One Year In, Carbonite CEO Aims Higher in Data Protection Market

Carbonite is one of those stalwarts of the Boston tech scene that doesn’t get a lot of attention—unless it’s about to get bought, say, or its stock price sees a big change.

But the company’s story holds lessons for where the digital world is headed—specifically, in technology areas like data protection, disaster recovery, cloud infrastructure, and security. There’s a multibillion-dollar annual market for those services, and as more companies come online and generate digital assets, it will continue to grow.

Carbonite (NASDAQ: CARB) has evolved to go after that market. David Friend and Jeff Flowers founded the company in 2005 to provide online backup services to consumers. They grew the business steadily, raised more than $67 million in venture funding, and had an IPO in 2011. By then, they were already selling to businesses as well as consumers. But the online backup sector has gotten more crowded, and Carbonite has had to fight to keep growing.

One year ago, Hewlett-Packard and IBM veteran Mohamad Ali was brought in as the company’s new CEO, replacing Friend. He was immediately thrown into the fire, as J2 Global (NASDAQ: JCOM) made a hostile bid last December to acquire Carbonite for about $400 million. Ali and his board of directors rejected the offer.

Mohamad Ali

Mohamad Ali

“We concluded this was not the right deal,” Ali says. “The board has to look at this very thoughtfully and very numerically. If you don’t end up in the [right] price range, you don’t do the deal.”

Ali knows big companies, and he knows acquisitions. At IBM, he led the $4.9 billion buyout of Cognos, among other M&A deals. And at HP, he served as chief strategy officer, reporting to CEO Meg Whitman. (You can hear Ali’s insights on the future of data and the enterprise IT landscape at Xconomy’s Enterprise Tech Strikes Back conference Dec. 2.)

He’s convinced that Carbonite can become a billion-dollar company—or better. With EMC no longer independent (assuming the Dell deal goes through), he says, “we are the next big tech company in Boston.” Asked to name other ascendant players in the region, Ali mentions Akamai, HubSpot, iRobot, and NetScout Systems, which has quietly risen to a $3 billion-plus market cap.

Carbonite’s current valuation is $275 million, and the company has just over 600 employees. That’s pretty modest for a company with billion-dollar ambitions. But Ali has serious plans to get there. As he sees it, small and medium-size companies make up almost 40 percent of Carbonite’s business, and that figure is growing. “We’re sitting in the middle of this huge market,” Ali says. “It’s a greenfield. A lot of these people don’t have disaster recovery services.”

He’s talking about organizations ranging from medical clinics and dentist offices to law firms and nutraceutical companies—all of which need to keep their customer data, applications, servers, and operating systems up and running when something crashes or a natural disaster hits. “We back up every bit—not just files. You can restore the whole thing,” Ali says. That provides “a whole new level of protection for a company.”

Ali’s not too worried about competing against big companies. At IBM and HP, he says, the approach for selling to mid-market customers was to take an enterprise-grade product, pare down its features, and cut the price. That won’t work in an era of consumer-friendly cloud services. He likes his company’s chances, thanks to its “consumer DNA.”

Asked to sum up what he has brought to Carbonite’s culture, Ali says his motto is “Make a buck, and make a difference in the world.” He adds that he is “re-anchoring the company around securing digital life.”

And that’s a clue about the future of Carbonite and the broader tech landscape. Because the company’s software touches its customers’ computers and files, it is in position to provide a key layer of security in the cloud—something that more customers are looking for with every new data breach. Carbonite recently hired several security experts, including David Raissipour from EMC’s RSA Security, Ron Trackey from Onapsis and RSA, and Mingyan Qu, also from RSA. Ali says he’s ultimately positioning Carbonite as a “business continuity and security company.”

Which is all to say that Carbonite and its competitors—which range from startups like Datto to giants like Symantec—can’t rely on being one-trick ponies. They have to find new ways to integrate things like advanced security and networking into their backup and recovery offerings. The ultimate goal is to become an anchor that businesses will rely on to hold steady in the digital sea.

Gregory T. Huang is Xconomy's Editor in chief. E-mail him at gthuang [at] xconomy.com. Follow @gthuang

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