We are fast approaching the 10th anniversary of the publication of  “The Innovator’s Dilemma,” by Harvard Business School professor,  Clayton Christensen.  Like many of you, I’ve read and re-read the book.  But, if you are one of the few who haven’t read this book, which carried an Amazon sales ranking of #1,285 on April 5, 2007, it seems like the 10th anniversary would be a good time to do it. 

I’ve also read “The Innovator’s Solution,” with an Amazon sales ranking of #1,617, which attempts to answer the “So what should I do about it?” question that logically follows from “The Innovator’s Dilemma.”   The respective rankings only reinforce the notion that there are more people willing to point out problems than there are people willing to solve them.  I recommend this book for anyone who wants to stop complaining about how customers are being duped by the manufacturers of low-quality products and figure out how to participate in the next opportunity wave.

On April 2nd, Data Domain announced the company’s plan for an initial public offering of its common stock.  Using Clay’s language of disruptive innovation,  Data Domain represents, in my opinion, a new-market disruption.  The company’s products enable customers to do things not previously possible.  Borrowing Clay’s language, Data Domain competes against “non-consumption,” which is another way of saying “potential customers who would otherwise do nothing.” Before anyone flies off the handle, yes, I am aware that there are several other suppliers out there supplying, or attempting to supply, similar technology.  Back in September of 2006,  NetworkWorld’s Deni Connor gave you a pretty comprehensive list. 

As with many technologies, Data Domain’s solutions address several different IT jobs (local data backup, local data archive, remote data backup, and remote data archive, to name a few). I believe that part of Data Domain’s success to date comes from the fact that they didn’t target the most-demanding customers, but rather the customers that had no viable alternative.  This focus on unserved customers enabled the company to attain an installed base of more than 600 customers in a relatively short period of time.  Despite Data Domain’s early success, I expect very fierce competition in this market, with every major storage system and server supplier placing or doubling down their bets.  Ultimately, partnerships and routes-to-market will prevail over technology, I suspect, because good-enough will be good-enough. 

That still leaves opportunity at the high end for deduplication companies that are focused on the massive consolidators.  “Massive consolidators” is my term for companies that either act as application and infrastructure outsourcers for a large number of companies or are so large in scale themselves, that they can drive real differentiation by squeezing the last dollar of efficiency out of the IT budget.   For these customers, scale in terms of service, availability, capacity, performance and cost-effectiveness will be key, and only a few suppliers will have the financial strength and technology to compete for these opportunities.  This is rarified air, not for the faint of heart, and will require continual investment to sustain the lead. 

In the area of data protection and archiving, tape will continue to play a role, but companies like Data Domain will eat away at the business over time.  By way of reinforcement, I noted this week a few interesting statistics from Iron Mountain’s most recent 10K filing with the SEC.  Iron Mountain’s tape business (they rotate tapes between the customers’ data centers and Iron Mountain’s storage facilities) grew 1% last year, while the company’s digital business, which is largely remote backup services for servers and PCs grew 23%.   Storage as a service was highly touted in 2001, but was slow to take off independent of application and business process outsourcing.  The advent of data deduplication technology, however, makes transfer of data over wires more affordable and makes the utilization of backend storage at the consolidator/outsourcer massively more efficient.  Iron Mountain, which grew its paper-records business both organically and through acquisition over the course of more than 50 years, is poised to do the same in the digital records business. While it won’t happen over night, Iron Mountain is positioned to become one of the industry’s massive consolidators and an IT process outsourcer.  Over time, they will require technology that delivers not only the highest performance, but the greatest efficiency in a shared resource.