Interview: Charles King on Iron Mountain-Mimosa Tie Up

February 23rd, 2010

Iron Mountain on Monday acquired Mimosa in a $112 million deal. The deal makes a great deal of sense both tactically and strategically for Iron Mountain and the price seems reasonable, according to Charles King, principal analyst at Pund-IT. You can read his perspectives on the deal below:

From a broader industry perspective, Iron Mountain has seen its core business come under a lot of pressure from traditional storage vendors. The archiving space was considered to be pretty un-sexy by a lot of people. There were some tape vendors out there that were certainly making a good deal of money on selling tape arrays and cassettes to companies that wanted their own on-site premises. Before permanent archiving, they would turn to companies like Iron Mountain, which is considered by most to be the leader in permanent archiving services.

But over the past five or six years, we’ve started to see the archiving market become much more stratified, both with higher capacity tape, very aggressive pricing from the traditional tape players as they’ve been pressured by dramatically lower prices in disc archiving solutions like EMC Centera and then the emergence of virtual tape libraries which basically allow companies to seamlessly blend tape and disc archiving into a single environment.

So what is a specialist like Iron Mountain do in a case like that? Its traditional business is being sliced and diced. So it make sense for them to become greater than they were.  We’ve seen that in some previous acquisitions in some of the cloud-based archive offerings the company has been offering as well.

The conventional wisdom is that in the storage business certainly is that business information by definition is valuable. So its’ worth the time and effort for companies to save that information in case they need it for a rainy day. That’s certainly the case for compliance-sensitive data. If a former employee brings a wrongful termination suit against a company, and as part of the discovery process their attorney employee or people close to management were referenced, which can be prohibitively expensive and complex. That’s where these e-discovery solutions come in.

Beyond the compliance and e-discovery, the there’s also the whole issue of being able to take information, much of it captured on e-mail or company documents, what we call unstructured information, and be able to search that and leverage it with business intelligent tools and that’s another part of what Mimosa brings. They do offer enterprise technologies that can incorporate e-mail and SharePoint files as well as document files. Their solutions are meant to be used on-site at the company so it basically gives Iron Mountain an enterprise content management solution within the company that could be deployed within the company’s firewall that compliments its external archive services and cloud services strategy.

This is the kind of opportunities that the big companies fully understand. IBM has poured billions of dollars into the development and acquisitions aimed at this same area. The entire EMC Documentum work group or product group is dedicated to this area and SharePoint content management is a really hot topic right now.

With that type of competition, if Iron Mountain wants to stay in the game and make sure it can take advantage of future opportunities they need to be in this space. Mimosa is not a big company. $112 million is not a big price. It gives them a company with known solutions and with an established customer base in the enterprise. It should give them the chance to get a foothold there and bee one of the companies considered as more and more of these deals move ahead.

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