Veeam’s Breakout Model: Disrupts with Portable Licensing 

L-R: Veeam Software co-founder Ratmir Timashev and Senior VP of Asia Pacific Japan (APJ), Shaun McLagan

Veeam Software, a global leader in intelligent data management, backup and recovery solutions, announced two weeks ago globally and a week ago in Asia Pacific & Japan (APJ), its newest subscription licensing solution. Known as Veeam Instance Licensing, it is considered an industry game-changer, as this model optimises cost for the multi-cloud customer, with just one portable licensing subscription. Enterprise IT News editor, Lorraine Lee sits down with Veeam’s co-founder, Ratmir Timashev and Senior Vice-President of APJ, Shaun McLagan, as they offer insights into the company’s differentiating factor.

EITN: How’s business?

SM: It’s really good as the company’s total bookings in APJ grew 36% year on year from 2017 to 2018. Globally, this last Q1 quarter, we experienced 41% growth finishing just under US$1bil in revenue. This comes on the back of a consistent double-digit growth over 42 consecutive quarters.

This growth is underpinned by a combination of factors:

  1. Our great technology
  2. Our great ecosystem of channel partners and alliances that is second to none
  3. Other legacy vendors struggling to adapt to the hyper-cloud world whereas Veeam is rising in the virtualisation space.

We just announced a very innovative licensing scheme, whereby instead of licensing per socket or per CPU or per virtual machine (VM), we are looking at managing instances. This is because we are seeing the trend of continual workload movement between on-premise to cloud to between cloud providers and sometimes, back on-premise.

Licensing per instance means that our licence is portable, i.e based on “instance” (or workload) which is a disruptive change in the market, but one which is fair to customers as more of them are taking advantage of the multi-cloud, hybrid cloud platform of today.

EITN: Can you elaborate a bit more on that?

SM: Traditional licensing models is based on capacity, which we don’t want to do because I think it’s very punitive to the customers as storage need is always growing. If one licenses by capacity, your customers will continually keep paying. But since we are seeing that customers are increasingly moving back and forth between on-premise to various clouds to on-premise, we think the idea is why don’t Veeam just license that piece and give the customer the freedom to run that information, that critical workload where they like.

We are not going to “double-dip” charge them if they move their workloads around from one cloud provider to another. Say, if a customer is going to run Nutanix or SAP Hana … where he wants to run it, we won’t tie the licensing to a single machine or VM. Instead, we give him the portability of that licence, which he only pays for once, which is much more flexible.

The opportunity to license structures where we are using more than a subscription-style model is getting very good feedback. Our customers see their cloud strategy as something of a continual motion. We are aligning to where our customers say they are going. We see this as a unique differentiator for us.

EITN: You do have some exclusive resellers such as Cisco, HPE, Lenovo and NetApp. On the other hand, do they demand exclusivity from you?

RT: Exclusivity demands by our resellers from us don’t make sense to them because customers could still buy Veeam and HP, Veeam and Cisco or Veeam and Nutanix, etc anyway by reaching out directly to us. However, it is now more convenient by bundling in Veeam’s data management and recovery products together with their hardware and infrastructure – pricing could be better for customers. For us, it benefits too because in addition to our own resellers, we are adding in their resellers – although previously, there were already 70-80% overlap with HP resellers.

SM: I think we are the best partner not only for HP, Cisco, Lenovo, NetApp but also for other alliance partners like Nutanix, AWS and Azure. Our goal, unlike others, is that we are not looking at their data storage spend. A few others in our market space compete with these vendors, whereas we don’t. They understand that what we do is not their core business. They tried many years ago but then, Cisco realised they can’t sell infrastructure and not talk data management. They see us as a great solution to add on to their offerings. Some of our platinum resellers could be absolutely HP loyalists but say, want to promote the hyperconvergence of Nutanix. We tell them, great, we can support that. We see ourselves as cloud and hardware-agnostic. If they say they are moving workloads to Azure, we say no problem, we can also help with that.

Some market segment are looking to lock people in, whether via appliances or storage, not us. We are not going down the hardware route, we are always going to be a software company. We just want to make sure that we have a cloud strategy for the next 4 – 5 years. For e.g with the release of some of our technology now, AWS is very excited about the amount of data that Veeam can move to its cloud for long term retention, opening up interesting partnership opportunities there as well.

EITN: Are you referring to the last acquisition – N2WS, acquired by Veeam in 2018?

RT: N2WS is the best provider of cloud-native enterprise backup and disaster recovery system to back-up AWS workloads. You can buy N2WS if you want to back up your data on AWS and restore to AWS. However, if you want to back-up AWS but later restore to Azure, you can have this cloud mobility through Veeam because we integrate N2WS technology with Veeam platform.  You can decouple off the AWS platform like many customers want to, for extra security or protection or compliance reasons.

In fact, in the new update of Veeam product, like-wise you can take your back-up data residing in other clouds and put it into AWS or Azure.

EITN: Are you also looking to work with Alibaba cloud?

RT: Yes, we are looking. We work with any object storage. If our customer wants to use a China-brand logo server, we can support that too.

EITN: A cheeky question – in the process of backing up data, theoretically, you can have a rogue employee who tries to sell your client’s sensitive data because you would have access. How do you deal with this?

RT: We don’t keep the back-up data as we only sell software. We don’t have our own cloud nor storage.

EITN: Well, late last year, there was the case of email breaches suffered by Veeam?

RT: Ah yes, so that was our marketing data. When customers visit our website, we have their email addresses for the purpose of sending marketing information. There was a breach that happened a long time ago. That data was sitting there for a few years in an AWS platform. We hired a 3rd party independent security team, an auditor firm and they found that nobody else had access other than a particular researcher. That data were names and email addresses, not highly-sensitive data such as credit card information, home or work addresses but this incident has been dealt with and remedial actions taken.

EITN: Describe the global trends and insights for customers embracing the cloud.

SM: The adoption of a public cloud is prevalent, however customers are realising that cloud is not necessarily the destination. They are getting more discerning with movement between clouds as they assess which ones are better or more economical for their different data-type and also moving some workloads back on-premise.

The growth in Microsoft Office 365 is a great example where people are asking, why run an entire email infrastructure on-premise which is complicated, expensive with opportunity for downtime, when we could use Office 365. Adopting Office 365 is in fact a cloud-strategy, even if someone purports not to be cloud-adoptive. One of our fastest moving products in 2018 was in fact, protecting Office 365 data. We continue to see that as a big growth engine for us. We also see organisations moving towards hyperconverged technologies like Nutanix and Cisco, away from legacy separate Storage Area Network (SAN). Our alliances there are taking off really well.

EITN: Is the trend in APJ mirroring the global trend or are we moving ahead?

RT: In APJ, the most cloud-adopted countries are Australia and New Zealand, whereas Japan is behind.

SM: NZ has earthquakes that make the use of cloud an imperative. It’s a highly virtualised workload there. Malaysia is right there in the middle. Japan is always more complicated, however though slow, we will see it grow. Hong Kong is a very mature market with multiple vendors.

EITN: How many distributors do you have in Malaysia?

SM: We have two distributors, namely ECS Pericomp and Ingram Micro as well as two cloud aggregators, Crayon and Rhipe.

EITN: How are you going to spend the fresh funding of US$500m from Insight Venture Partners? What slice does APJ get?

RT: We are investing aggressively here. We just opened our new office in Singapore recently and is looking at Shanghai and Tokyo soon. We are aiming to increase sales and marketing personnel from 300 to 400 people as well as add on technical support staff in this region. 

SM: Even as some of our competitors are de-investing, we are investing. There will be a clear winner in this data management and recovery space in 3 – 4 years’ time.

RT: Now that there’s a major shift from on-premise to multi-cloud, we are positioning ourselves to protect this space. Data spread is now everywhere and becoming more critical. So the need for protection is even more essential. Not only must we have the capability to move data around easily in a hybrid cloud world, more importantly, Veeam doesn’t charge you for moving your workload, unlike other cloud providers. We are disruptive in this sense as we are the first in the industry to offer this annual portable licence.

EITN: Others may jump onto the bandwagon?

RT: When we started the company 12 years ago, we were the first start-up vendor that licenced its software per CPU socket because that was how VMware licensed. That was very disruptive then as our competitors were charging by capacity or by applications or even both. It took our competitors maybe 3-4 years to follow suite. Now as we move to portable licensing, I believe that eventually, our competitors will follow. Customers will demand that as they would not want to pay twice or 3 times for the workload just because they are shifting from cloud to cloud. In the traditional model, customers have to buy subscription by VMware and/or AWS and/or Azure, etc.

EITN: What sort of adjustment do you expect on your revenue with this shift in licensing model?

RT: Maybe in the short-term there will be a little dip but we do what’s right for customers. As we are a private company, we are not driven by quarterly earnings. In the long-term, customers will buy more because they appreciate that we are fair. Overall, we think that the number of workloads or instances are increasing so fast that it will compensate for the initial adjustment and eventually, we will make good money from this.

SM: We also track 3 data points closely:

  1. Net Promoter Score (NPS) – at 73 NPS, we are 3.5x higher than other market players, placing us in the region of brands like Netflix, Apple and Amazon. Word-of-mouth is our no. 1.
  2. Net new customer position – we added 4000 customers a month globally. Last year, we added a total of 48000 customers whereas our competitors may add only 1000 customers p.m, even lose some!
  3. Revenue – total bookings growth of 16% globally, in APJ 36%!

These 3 statistics together show that customers like our licensing model and know that our innovative technology is saving them some money. This year, we will do US$1 billion in trailing 12-month revenue. The results will show for itself.

EITN: Any acquisition plans and in which part of the world are you targeting?

RT: Yes, we are looking at acquisitions similar to N2WS, particularly in Northern America and Europe.

EITN: Do you intend to branch off to acquire in other tech sectors?

RT: No, as we believe data management and recovery segment in a multi-cloud world is big enough. Gartner estimates the market size of US$7 bil alone in enterprise software backup and US$15bil in data management. We believe it is even bigger when you move data to clouds and the market is growing 5-6% annually.

EITN: What sort of impact to your business do you see with the advent of 5G?

SM: 5G will speed up the velocity for data movement. This just means there will be more data created, which will present even more challenges managing data with the bigger pipes. Continuous data protection (CDP) in real time will be needed. Later this year, Veeam will be releasing Veeam Availability Suite v10 offering CDP, which can cater to data recovery in seconds.

EITN: Do you find that you have to educate the market in APJ regarding data protection?

SM: With the General Data Protection Regulation (GDPR came into force in May 2018), even though it’s European, it has a global impact. So that made data management a board-level discussion. The rise of ransomware and malware again made organisations look at their security posture and to think of incident responses to security breaches. The adoption of cloud also made people think of securing and recovering data and certainly made senior management much more aware.

RT: However, sometimes customers are still mistaken. When they use Office 365 or AWS for example, they think that these cloud vendors will take care of and backup their data. In fact, this is not the case. These vendors may provide a resilient infrastructure but it is still the customers’ responsibilities to protect their own data. Microsoft cannot protect you from an email hack if you choose to open a dubious link! This is the aspect that we have to educate the customers.

EITN: How are you harnessing artificial intelligence and machine learning in your product offering?

RT: We now have Veeam Intelligent Diagnostics to analyse the usage logs and data submitted by customers. Intelligent Diagnostics trigger alarms for customers’ misconfigurations and recommend actions in advance. This harnesses the use of machine learning and artificial intelligence, thus allowing elimination of configuration issues without the necessity to address Veeam Support.

EITN: Where do you see Veeam’s trajectory in the coming years?

RT: We are no. 1 in Europe and no. 4 worldwide. We believe we are actually no. 1 worldwide because for the competitors who are ahead of us, i.e Veritas, IBM and DellEMC, almost 100% of their revenue come from existing customers, so they are just getting support revenue. For us, almost 60% of our revenue come from new customers and new licenses. We are gradually taking market share from them year on year, so we target to be no. 1 in 3 years’ time.  We achieved this result organically with one good platform within the last 11 years. Our competitors have been in business 25+ years and they achieved their positions via acquisitions.

SM: Our investment in Malaysia will continue. We are hiring. We are looking at Malaysia as a key hub for this region because of the strong technical and language skills available here.

EITN: New developments to look forward to?

RT: In some regions, people are open to using containers and kernel-based virtual machines (KVM) in China. In Europe, large telcos are building 5G network on KVM. Well, we are developing some functionality in-house and sometimes via acquisitions as that could be faster for us to capitalise.