Tegile also pledged that the channel commitment will remain the same as part of WD, and thinks that the deal will be a plus for partners.
Another of the more mature generation of storage startups is disappearing, with the announcement that Western Digital is acquiring longtime strategic partner Tegile Systems. Terms of the deal were not disclosed, and the acquisition is expected to close the week of Sept. 4, 2017. For Tegile, the deal is all about the much larger market opportunities and internal resources that will come from being part of WD’s Data Center Systems [DCS] business unit. They also believe the deal will be a big plus for the Tegile partner community.
“For Tegile, the deal is a combination of many things,” said Narayan Venkat, Tegile’s Chief Product and Marketing Officer. “Tegile as an upstart has done a very good business. We have a great product, which allows us to win against larger incumbents. We also have over 1700 customers. However, to achieve necessary scale in market and customer penetration for large-scale growth, you need to have economies of scale, particularly as the market is becoming more consolidated and more virtualized. This acquisition gives us the opportunity to build a substantial business, and expand our customer base, and in so doing provide better value proposition for both end-customers and channel partners.”
The deal was facilitated by the deep relationship that existed between the two companies.
“WD has been a great partner to us,” Venkat said. “They were our initial supplier of HDD and then flash and SSDs. As our partnership evolved they became a strategic investor in the company as well. They are the largest supplier of storage infrastructure in the world, and are set up well to capture a sizable portion of the market going forward.
WD DCS has not been that successful in capturing a sizable portion of the market until now, however. WD spent a lot of money to acquire Hitachi GST and then SanDisk, utilizing them as the core of the DCS business unit.
“DCS is still a fledgling business for WD,” Venkat said, “They are the dominant player in HDD and with the acquisition of SanDisk they were positioned well for NAND Flash. They have a clearly expressed intent to build the systems business, and a strategy for long term growth. But data centre systems is still a relatively young business for them, and they are in the process of building it out and scaling.”
Venkat said that Tegile’s technology brings a strategic fit that should allow WD DCS to increase its business significantly.
“They have been focused on Big Data and object storage,” he indicated. “Bringing Tegile in provides a more comprehensive portfolio, addressing the market for fast data workflows where performance is of the essence. When you combine that with the existing DCS business, we are positioned well to provide scalable high performance across object, block and file storage.”
Tegile, like Hitachi GST and SanDisk before it, will be integrated into the WD DCS business unit, but will remain as a separate brand.
Any time an innovative startup is purchased by a much larger company, there are always customer concerns that the innovation will be squelched. Venkat said that the benefits of the deal for Tegile customers should allay those concerns.
“The pace with which we will be able to bring new technologies to market will be able to improve, because of the greatly enhanced resources,” he said. “You will see greater breadth and depth of innovation, not just in software technology, but in components and systems. That very steady pace of innovation from the economies of scale WD provides can be passed on to customers. They also will have no need for concern of future shortages of NAND Flash.”
Venkat said partners will see similar benefits.
“The 100 per cent commitment to the channel will not change,” he said. “More funds will also be available for investment in channel programs. Tegile partners as well as WD partners will both see the benefits of an expanded portfolio of offerings.”
Tegile has between 300 and 350 channel partners, while WD’s partner community is considerably larger. There is extremely little channel overlap. Tegile partners should not fear being swamped by a flood of newly certified partners from the WD side though, said Venkat.
“Many of WD’s partners are more consumer-focused,” he said. “Not that many of the WD partners are focused on systems, and those that are tend to be object storage-focused. Object storage purchases tend to be larger, but it’s more specialized, and there are a lot fewer partners. It’s also a much smaller market. Outside of the hyperscalers, it’s a $2-4 billion opportunity, while all-flash and hybrid is $16-20 billion. I don’t think partner overlap will be an issue here, nor will overdistribution.”