Legato to benefit from OTG acquisition

The acquisition of OTG should bolster Legato's capabilities over time and will benefit Legato customers. However, OTG customers that bought products from Legato's competitors should expect little future integration.

Event

On 22 February 2002, Legato Systems announced an agreement to acquire hierarchical storage management (HSM) vendor OTG Software for cash and stock valued at $403m. Regulators and shareholders must approve the deal, expected to close in 2Q02.

First take

This deal will benefit Legato customers. Legato will not discontinue or change any products. It will acquire technology and application knowledge that fits nicely into its product portfolio.

However, technical integration of the OTG products into the Legato product line will take some time and effort because the companies have not performed significant integration work in the past.

Enterprises that purchased products from OTG and Legato can now expect increased product integration between Legato NetWorker and OTG's DiskXtender but this will take Legato 18 months (0.7 probability). They can also expect increased support and services through Legato and its channel partners.

However, customers that purchased OTG in conjunction with other storage management vendors (e.g. IBM/Tivoli) should recognise that deeper integration with OTG products will likely not occur.

Legato competitors that have partnered with OTG in the past may eventually seek new partners but they have no sense of urgency to do so because product integration requires a great deal of effort and because the HSM market has not yet shown high growth.

Despite unabated storage growth, HSM technology has not been widely adopted in distributing computing environments and therefore Legato has experienced some difficulty reselling OTG products. However, Legato will not face any difficulty in familiarizing its sales force with OTG because Legato has rounded out its portfolio with OTG products for quite some time.

Analytical Source: Raymond Paquet, Networked Systems Management, Gartner