Datto is developing a business continuity solution for applications in the Microsoft Azure cloud.
The forthcoming solution, along with a threat detection offering based on technology acquired along with security vendor BitDam this week, will be prominent parts of a larger push by Datto into two of the biggest and hottest markets in managed services.
“The themes of cloud and security will be areas of focus for Datto as we deliver new solutions to our MSP partners in 2021,” said CEO Tim Weller today during an earnings conference call today covering the fourth quarter of the company’s 2020 fiscal year.
The new Azure continuity system, which will enter beta testing in the second quarter of 2021 with broader availability to follow later in the year, will include functionality for predicting capacity costs, Weller hinted, adding that users would be leery of deploying a cloud infrastructure continuity solution that lacks such a feature.
“You have to be to tell MSPs what you think it’s going to cost on day one and what do you think it’s going to cost three to five years in, and we’ve done a lot of studying of that,” he said.
Datto already offers a cloud-based continuity solution for PCs and cloud-to-cloud backup support for data in Microsoft 365 and Google Workspace. Its new solution will provide disaster recovery for entire Azure-based workloads. That’s something Microsoft’s own Azure backup offerings can’t do, according to Weller. Even so, he continued, Datto’s product will be more of a boon to Microsoft over time than a threat to its Azure backup revenue.
“A strong Datto Azure continuity solution is likely to bring thousands of MSPs and their entire end user universe towards Azure versus other public clouds, so we think it’ll be symbiotic,” he said.
It’s also likely to help Datto add a new set of cloud service providers to its existing collection of 17,000 partners, Weller continued. “We actually think it’s a great opportunity to gain share. Azure is a big world already, and anybody that’s in there now we are not addressing.”
Adding continuity for Azure environments will also round out Datto’s existing BDR portfolio, according to Weller. “Our solutions will be hybrid cloud focused so partners get a unified user experience independent of whether their workloads are on premises, in private clouds, or in public clouds,” he said.
That will separate Datto from its competition, Weller asserted. “Where people have done Azure backup to date, they’ve generally built something very specific or they’ve done it through acquisition, and they don’t really even have a common platform.”
Weller provided further detail about the BitDam acquisition during today’s briefing. Datto, he said, was already a security vendor by virtue of helping businesses recover data encrypted in ransomware attacks and patching endpoints through its RMM solution. The company added ransomware detection and isolation functionality to Datto RMM last December as well.
Even so, Weller noted, buying BitDam takes Datto into new security territory. “While we have always been in security, this marks the beginning of us offering specific products or features that allow MSPs to grow while selling security with Datto,” he said.
BitDam software will be available to partners beginning later this year, Weller stated, at unspecified prices that will leave ample room for incremental profit.
“We’ve certainly worked back from what end users and MSPs pay there in terms of dollars per seats,” he said. “We’ll price accordingly to make sure we have very good margin for MSPs in that kind of a product set.”
Adding threat detection to Datto’s portfolio, Weller said, is part of a larger series of security initiatives. “We’ve developed a model that’s visualized in three concentric rings: securing Datto, securing our MSP partners, and helping those partners in securing their SMB clients.”
The first of those rings refers to ongoing efforts to identify and eliminate vulnerabilities in Datto products. “We continue to invest heavily in technology and the best information security team in the industry, which leads our efforts to secure our infrastructure practices and products to the highest standards,” Weller said.
The second ring refers to initiatives like the information sharing and analysis center Datto helped launch in 2019. BitDam sits within the third ring.
“Experts increasingly recognize that an attacker will breach any network eventually, and it’s important to be able to respond in real time and operate your business systems while remediating it,” Weller said.
All three rings of Datto’s security strategy, meanwhile, fit within an even larger “cyber resilience” strategy that includes cloud data protection products like the new Azure continuity platform as well.
OpenText, which owns backup vendor Carbonite and security vendor Webroot, uses “cyber resilience” to describe its product vision as well. Acronis has similarly bet its future on a platform combining backup, disaster recovery, anti-malware, anti-ransomware, web filtering, and data authenticity validation functionality, among other features, in a single tightly integrated package.
According to financial results published today, Datto grew subscription revenue 16% year over year in its fiscal fourth quarter to $129 million, and 18% in 2020 as a whole to $485.3 million.
Annual run-rate revenue, a measure of the annualized value of all subscription agreements at the end of a reporting period, climbed 14% last year to $542.8 million. The company expects to collect $142 to $144 million of revenue during the current quarter.
