Journalists at The Intercept, the site founded by Glenn Greenwald and others as a home for Edward Snowden-style disclosures and national security coverage, published a deep dive on Thursday into the security of Microsoft's BitLocker full-disk encryption technology.
In "Microsoft Gives Details About Its Controversial Disk Encryption," The Intercept's Micah Lee followed up on an earlier how-to he'd written about using BitLocker, among other full-disk encryption technologies for various platforms. Lee serves as a combination journalist and resident technologist who helps the site handle the operational security, including source protection and cryptography, for The Intercept. Based on security concerns raised in the feedback to the how-to article, Lee approached Microsoft about specific issues and got some interesting replies from an unnamed Microsoft spokesperson.
According to Lee's piece, the main concerns of the security community about Microsoft's BitLocker technology, which first shipped in versions of Windows Vista, include:
- That it's closed-source Microsoft code that no one but Microsoft and those it invites, be they technology partners or government agencies, may inspect -- a common security community concern about nearly all of Microsoft's proprietary code.
- That BitLocker may rely on a pseudorandom number generator (PRNG) called Dual_EC_DRBG, short for Dual Elliptic Curve Deterministic Random Bit Generator, that many experts believe has been compromised by the U.S. National Security Agency.
- That an important component of BitLocker security, called the "Elephant diffuser," was removed from Windows 8 to potentially weaken its security.
- That Microsoft's real, reported and rumored track record of cooperating with U.S. law enforcement and intelligence agencies makes any security solutions produced by the company automatically suspect, a concern that is closely related to the closed-source-versus-open-source question.
On the PRNG question, Microsoft told Lee that Dual_EC_DRBG is not used by BitLocker or by Windows itself by default. "It has never been the default, and it requires an administrator action to turn it on," Lee quoted the spokesperson as saying. Instead, BitLocker uses the default Windows algorithm, CTR_DRBG.
While the Elephant diffuser was removed, Microsoft cited performance problems caused by the diffuser and a lack of compliance with the U.S. Federal Information Processing Standards (FIPS). "[The Elephant diffuser is] not FIPS compliant, so certain companies and government clients can't use it," Lee quoted Microsoft as saying. Lee also pointed out that LUKS, the respected disk encryption technology for Linux, also lacks a diffuser and is vulnerable to the same types of attacks that not having Elephant diffuser exposes in Windows.
An even less reassuring response, from a technical security and privacy standpoint, came on a question about whether Microsoft can provide access to BitLocker disks to comply with a government order. "The spokesperson told me they could not answer that question," Lee wrote.
In the earlier how-to piece, Lee presented BitLocker as "the best of several bad options for Windows users." In the deep dive, Lee also looks at alternatives, including TrueCrypt, VeraCrypt, CipherShed, BestCrypt, Symantec Endpoint Encryption and DiskCryptor, and arrives at roughly the same conclusion.
"Balancing trust, ease of use, transparency, apparent robustness, compatibility and resources for squashing bugs, BitLocker comes out ahead for the average user," Lee concludes. "Whatever you choose, if trusting a proprietary operating system not to be malicious doesn't fit your threat model, maybe it's time to switch to Linux."
Full-disk encryption is a major pillar of any complete security solution these days. The Intercept has done the Microsoft community a service by turning up some hard facts about the security of Microsoft's full-disk encryption technology. Lee's deep dive gives anyone considering Windows disk encryption the information that allows them to approach the myriad challenges and risks with open eyes.
Posted by Scott Bekker on June 04, 2015 at 1:07 PM0 comments
At its three-day Automation Nation conference in Orlando this week, LabTech executives made clear how important ScreenConnect is to the remote monitoring and management (RMM) tool's future.
ConnectWise, which has an equity stake in LabTech, acquired ScreenConnect in February. Within a month, LabTech integrated the standalone remote control technology into version 10 of its eponymous RMM tool.
In a telephone interview from Automation Nation on Wednesday, LabTech CEO Matt Nachtrab described LabTech 10's support for ScreenConnect as a quick integration that placed buttons for the new technology side-by-side with the company's pre-existing remote control technology, VNC.
Nachtrab makes no bones about how much better ScreenConnect works than VNC. "To remote control, historically they would click VNC. But it would be slow to connect and slow while you're connected. With ScreenConnect, in about 2 seconds you're on that remote computer; and while you're on, it's almost like you're working at that computer," he said.
At the time of the acquisition, Nachtrab asserted that ScreenConnect represented a 95 percent improvement in time to connect compared to VNC. During a keynote this week, another LabTech executive showed some of the conference's 700 attendees a tombstone slide featuring VNC and held a moment of silence for the outgoing remoting technology.
"It's a huge strategic deal," Nachtrab said Wednesday of the importance of ScreenConnect to LabTech's future. "The No. 1 feature used in LabTech was VNC -- No. 1, by far. It just wasn't a very good experience. We replaced the No. 1 feature area of our product, at no additional charge to our customer base, with a very elegant and enjoyable remote control. It's huge for the product of LabTech."
Version 10.5, set for release later this year, will be integrated much more completely with ScreenConnect.
"They're doing a deeper integration of ScreenConnect within LabTech to make it feel like it's more one system," Nachtrab said. Among the items in the roadmap for the ScreenConnect Plug-in for the LabTech 10.5 timeframe are support for Mac agents and an agent-presence indicator, which lights up green to tell an administrator if a device is available to remote in to. Also planned for the plug-in are enhanced deployment options, which allow a client, location or computer to be excluded from remoting capabilities.
"In LabTech for privacy and HIPAA compliance reasons, we have the ability to configure by customer, and even by computer, very granularly what happens when a technician attempts to take control," Nachtrab said. For example, at a hospital computer, a system could be configured to provide an end user a prompt to allow or deny a remote control attempt, or to deny all attempts when a computer is unattended. VNC supports those types of policies in version 10, but ScreenConnect will support them in 10.5.
LabTech engineers are also working to make ScreenConnect the default remote control feature in the 10.5 timeframe for Web Control Center, a lightweight feature set that allows technicians to manage customers' systems while out of the office. The ScreenConnect remoting capability is also being added to Web Portal, an ad hoc support and mobile workforce tool.
The remote control capabilities aren't the only integrations coming in version 10.5. Another major area of improvement is in LabTech Ignite, which is the RMM's engine for application and service monitoring. In an effort to make it more easily customizable, the company is adding Ignite Management Packs, described in a LabTech public roadmap as, "Comprehensive solution packs for application and/or service monitoring enabled with searches, monitors, thresholds and alert actions necessary for management of devices running Exchange, IIS, SQL, etc. These new Management Packs give you the freedom to choose which LabTech Ignite solutions you want to utilize and which ones you do not." Management Packs for version 10.5 will include Web/proxy, messaging, database and network.
Other features coming in LabTech 10.5 include support for Windows 10 and Hyper-V, new Active Directory integrations, a redesigned StorageCraft plug-in for backup, a new HitmanPro plug-in for whitelisting and an ESET plug-in.
The importance of the ScreenConnect addition goes beyond the features of LabTech's future RMM releases, Nachtrab said. Because ScreenConnect is a standalone remote control tool, he said, "It's a nice, light entry point to the LabTech family. It's also fully multinational and multilingual. So strategically ScreenConnect is massively important to the long-term expansion of all the ConnectWise products."
Posted by Scott Bekker on June 03, 2015 at 2:02 PM0 comments
Microsoft on Tuesday named its 2015 Partner of the Year award winners. Here are the winners in the 43 worldwide categories:
Alliance Partner of the Year: Accenture/Avanade
Global Commercial ISV Alliance Partner of the Year: GE Healthcare
Application Development Partner of the Year: Lieberman Software
Application Integration Partner of the Year: nVisionIT
Application Lifecycle Management Partner of the Year: Readify
Big Data and Analytics Partner of the Year: Neudesic
Business Intelligence Partner of the Year: BizData
Cloud Customer Relationship Management Partner of the Year:
Cloud Packaged Solutions Partner of the Year: SADA Systems Inc.
Cloud Platform -- Application Innovation Partner of the Year: VMob
Cloud Platform -- Customer Focus Partner of the Year: bluesource
Cloud Productivity Partner of the Year: Kloud
Collaboration and Content Partner of the Year: AvePoint Inc.
Communications Partner of the Year: Enabling Technologies Corp.
Customer Relationship Management (CRM) Partner of the Year: Accenture/Avanade
Data Platform Partner of the Year: Scalability Experts
Devices and Deployment Partner of the Year: Sogeti
Digital Advertising Partner of the Year:
Distributor Partner of the Year: Tech Data Europe
Enterprise Mobility Partner of the Year: Oxford Computer Group LLC
Enterprise Resource Planning (ERP) Partner of the Year: mcaConnect LLC
Hosting Partner of the Year: Rackspace
Innovative Technology for Good Citizenship Partner of the Year: alligatortek
Intelligent Systems Partner of the Year: Harman
Learning Partner of the Year: QA Limited
Messaging Partner of the Year: Convergent Computing (CCO)
Microsoft Dynamics Industry Partner of the Year: UXC Eclipse
Modern Datacenter -- Customer Focus Partner of the Year (3 winners): Dimension Data, Cisco, NetApp
Modern Datacenter -- Hybrid Partner of the Year: Convergent Computing (CCO)
OEM Device Partner of the Year: TrekStor GmbH
Office and SharePoint Application Development Partner of the Year: Nintex
Open Source on Azure Partner of the Year: Alter Way
Project and Portfolio Management Partner of the Year: Projectum
Public Sector -- CityNext Partner of the Year: LeapThought NZ Ltd.
Public Sector -- Education Partner of the Year: IAM Cloud
Public Sector -- Government Partner of the Year: Advanced Digital Systems Inc. (d/b/a "Mi-Co")
Public Sector -- Health Partner of the Year: Rapid Circle
Public Sector -- Public Safety and National Security Partner of the Year: Black Marble
Small & Midmarket Cloud Solutions Partner of the Year: Adactit
Software Asset Management (SAM) Partner of the Year: COMPAREX
Volume Licensing Partner of the Year: COMPAREX
Windows 8 Custom App Developer Partner of the Year: Black Marble
YouthSpark Citizenship Partner of the Year:
Click here for a full list, including finalists and links to country Partner of the Year Award Winners.
Posted by Scott Bekker on June 02, 2015 at 1:15 PM0 comments
Windows 10 will be available on July 29, Microsoft announced Monday, giving partners a little less than two months to get ready for a massively disruptive change to Microsoft's client operating system business model.
The release is on the early side of industry expectations that the OS would arrive in the second half of calendar year 2015. Unconfirmed reports over the last few weeks had been pointing to a July release. The timing means Microsoft will succeed in having a buzz-heavy OS in the market in time for the critical back-to-school season.
The most significant change in Windows 10 is that the upgrade will be free for most users in the year after release and that they will be able to continue upgrading to the latest version of the OS so long as their device is supported. (For a good overview of the caveats and open questions around what free means, see Kurt Mackie's recent piece.)
Terry Myerson, executive vice president of the Microsoft Operating System Group, unveiled the availability date on Monday in a blog entry titled, "Hello World: Windows 10 Available on July 29," which was a play on both the traditional "Hello World" phrase common for new computer programs and on the "Windows Hello" features in version 10.
Myerson left the actual announcement to Cortana, the digital assistant who made her debut on Windows Phone 8.1 and will be coming to all devices running Windows in version 10. "Windows 10 will be available on July 29, but you can reserve a copy now. Can't wait to be on your PC," a Cortana recording embedded in Myerson's blog post said. Myerson also invited Windows Phone and Windows 10 PC preview users to ask Cortana themselves, although the experience was still buggy. A test on a Windows Phone 8.1 with Cortana brought back a Bing search result, rather than the spoken answer provided in the blog's sound clip.
The July 29 release will only include PCs and tablets. Myerson gave no details on when Windows 10 would be available for Windows Phone or other form factors, such as the Microsoft HoloLens mixed reality goggles that Microsoft is preparing to ship.
In addition to free upgrades, Cortana and Windows Hello, Myerson's blog emphasized several areas of improvement coming in Windows 10, such as the full return of the Start menu, quicker startup and resume, Windows Defender, the new Microsoft Edge browser and Office on Windows.
For partners, the radical change in licensing of Windows upgrades is sure to have unpredictable consequences, especially for licensing solution providers, original equipment manufacturers and distributors. (For more, see "10 Ways Windows 10 Will Affect Microsoft Partners" and "Microsoft Throws Hardware Roadmap for Loop with Windows 10 as a Service.")
Microsoft has offered some traditional resources for partners that highlight new selling opportunities tied to the new operating system features. General Manager of the Microsoft Worldwide Partner Group Gavriella Schuster highlighted a number of marketing decks, training videos and other partner resources in a March blog post.
Given the timing of the release, Windows 10 partner readiness is guaranteed to be a top focus at the Microsoft Worldwide Partner Conference (WPC) on July 12-16 in Orlando, Fla.
Update (6/2): Later on Monday, Corporate Vice President of the Microsoft Worldwide Partner Group Phil Sorgen followed up with a partner-specific post about Windows 10, outlining new resources such as expanded training tools, materials for Windows 10 Technical Preview campaigns and a Windows 10 pre-RTM proof of concept module.
Sorgen's post on his Channel Chief blog acknowledged the scope of the business shift represented by Windows 10: "As I've said in previous posts, times of change can spark the best in our progress and creativity. We think Windows 10 holds a vast opportunity to reinvent productivity and inspire new ways to develop and delight customers."
The bulk of his message focused on concrete opportunities. "By taking license costs out of the equation," Sorgen argued, the Windows 10 free upgrade offer should fuel business segment interest in Windows 10. Sorgen then made the familiar case for partners to move up the solution stack.
He said Windows 10 will enable partners to "[deliver] the traditional set of migration-related projects easier and therefore faster," "deliver a variety of ongoing, higher value services," "secure new universal LOB application projects" and "provision Office 365 and Azure cloud services to your customers."
Posted by Scott Bekker on June 01, 2015 at 9:23 AM0 comments
This week saw a number of high-profile acquisitions, with EMC Corp., Hewlett-Packard Co. and Tech Data Corp. driving the action.
EMC's was the only deal with a dollar figure attached, and it was a big one. The storage giant has a definitive agreement to buy privately-held Virtustream for $1.2 billion in a deal expected to close in the third quarter.
The acquisition is part of EMC's effort to build an end-to-end hybrid cloud infrastructure and services offering. Virtustream will be part of the EMC Federation family with Virtustream's CEO and co-founder Rodney Rogers reporting to EMC Chairman and CEO Joe Tucci.
The Virtustream products -- which migrate, run and manage applications, including SAP, in the cloud -- will be sold direct and through EMC partners.
The HP deal fits into its network functions virtualization (NFV) push, branded the HP OpenNFV Program. The company is acquiring Mountain View, Calif.-based ConteXtream.
Saar Gillai, senior vice president and general manager of NFV for HP, in a blog post described ConteXtream as a provider of OpenDaylight-based, carrier-grade SDN fabric for NFV and a current HP OpenNFV partner. "ConteXtream offers solutions that allow service providers to create a more flexible and programmable network through an SDN/NFV model," he said.
Distributor Tech Data is acquiring parts of Signature Technology Group (STG), a North American datacenter and professional services company, in a deal expected to close next month.
Phoenix-based STG's services will be folded into Tech Data's Advanced Infrastructure Solutions (AIS) division. In a statement on the deal, Joe Quaglia, president of the Americas at Tech Data, said STG will strengthen Tech Data's datacenter offering, diversify the services portfolio and provide an opportunity for the distributor's solution provider partners.
Chuck Bartlett, senior vice president of AIS at Tech Data, signaled that the STG addition would result in packages that could backstop solution providers' other offerings.
"IDC has predicted that over the next two years, more than 60 percent of companies will stop managing their IT infrastructure and rely on qualified service partners to boost efficiency and provide value," Bartlett said in a statement. "STG will complement our AIS offering, giving our solution providers an extension of their business and service levels for their end users. Their specialized, expert skillset in the datacenter will help provide enhanced support for our field organization, better equipping our solution providers to effectively serve complex datacenter environments."
Posted by Scott Bekker on May 28, 2015 at 1:11 PM0 comments
Here at Redmond Channel Partner, we aim to provide an independent magazine and Web site (RCPmag.com) that serve the needs of the Microsoft partner community. As part of our editorial mission, we regularly check up with our readers on how well Microsoft is meeting your needs. Hence, this "RCP Microsoft Partner Satisfaction Survey."
The information you provide will only be used in aggregate and any verbatim quotes we use in articles based on these results will not include your name or company affiliation. None of your personally identifiable data will be shared with Microsoft or any other vendors.
What's the point? Let's face it -- when you give feedback directly to Microsoft through official channels, you've often got to flatter it because you're simultaneously lobbying for resources that it controls. This survey is your chance to help get real, unvarnished feedback to Microsoft that will help it get you products that better meet your customers' needs and get you the programmatic resources that you need to grow your business.
Take the survey here. It's only 10 questions and will only take a few minutes. As an additional thank you for participating, we'll include your name in drawings for three Amazon.com gift cards worth $50 each. So sound off!
Posted by Scott Bekker on May 27, 2015 at 8:45 AM0 comments
Bushel, a SaaS-based mobile device management (MDM) solution for Apple devices, on Wednesday launched an affiliate program that represents the first stage of a channel push.
Bushel grew out of Minneapolis-based JAMF Software LLC, maker of an on-premises Apple device management platform. While Bushel's primary market is Apple ecosystem partners, Bushel Product Manager Charles Edge told RCP that the product makes sense for Microsoft partners and managed service providers (MSPs) looking to manage the Apple devices that crop up around the edges of their customers' networks.
"It's very similar to what Microsoft has done releasing Intune for Windows," Edge said of Microsoft's SaaS solution for system management. "What we're after is policy-based management for small business. We're taking out complexity and the things you need lots of experience to do."
Bushel can be used to manage Macs, iPads, iPhones and iPods. Capabilities of the product include device inventory, app distribution, e-mail configuration, Wi-Fi setting distribution and device protection.
Under the small business-focused pricing model, the first three devices managed by Bushel are free, with supplemental devices costing $2 per month. The affiliate program, which Edge likens to consumer affiliate programs, involves a partner providing a specific sign-up link for customers that returns a percentage of the monthly payment to the partner.
Partners are able to manage devices on behalf of customers only with the customer's individual login, Edge said. So, for example, managing five customers would require five separate logins.
Other elements will be coming to the channel program. "Within a couple weeks we'll have marketing materials, PDFs and leave-behinds, customizable assets so the partners can put their brand on it, and YouTube channels with videos on how to set things up and manage them," Edge said.
Bushel is in a fast-growth stage, climbing from about 500 customers at the formal launch in mid-January to 3,300 organizations now. Anticipating similar uptake with partners, Edge said the company will wait for feedback from the channel on what resources and features to add.
One item that's on the radar but not formally on a roadmap is potential integration with Intune and other management platforms for single-pane-of-glass management. "We're looking at ways to partner with and do integrations with other platforms," he said. "But at the four-month mark, we're still gaining lots and lots of marketshare on the Apple side."
Posted by Scott Bekker on May 27, 2015 at 11:35 AM0 comments
Seven months after buying Riverbed Technology's SteelStore product line for $80 million, NetApp Inc. made the hybrid data protection line more completely its own on Wednesday by rebranding it as NetApp AltaVault.
In the months in between, NetApp marketed the product line as NetApp SteelStore. The newly branded AltaVault will push the product line forward with new capabilities and new appliance models.
The AltaVault brand covers three discrete products types. Traditional AltaVault physical appliances will run NetApp software on NetApp hardware. The AVA400 physical appliance, supporting up to 72 disk drives and 288TB of raw capacity, is available now. A larger AVA800, supporting up to 96 drives and 576TB, is planned for Q3.
Virtual AltaVault appliances run NetApp software on VMware ESX or Microsoft Hyper-V virtual machines on third-party hardware. Cloud appliances for AltaVault are currently available in the Amazon Web Services marketplace and are scheduled to be available in the Microsoft Azure marketplace later this year.
The appliances include inline deduplication and compression, and they integrate with NetApp SnapProtect. Other supported backup software includes Arcserve, CommVault Simpana, Dell vRanger, EMC NetWorker, HP Data Protector, IBM Spectrum Protect, Veeam, Veritas Backup Exec, Veritas Enterprise Vault, Veritas NetBackup, Microsoft SQL Server and Oracle RMAN.
Posted by Scott Bekker on May 27, 2015 at 12:26 PM0 comments
The venerable IT services and solutions provider Computer Sciences Corp. (CSC) is splitting in two.
The Falls Church, Va.-based company, which was founded in 1959, is walling off its U.S. public sector business from the rest of its operations in a move approved by its board of directors and unveiled this week. CSC is a major Microsoft partner, listing Microsoft among its 15 global technology alliances.
The main business will be called CSC-Global Commercial, with customers drawn from Fortune 1,000 companies and non-U.S. government clients. That side of the business accounts for $8.1 billion in fiscal year 2015 revenue, more than 1,000 customers, 51,000 employees and 34 delivery centers globally, CSC said.
The other business will be called CSC-U.S. Public Sector and will serve U.S. federal, state and defense agencies. With $4.1 billion in FY 15 revenues, the public sector business employs 14,000 people, CSC said.
In a statement, CSC CEO Mike Lawrie noted diverging "growth profiles and cash flow dynamics" for the two sides of the business. "Our analysis shows significant benefits of going with a pure-play strategy. We expect this change to enable both businesses to enhance innovation and improve delivery, in ways that are consistent with the rate and pace of the markets they serve," Lawrie said.
The separation is expected to be completed by the end of October. At that point, CSC shareholders will own shares of both companies. CSC announced plans to pay a special cash dividend to shareholders of $10.50 per share when the separation is closed.
Posted by Scott Bekker on May 20, 2015 at 1:12 PM0 comments
In an era in which Microsoft is preaching intellectual property development to its partner choir, the technology giant has named Cireson to the Microsoft National Solution Provider (NSP) program.
San Diego-based Cireson bills itself as a company that enhances Microsoft Azure and Microsoft System Center with its own service and asset management offerings, including the recently unveiled Cireson Platform.
As for the NSP designation, it applies to a group of about 30 partners in the United States that get an extra layer of partner management from Microsoft. The program evolved from the older National Systems Integrator (NSI) designation, which typically covered systems integrators who spanned multiple U.S. regions and had either broad expertise or high-end specialty expertise.
Other NSPs include such well-known Microsoft partners as Perficient Inc., Tallan Inc., SADA Systems, Project Leadership Associates and Nimbo.
Posted by Scott Bekker on May 20, 2015 at 12:15 PM0 comments
For years, Microsoft has used the phrase "better together" as shorthand for all the benefits and special features you get if you run an exclusively Microsoft stack.
At a Microsoft Build Tour event on Monday in New York, one of the customers in a testimonial video used the same phrase. But here's the thing: He was talking about the benefits inside his organization of new interoperability between Microsoft and Salesforce.com. The products that were better together were parts of the Microsoft stack and Salesforce.com's cloud CRM -- not, say, Windows Server, SharePoint and SQL Server with Office.
Even if it was originally an unwitting comment by the customer, the fact that an inversion of a standing Microsoft catchphrase made it into a heavily edited Microsoft promotional video is telling. More telling, the rest of the video included developers talking about how much more open Microsoft is now and, literally, how it's no longer thought of as the "Death Star."
Having sat through Microsoft's presentations for nearly 17 years, it struck me again and again on Monday how many times Microsoft made reference to interoperating with the non-Microsoft world. Yes, the company has said things like that over the years, but the references now are more mature, more matter of fact. In the past, Microsoft presenters might make reference to a necessary competitor, but they'd often do so with a wink or a snide comment. The subtext was often, "Clearly it would be better if you used a completely Microsoft stack, but if you're foolish enough to use this inferior product, we'll deign to work with it."
Nothing felt snide or superior on Monday.
"What we've done over the last two years is really transform the platform," Neil Hutson, a Microsoft technology evangelist speaking on the Build Tour, said of Office in one typical comment. He was talking about how Office is now running on Android and iOS, and he went on to describe all the non-Microsoft languages you can use to develop for Office now. Then he invited developers to take things further. Describing Office Graph, Hutson said, "We have completely opened up the back end."
Other references were to the Windows Universal Application bridges for Android and iOS, frequent references to GitHub and recurring references to Salesforce.com. There was an Apple Mac on stage. One demo showed an Android phone emulator in Visual Studio. Microsoft regularly plugged the new Visual Studio Code, a development environment for Mac and Linux. One of the evangelists used the word "Google" as a synonym for search.
The themes carry over from the main Build show in late April when Azure CTO Mark Russinovich appeared on stage wearing a Docker T-shirt and giving a talk on interoperability between Microsoft and Docker's container technologies.
Clearly, Microsoft still prefers customers to go all-in with Microsoft. "Native is better," Kevin Gallo, partner director for developer ecosystem and platform, said of Windows Universal Apps in a keynote on Monday as he explained the Android and iOS bridges.
But the feel on this Build Tour is that Microsoft is clearly recalibrating its approach to the market. The new Microsoft seems to be opening up to match the speed of open source, mobile and cloud competitors. Microsoft is no longer pretending to itself or to its customers that it can do everything well for everybody -- or that everyone should, or will, wait while it tries.
Posted by Scott Bekker on May 18, 2015 at 12:13 PM0 comments
It's been a wild ride for new Carbonite President and CEO Mohamad Ali. Named to the post on Dec. 4, Ali took charge of a cloud and hybrid backup and recovery solutions company that had received a buyout offer from J2 Global Inc. just two days earlier.
In the crucible of the back-and-forth between J2 and Carbonite, which quickly devolved from a friendly offer into a hostile bid, Ali and the Carbonite board of directors appear to have reaffirmed a vision for Carbonite's future that's different from what many investors see. As it happens, that vision is focused on SMB and is completely reliant on a channel strategy, as opposed to riding out the consumer legacy of the brand.
Ali is well-prepared for such high-profile stress. His last position was chief strategy officer at Hewlett-Packard, where he reported directly to CEO Meg Whitman on the company's restructuring. RCP caught up with Ali in a recent telephone interview to talk about his vision for Carbonite and his view of the channel.
"The investment community is still valuing the company as a lower growth consumer business," Ali said. "One of the things I saw in Carbonite was a really amazing SMB business that was buried in this consumer business."
By annual run rate, Ali argues that Carbonite's consumer business brings in $90 million at a 2 percent growth rate. The SMB business, by contrast, is a $50 million business with 42 percent growth in bookings in the last quarter.
"If you look at the hot cloud companies out there, not too many of them have revenues of $50 million and are growing at over 40 percent," Ali said. He wouldn't speculate on when the SMB business might outpace consumer, but he offered a sort of verbal wink: "You can do the math and figure out where you're going to have the crossover."
"One of the things I saw in Carbonite was a really amazing SMB business that was buried in this consumer business."
Mohamad Ali, President and CEO, Carbonite
That confidence in the future of the SMB side helps explain why Carbonite turned down a $415 million offer from J2, which had also tried unsuccessfully to acquire Carbonite in 2012. In a Carbonite statement on Jan. 9 titled, "Carbonite's Board of Directors Unanimously Rejects Unsolicited Tender Offer from J2 Global," the company said it believed the 27.6 percent premium that J2's $15-per-share offer represented over the unaffected market price on Dec. 2 "substantially undervalues the company." The statement also expressed the board's support for Ali and his channel strategy.
"The new President and Chief Executive Officer has strategies with respect to improved operating and margin performance, scalability of the business and other areas of operational and strategic focus, including expanding the market for the Company's products through broader distribution capabilities, as well as enhanced features and functionality in the product portfolio," the statement read.
In the short term, at least, the stance has been costly. A look at a stock chart covering the December-to-mid-April period looks like steep cliffs on either side of a plateau. One cliff, heading upward, reflected J2's offer when the NASDAQ-traded CARB jumped from an $11.76 close on Dec. 2 to a $14.44 close on Dec. 3. The plateau for most of the December-through-March period fluctuated with the twists and turns in the buyout drama, peaking at a $15.30-per-share close on March 2. The other cliff, heading down, reflected J2's change in strategy to approaching Carbonite about buying only its endpoint business and withdrawing the candidates it had planned to offer for election to Carbonite's board. That cliff goes from a $14.23 close on April 1 down to an $11.59 close on April 6.
The stock value continued to fall to a nadir of $10.03 earlier this month. The announcement Thursday of a $20 million stock buyback program through 2018 by Carbonite briefly brought the price up 7 percent in midday trading before settling down to a little less than a 4 percent gain ($10.62) by close of trading.
Against that tumultuous backdrop, Carbonite has continued to invest in an SMB- and channel-focused future. Its partner recruitment efforts are "on fire," Ali said. "We had 5,400 resellers when I got here. Today we're up to 6,000. Where I'm heavily focused is with the seven big distributors and direct market resellers. From HP, I know some of these executives and CEOs personally. They love what we've done with the 6,000 VARs and are huge believers."
Carbonite also spent a reported $20 million in mid-December to acquire MailStore, a vendor of e-mail archiving solutions for SMBs. "In addition to offering email archiving to businesses worldwide with MailStore's existing solutions, Carbonite will integrate MailStore's robust full-text search and indexing capabilities into our product portfolio to help our business customers better manage, understand and leverage their data," Ali said in a statement at the time. Aside from the obvious SMB appeal of the product, MailStore also already had a Service Provider Edition for channel partners. Incidentally, the MailStore acquisition was a point of contention in a Dec. 23 letter to Carbonite from J2, which contended that the acquisition reduced Carbonite's value by $0.50 per share.
As part of its channel push, Carbonite also commissioned research from IDC showing, among other things, how much small businesses were willing to spend on backup and recovery. The study found SMBs are willing to pay $2,800 a year on average to protect their data, an amount less than some of Carbonite's competition but well in the range of the company's three-server, $799 solution, Ali said.
"That study is underscoring the approach we're taking, which is super-simple products. And since we came from the consumer world, we're able to create these super-simple products [that are also] price disruptive," Ali said. "CSB [Carbonite Server Backup] is six steps to install, compared to 20 to 30 for other products. That product is what's driving 40 percent growth. There's a huge whitespace opportunity in SMB."
Most recently, Carbonite went on a senior executive hiring spree announced May 6 that Ali characterized as channel-oriented. As Ali explains the hires, Chief Marketing Officer Nina McIntyre has experience marketing to the channel; Paddy Sreenivasan, vice president of server engineering, will stitch the products together with the ecosystem; Irwin Weiss, vice president of IT, will work on integrating Carbonite's internal systems with the channel; and Christopher Wey, vice president of corporate development, will bring his long channel and M&A experience to Carbonite.
A month ago, Carbonite declared it was shutting down a process to explore a potential sale of the company -- a process that was originally spun up in response to the J2 offer. In working to fend off a takeover and steadily investing in channel efforts, the company's board and executives seem to be putting real money behind the message that Carbonite's best potential lies in developing the channel and chasing the SMB opportunity.
Posted by Scott Bekker on May 14, 2015 at 3:34 PM0 comments