New Arctera CEO On Post-Cohesity-Veritas Merger Life, AI And Channel Strategy

‘Arctera is a growth business with a phenomenal set of assets. I don’t say it’s probably the world’s oldest startup, but it is certainly one of the bigger ones. It’s not quite a quote, unquote, traditional startup in essence, but we are starting our life with a clean sheet of paper to allow us to build the company that we believe will bring the best out of the three key assets we have as our as a starting point. We’re really excited,’ says Arctera CEO Lawrence Wong.

This month will be remembered for two major events in the data protection and data resilience industry.

First, Cohesity closed its acquisition of Veritas’ enterprise data protection business, centered mainly around Veritas’ NetBackup technology in a $3-billion deal that pushes Cohesity from the number six position in the industry to either number one or number two, depending on analysts’ estimations.

Second, the remaining part of Veritas—its Enterprise Vault data archiving, Infrascale data availability, and Backup Exec data protection businesses—are now part of a brand-new company called Arctera.

Pleasanton, Calif.-based Arctera is led by CEO Lawrence Wong, a former Accenture managing director and, for the three years prior to the close of the Cohesity-Veritas merger, a senior vice president at Veritas.

Wong, who worked closely with former Veritas CEO Greg Hughes on driving that company’s growth, is now looking forward to helping blaze Arctera’s future path. He is aided in that quest by the fact that Arctera is already a profitable and growing company.

“We are a ‘Rule of 40’ company,” Wong told CRN. “And I say that, by the way, not because I’m trying to brag or anything else. But that affords us the opportunity to actually invest in our products and our roadmap. That’s what we intend to do. That’s what we’ve been telling our customers, because the first thing that I hear when I go visit a customer right now is, ‘What’s going to happen to my product.’”

Wong also talked about the importance of combining data resilience with traditional data protection to help businesses thrive in the face of increased ransomware and other cyberattacks, and he outlined Arctera’s business and its opportunities, and also discussed some plans for the coming new year.

There’s a lot going on at this brand new yet massive data protection and data resilience company. For details, read the CRN’s question and answer conversation with Wong, which has been lightly edited for clarity.

How do you define Arctera?

Arctera is the world’s leading data management company. We have over 1,500 ‘Arcterans’ around the world supporting over 30,000 customers, including 70 of the Fortune 100. We're just north of $400 million in ARR [annual recurring revenue) as a company. We are in a market that continues to grow in our favor. We’re in the business of data. Data only continues to grow, and only continues to become more important for every enterprise. And we are fortunate to be in the middle of that trend. We have three what we like to call internally ‘legendary platforms’ that help solve some of the most difficult data management problems for our customers. Each of them sits in a growth market.

What are those three?

We’ve got our data compliance business, which is a roughly a $12-billion business growing at low- to mid-double digits. This is really the world of archiving. This is one of these areas that in the last five years has been driven by the change in usage of data, storing of data, and actual management of data. It has gone from basically being more of a back room cost of doing business to essentially boardroom-level conversations around risk, providence, and essentially understanding what data you have, particularly the dark data, and being able to illuminate it and use it for either unlocking insight or in ensuring that you’re demonstrating compliance to regulatory authorities or in case of legal action.

The second business is around data resilience, which is essentially keeping critical workloads up and running 24x7. We have one of the more unique solutions in the market, with a very strong customer base. Data resilience continues to be a critical issue. It also has become instrumental as an emerging tool for many businesses looking at different infrastructure environments for their workloads. With the focus on public cloud or hybrid cloud, we can provide customers with what we call a forward gear and a reverse gear into each of these different environments because we abstract the underlying complexities of physical data storage that creates for most companies an anchor to the environments that they choose.

Our third product, Backup Exec, is our platform around data protection. Data protection, given cybersecurity issues, has become one of the biggest top-of-mind things for anyone who has data. Backup Exec is focused on SMBs and SMEs. It's a very different market from enterprise data protection. It requires simplicity and ease of use because these folks don't have fancy IT departments with a bunch of engineers. It has to be something they can deploy quickly and manage easily on a day-to-day basis. And they deserve the same level of cyber resilience and protection and ability to recover that large enterprises do. In fact, you could argue that the bad actors are going after small businesses more frequently than they do large enterprises, thinking that they may not have as much security around them. There's a huge market need and a wonderful opportunity for us. All three of these things represent growth businesses for us. And we're thrilled for the opportunity to be able to focus on them as part of Arctera.

Just now you mentioned illuminating ‘dark data.’ In that context, are you talking about data that a company can’t see, or data on the dark web?

It’s the former. It’s data they have but they do not know what it is. That’s one of the biggest things that people learn whenever they run into a cyberattack situation. We always say it's not a matter of if, it’s a matter of when. When a cyber-attack happens and some information has been exfiltrated by some bad actor, a lot of enterprises unfortunately don’t know what's been exfiled. Our tools allow you to classify that information, understand what that information is, understand where it's located, and understand the nature of it so that you can provide the right level of protection for it and have the right mitigation strategies for when a bad incident occurs.

Furthermore, this whole notion of understanding what your data is even more critically important with the rise of generative AI. Regulators are very far behind at the moment in terms of thinking about how they should be managing and creating policies around the use of data in the world of generative AI. This boils down to data provenance. If you're an enterprise using any sort of LLM and tailoring that LLM to solve a problem, more likely than not you will have to demonstrate to either your end customers or, in a litigation, regulators, the provenance of the data used to create the algorithms. All of these things are in the data field because you need to know the data is ready for AI and that it’s free of biases, and you can demonstrate that using a lot of the tools and solutions that we bring.

In the acquisition, Cohesity got Veritas’ legacy NetBackup business and Arctera got Backup Exec. NetBackup has traditionally been enterprise-focused, and Backup Exec SMB-focused. Does Arctera plan to expand more into the enterprise going forward?

No, we’re not. We’re going to focus on the SMB. The SMB is the sweet spot for backup.

Does Arctera compete with Cohesity?

No, not in that manner. Cohesity’s Data Protection business is enterprise-focused. Our data compliance and data resilience businesses are focused on the enterprise. The only business we have focused on the SMBs and SMEs is our is our Backup Exec data protection business.

Do you expect to partner with Cohesity?

We’ve been talking about it. We’re actually in dialog, so I can’t really comment, but yes, it would be very complementary.

With the acquisition of Veritas’ enterprise business by Cohesity, who owns Arctera?

Arctera continues to be owned by the Carlyle Group. There’s nothing on the horizon that will change that that I know of. When you’re in private equity, you’re in the business of buying and improving companies and then selling them off. We will work through that same cycle here where we transform the business and hopefully earn our sponsors a good return.

Is Arctera a profitable business?

Yes, it’s very profitable. We are a ‘Rule of 40’ company. And I say that, by the way, not because I’m trying to brag or anything else. But that affords us the opportunity to actually invest in our products and our roadmap. That's what we intend to do. That's what we've been telling our customers, because the first thing that I hear when I go visit a customer right now is, ‘What's going to happen to my product.’ And then they go, ‘Whew! I’m relieved to hear that you guys are doubling down, that you're investing, and that you're going to be continuing to advance the state of the art in the product.’ Carlyle’s been a phenomenal sponsor here because they have recognized that in the world of software, which is the world that we're in, you don't stop innovating. They are very much behind us as we continue to advance the state of the art in everything we do.

Has Arctera made AI a big part of how you run your own business and/or part of the offerings that you take to customers?

Both. In terms of the offering for our customers, if you look at our data compliance portfolio, our key product Arctera Insight uses a significant amount of artificial intelligence and machine learning to identify where the data is, identify who has access to it, understand where it resides, whether it's PII (personally identifiable information) or not PII. It has a tremendous amount of AI and ML built into it. A lot of innovation has gone into the actual product that we bring to our end customers. It is also being used by customers for AI-based use cases. That's an emerging use case as customers start to adopt AI. We talked about data provenance and the need to understand what data you have and about illuminating dark data. Those are other areas where AI comes up. And then within the four walls of our company, we use a tremendous amount of AI, and we plan to use even more AI as we go forward. With the separation from Veritas, Arctera will build our own new set of IT systems. As you would imagine with any spin-off, we've got a transition services agreement where we're sharing IT functions. But as we go through the next 12 months, we're going to be building our own IT system from the ground up, and that's going to be a modern, data-driven system using AI with all the great tools that help us drive phenomenal growth and productivity in our day-to-day work. We use it today already in pockets of our organization where we feel it is a significant game changer in terms of helping us deliver products better, faster, and of high quality.

Over the last few years, the data protection industry has been moving from merely protecting data and towards adding cyber resilience capabilities, especially in some younger companies like Cohesity and Rubrik. What is Arctera doing in terms of cyber resilience?

Again, we have our three different platforms that address different problems. Cyber is a recurring theme in terms of use cases across each of these, in cyber resilience in particular. Our data compliance platform, which through its classification engine called information governance, lets companies identify what type of data they have so they can apply the right cyber protection policies and manage it. A cyber resilience strategy is first and foremost understanding what data you have, where it sits, and what you need to do with it. That's what our data compliance portfolio does. It has been a huge driver of growth for our data resilience business, which is our InfoScale product line. That is essentially the bread and butter of what we do from the standpoint of making sure that systems are up and running. Cyber has just put an even bigger focus on it. …

Cyber is a big use case for our data resilience business as well. Our data protection business, Backup Exec, is focused on the SMB. Cyber, if it wasn't the reason previously, has certainly become the key reason for SMBs to have a very strong backup strategy. Whether you're a five-chair dental office or a mid-sized company with 100 to 1,000 employees, bad actors are coming after you, and you’ll have to have those capabilities: recovery to an environment that allows you to get back up and running, ability to be able to look at the data you're backing up and make sure it doesn't have any bad things inside it. All of these things apply to the SMB market, but in a context where it has to be simple and easy to use, because they don't have fancy IT departments to help support them the way enterprises do.

How important are indirect sales channels to Arctera?

They’re phenomenally important. We’re a 100-percent channel company. Arctera, particularly given the way we’ve organized ourselves around three distinct business units, can tailor our channel strategy to focus on a set of channel partners that are going to double down with us to solve our customers’ problems. Because each one of these businesses solves different problems for a customer, they have different buying centers. They typically also require highly specialized expertise that some of the larger channel partners have. They can do all three of these things. But you'll find there's a tremendous set of specialist boutique partners who go deep in one of these areas. That gives us the opportunity to go do that, because we don't have a bigger company where we have to do a one-size-fits-all type of channel program where a partner focuses on one product to get to a certain metal status. With us, they can focus on each of these specific businesses.

Does Arctera have an acquisition strategy?

We do, but certainly we can never talk about what we’re gonna go after, right? We're in the business of growth, and we're looking at all the different ways to do that, and if acquisition opportunities come up, we certainly are going to look into them.

Anything else we need to know about Arctera, which may be the oldest data protection industry startup?

What I want you to take away is that Arctera is a growth business with a phenomenal set of assets. I don’t say it’s probably the world’s oldest startup, but it is certainly one of the bigger ones. It’s not quite a quote, unquote, traditional startup in essence, but we are starting our life with a clean sheet of paper to allow us to build the company that we believe will bring the best out of the three key assets we have as our as a starting point. We’re really excited. We have 1,500 Arcterans who are ecstatic to get going.