Datto Grows Backup, Disaster Recovery Business 300% (Here's How)

Datto Grows Backup, Disaster Recovery Business 300% (Here's How)

Datto, a backup and disaster recovery (BDR) company that works closely with MSPs, expects to grow at least 300 percent this year. How is Datto growing so darn fast? MSPmentor found a three-part answer while visiting Datto's headquarters yesterday. Here's an insider's look at the company, and Datto's plan to march forward with MSPs.

First, the big question: How is Datto growing so fast? The three-part answer:

  1. The right product in the right market at the right time;
  2. An open book management style; and
  3. a centralized team in Connecticut that includes all sales, marketing, support and business development functions under one roof.
MSPmentor visited Datto's Norwalk, Conn., headquarters yesterday. The tour and visit included conversations with CEO Austin McChord; VP of Marketing Bill Pisani; and Director of Sales Tom Simon.

On the one hand, Datto is fortunate to be in a growth market. MSPs crave storage -- lots of storage -- for their customers. Plus, customers increasingly understand the value of BDR solutions, especially those tied to cloud computing and cloud services.

By the Numbers

But Datto's recent growth involves far more  than "right place, right time, right product." Consider these company milestones and corporate culture tidbits.
  • The company now employees about 120 people, up from 50 in 2011.
  • Headcount will grow to 160 employees by the end of this year.
  • Datto is profitable, self-funded and generates cash every month.
  • The company's headquarters -- 55,000 square feet -- will soon include an MSP training center.
  • Phones throughout Datto's offices display current day sales statistics, support ticket information and other real-time metrics for everyone to see.
  • Big-screen scoreboards throughout the office share additional support and sales data points.
Basically, there are no secrets within the halls of Datto. Everybody knows how each core department is performing at any specific moment. Twice-weekly meetings, featuring Datto's directors, allow the company to make real-time course corrections.

Like Apple, Only Different

In some ways, Datto has organized itself similar to Apple. All key employees and departments are housed in a single location -- to speed decisions and spark in-hall conversations that trigger new innovations. Steve Jobs used that centralized management approach at both Apple and Pixar.

Please don't misunderstand me: I'm not calling Datto the next Apple. But the company's decision to in-source its intellectual property -- all under one roof -- is rare in the software and technology market.

Technical Mind, Business Vision

CEO McChord is particularly interesting. Said VP Pisani: "He has right and left brain firing on all cylinders. He influences the marketing creative. Then he has an analytical side, a technical side. It does keep us on our toes. He knows sales, marketing, development, operations. By being a master of all, he sets the bar very high."

Yet McChord is down to earth. He greets me dressed casually --  sneakers, jeans, a T-shirt and a business shirt. During an office tour, McChord jumps between business and technology conversations extremely rapidly. Company insiders say he personally programmed the alert system that keeps everyone informed on real-time sales and support data. At the same time, McChord says he wants to build a financially sound business -- which Datto has already achieved.

"Measure everything is a mantra in a lot of businesses. But here, were are fearless in who we share [the information] with. All people [in Datto] need to see our performance numbers."

McChord started Datto in a basement. Early advice came from his dad -- an entrepreneur who specialized in civil engineering. Gradually, McChord says he managed to recruit "people who have passion." An RIT graduate, McChord tapped into his alma mater for some hires. Datto has also tapped into local universities to find tech-savvy employees.

Today's -- and Tomorrow's -- Products

Datto's flagship product line -- the SIRIS -- generates 80 percent of all sales. But keep an eye on GenISIS, a software platform that's designed for MSPs that want to upgrade existing hardware to SIRIS. It's designed to win business from MSPs that already work with Axcient, CharTec, eFolder, HEROware and Zenith Infotech.

It's clear Datto plans to diversify its revenue stream while introducing new solutions to MSPs. One potential area of opportunity: "We want to bring even more value to the data," hints McChord. Could some sort of business analytics push be coming? Stay tuned and keep this in mind: McChord studied bioinformatics in college, and he was deep into analytics and computational problems.

Channel Strategy

McChord says Datto's commitment remains focused on the MSP market. "We will never be direct; we really like the partnerships we have with the providers. We learn from them."

Still, McChord concedes that a pure channel strategy involved an inflection point early on in the company's history. "Our initial MSPs called and said 'don't sell direct.' That was a scary choice at the time. We had to give up 30 percent of our revenue on the idea that there will be future growth in the channel. But the company was so tiny at the time there wasn’t a lot to lose. It gave us instant clarity into who we are targeting."

Poke around and it becomes clear Bill Pisani, VP of marketing, and Shannon Kohn, marketing and channel relations director, are working on some new channel surprises. (Two words: Stay tuned.) During my visit, Kohn was on the road continuing to evangelize Datto to MSPs.

Rising Tide Won't Lift All Boats

Although the overall BDR market is growing, McChord says the "the party has to stop at some point for some vendors. Not everyone is profitable. Those who are losing money will need to shift their business models at some point. Why not have with a profitable model from the start?"

"We want people to understand we're stable," he added. "Sometimes people interpret venture capital money as stability. But that's not a guarantee of stability. In our case our model [self-funded growth] is proven and it works."

Read between the lines and McChord is pointing to potential rivals like Axcient and Zenith Infotech without mentioning them by name.

Axcient is fast-growing and venture backed, and has hired seasoned talent. The company has also built strategic relationships with such companies as Hewlett-Packard, catching on with VARs and MSPs.

Zenith Infotech, meanwhile, was the early leader in the BDR market but defaulted on a bond payment in September 2011, which triggered unrest among some Zenith Infotech partners.

And more recently, potential rivals like Doyenz pulled out of the European cloud-based BDR market amid layoffs. Asserts McChord: "It's highly likely we're the No. 1 provider of BDRs and shipped more BDRs than anyone last month."

It's difficult for MSPmentor to verify that claim since BDR sales are not publicly disclosed. Also of note: MSPmentor is not suggesting a boot-strapped business approach is better than a venture capital approach. Both models have their potential upsides and inherent risks. Axcient, for instance, will likely use its venture capital for a huge strategic bet: Seeking to disrupt the Symantec Backup Exec market, which has a massive installed base.

Datto's Team -- In One Headquarters

When speaking about the Datto team and business leaders in general, McChord says: "Sometimes there's too much fascination with the guy at the top [the CEO]. Everyone is hungry for success here, and eager to serve our partners."

That team lives under one roof. "We want to keep our human capital inside the company rather than outsource that human capital. We know our approach is a competitive advantage."

Among the latest recruits: VP of marketing Bill Pisani, who arrived in February. Also, Director of Sales Tom Simon arrived around two years ago.

Simon is a career sales guy -- with experience in the VAR market (MicroWarehouse) and consumer products. "I was intrigued by Datto because the channel is the customer. Those MSPs are generating revenue off our products so they want to speak with us."

And over the next year or so, watch for Simon and Datto to make an international push. "You'll see us working directly with partners in Canada. And more. International growth is a priority for 2013."

Still, Datto doesn't want to take existing MSPs for granted. Pisani says, "We owe our growth to our partners. We need to support them in any way we can. We'll always supporting our products, not just sell an appliance. We are selling all the service and support that go along with the appliance."

Potential Challenges

What are Datto's major challenges? McChord and other team members point to (A) finding the right talent and (B) managing growth.

On the one hand, Datto is not too far from talent hubs like New York and Boston. And there are plenty of colleges close by from which to recruit talent. But Connecticut is not Silicon Valley, and I do wonder if Datto can continually find local talent to drive a global push.

Meanwhile, there are additional risks for Datto and the broader BDR market. Generally speaking, BDR companies focus mainly on server and desktop data protection. But more and more servers are shifting to the cloud, plus more and more business data lives on smartphones and tablets. BDR companies, at some point, will need to respond to those trends.

A Simple Message

Regardless of future market directions, Director of Sales Tom Simon says Datto's message will remain consistent. "Our pitch is simple: We want to partner with you."

That message echoes across the company. Take one look at Datto's in-office phones, and you'll see real-time partner sales and support data to back up that point.
TAGS: Technology
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