Falconstor, SIR and OEMs

This article on Byteandswitch.com highlights enhancements to FalconStor’s SIR deduplication platform, but I have to wonder whether anyone cares. FalconStor was a big player in providing VTL software to OEMs; but their deduplication software has been largely ignored.

FalconStor had their heyday in VTL. They aggressively pursued OEM deals with large vendors including EMC, IBM, and Sun. EMC was the most successful with their EDL family of products. As the market moved to deduplication, you would think that FalconStor would be the default OEM supplier of deduplication software as well. You would be wrong.

Ironically, FalconStor’s VTL success was their downfall in deduplication. Their OEMs realized that they were all selling the same VTL software and did not want to repeat the situation with deduplication.  EMC and IBM, have already announced that they are using alternative deduplication providers.

EMC (26% of FalconStor revenue in 2007) partnered with Quantum.  They now sell VTL appliances based exclusively on Quantum deduplication technology, the Rube Goldberg DL3D 4000 for those still wanting to use the FalconStor with Quantum deduplication, and the non-deduplication enabled EDL. EMC has the challenging task of differentiating each solution and supporting the disparate products. FalconStor will be impacted by EMC’s partnership, and if EMC’s DL3D solutions take off, the impact could be substantial.

IBM decided to take the M&A route and purchased Diligent. Unlike EMC, who at least tried to create a migration path to deduplication with the DL3D 4000, there is no option with IBM.  Existing TS75xx VTLs will have to be forklift upgraded to the new TS7650G which is a complex and costly process. This defection by another OEM is another blow to FalconStor and SIR.

In summary, two out of the three major  FalconStor OEMs are looking elsewhere for deduplication.  The third OEM, Sun, announced a partnership with Diligent in 2007 although it appears that Sun has now focused on FalconStor exclusively. It still remains unclear who is actually selling or buying this stuff. Clearly not IBM or EMC and we rarely see Sun. I have not had a request for a competitive update on FalconStor or Sun for over a year. We compete with almost everyone at different times and it is very odd that SIR is never mentioned. It makes you wonder whether there is something else going on here causing the OEM defections.

In short, it appears that FalconStor’s position in OEM marketings is eroding and ironically, this is attributable to their previous success in VTL software.  FalconStor faces a difficult task of rebuilding their OEM business in a down economy.

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