brockett, the current President of StorageCraft, and future President of Arcserve

“A key distinction is that we are very MSP-centric and they are very VAR-centric,” Brockett said. “Internationally, we will be able to bring an MSP-centric model. StorageCraft has been rolling out new services for MSP partners. Office 365 has been growing 25% CAGR for us over the last three years. Our partner business has gone up 23% from Q2 to Q3, built largely around the MSP model. The new company will also have appliance solutions, and native cloud solutions, and will be able to go head to head with any tech in the market and win during bakeoffs.”

Signorello said that increasing the size of the company is an asset.

“Bringing these two businesses together will put us in the top five,” he said. “That will be really meaningful. It’s ultimately about rapid scalability. We will be able to put more presales folks out into the channel. We believe we will have the broadest portfolio under one roof anyone can provide. Regardless of market size, our ecosystem will now protect all data workloads.”

Signorello also stressed that this isn’t one of those deals that makes a company bigger without delivering significant economies within the merged company itself. “Rest assured there are significant economies of scale in pulling two large business together, in bringing support organizations and R&D together,” he said. But this is much more about Go-to-Market and top line focus than the need to drive out significant costs.”

Both executives emphasized that the 100% channel focus of both companies will continue in the new company, and that the new Arcserve will do all it can to stop partners from tripping over each other.

“When two 100% channel focused companies with highly complementary ecosystems merge, I believe it can only be great news for the channel,” Signorello said. “We have roughly 5000 partners and StorageCraft has 5000 MSPs and 5000 VARs. But our partners are mostly in different regions from theirs. I’m not worried about folks stepping on one another. We will do everything in our power to stay away from channel conflict.”

“We are going to bring new capabilities to existing partners, but not new competition,” Brockett added.

“A challenge we both have had from a business perspective is that we are competing against very big players,” Signorello said. “Some competitors are pulling back on their compensation to the channel. We have market-leading profitability for the channel. We traditionally don’t get beat on that and you will see a doubling down on it.”

“We think the channel is healthy and dynamic, and we know nothing works if it doesn’t benefit channel partners,” Brockett said. “Hybrid is the future, even for the SMB, and we want to extend our product portfolio as a combined company.”

What is not on the map, Signorello stated, is migrating customers to a simpler roadmap going forward.

“We want to be really clear about this,” he stated. “Getting customers to shift to new combined product is not a priority. We are committed to supporting existing products.”

Similarly, it is anticipated that third party OEM deals will continue. Datto, for instance, has been a big StorageCraft OEM customer.

“We don’t see anything changing on strategic partnerships,” Brockett said. “We think there’s an opportunity to expand those.”

Signorello also emphasized that this was a business deal designed by the companies involved, not a private equity play.

“It’s not a private equity-led transaction,” he said. “It was led by Doug, myself and StorageCraft CEO Matt Medeiros. We started having exploratory conversations exploratory three years ago, and they picked up again last spring. I feel stronger now than I did nine months ago when I really started digging into this.”

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