Data protection vendor Veeam has announced it will offer, for the first time, a first-party Backup-as-a-Service product. Called Cirrus by Veeam, it protects data in Microsoft 365 and Microsoft Azure.
The product comes from Veeam’s acquisition of the Cirrus software product (and the team behind it) from Australian company CT4. Cirrus is a cloud-native, largely functions-based/serverless application built in Microsoft Azure that provides a multi-tenant, multi-tier frontend to Veeam Backup 365.
Until now, Veeam’s Backup-as-a-Service was only available through channel partners, its Veeam cloud service providers or VCSPs. Veeam partners can whitelabel and resell the Cirrus product as another offering, but customers will also be able to purchase directly from Veeam for the first time. Veeam is a heavily channel oriented company, and it has been careful to consult with its partners on this move which could be viewed as competing directly with them.
“We’ve spoken to our largest [partners], and initially, obviously, there’s hesitation but they’ve come to fully embrace it much like the hyperscale cloud offerings where they’re reselling,” said Danny Allen, chief technology officer at Veeam.
“We believe that there’s a major part for the local VCSPs to play simply because they understand the local regulations and regulatory requirements of the industry,” he said. “They have relationships with the customer, so we’re not cutting them out.”
It’s a delicate dance, but with every other major competitor offering a first-party as-a-Service option, and upstarts like Alcion demonstrating the customer demand, Veeam would struggle to resist customer pressure to add something like this for much longer. Microsoft itself finally succumbed, announcing first-party backup and archive services for Microsoft 365 in July 2023. Salesforce killed off its native data recovery service in 2020, before bringing it back in 2021 after customer outcry and just recently announced a new and more comprehensive option in August 2023. It seems customers quite like being able to recover important data if it gets damaged or lost.
Dealing directly with Veeam will likely appeal most to two major groups: the very small customers that are already accustomed to purchasing as-a-Service software from other vendors without going through partners, and very large customers that like to form strategic partnerships with key vendors.
“They’re coming directly to Veeam because we have brand recognition, and they’re saying we want this directly from you,” says Allen. “They’re either very large enterprises saying ‘You run this for us’ or, on the lower end of the market, there are people that we don’t even talk to.”
These smaller organizations with 10-30 employees simply sign up, pay the full recommended retail price, and move on. It’s the middle tier that prefer to deal with partners, and will likely continue to do so. Channel partners might need to work a little harder to build relationships with them and clearly demonstrate that they provide value above and beyond what an off-the-shelf Backup-as-a-Service product delivers.
The opportunity is substantial. Veeam estimates that of the roughly 345 million Microsoft 365 paying customers, only around 15% (50 million) have data protection in place. Veeam is currently protecting 16 million of them, around 33% market share. Allen cited research data suggesting CAGR of around 20% for the data protection as a service market more broadly—which includes DR-aaS, cyber resilience and archive—but he believes each sub-component is growing at roughly the same 20% rate.
Breaking down the 16 million Veeam Backup 365 customers provides interesting insights into customer thinking. Veeam has around 10 million customers that currently self-manage Veeam Backup 365. 5 million have Veeam Backup 365 deployed on-site and another 5 million deploy Veeam Backup 365 in the cloud, but manage it themselves. The remaining 6 million use Veeam cloud service providers to obtain Veeam Backup 365 as a managed service.
Veeam believes there is pent up demand from customers that don’t want to manage backup repositories or deal with the operational details of backup infrastructure. Some of them will be purchasing backup for the first time, helping Veeam, and others, to grow into the unprotected 75% of Microsoft 365 customers. Others may reconsider the wisdom of continuing to manage infrastructure and switch from self-managed deployments to VCSP-facilitated or direct as-a-Service options.
There will likely be some sales cannibalization, but centrally managed services can offer economies of scale that could improve Veeam’s margins. It is also better for Veeam to retain customers that might otherwise look elsewhere to meet their as-a-Service needs.
The Cirrus by Veeam brand will continue at least until Veeam completes its backend integration of the technology into Veeam proper. After that, the brand will switch to something more clearly part of the Veeam portfolio, likely sometime in Q1 of 2024.
It remains fascinating how data protection continually reinvents and renews itself as a category. The response from Veeam’s competitors and customers alike will be interesting to watch.
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