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Deal Radar 2010: KOM Networks

Posted on Wednesday, Feb 24th 2010

KOM Networks provides storage management solutions for companies to enable them to protect and retain their data. Based in Ottawa, Canada, with a sales office located in New Hampshire, KOM aims to enable enterprises of all sizes to be more productive and meet compliance requirements in a cost-effective way and without altering their network infrastructure or daily business routines.

CEO Taher Shaath joined the company in 1991 and has been instrumental in transforming KOM Networks into the company it has become today. Prior to KOM, Shaath was the managing director of Team International, a consulting firm based in Kuwait and the United Arab Emirates. He also held senior management positions at Arab Consultant Group in Kuwait, KNPC and Riyadh Bank in Kuwait.

KOM was founded by Kenneth O. Mair, who along with a partner from the NRC Canada’s National Research Council started K.O.Mair and Associates in a garage in 1969. KOM Networks began operations by providing high-performance components, back-planes, multiplexers and third-party service for DEC (Digital Equipment Corporation) hardware. In 1982, KOM diversified its resources into the development of the first optical storage management software. The company then pioneered the integration of WORM (write once, read many) optical disk drives and management for medical applications and recognized the benefits of this mass storage technology. It redirected its efforts exclusively towards this new field.

The company went through a restructuring in the 1990s and today provides policy-based software storage solutions that help a wide range of organizations archive, access, and protect their digital assets across multiple storage devices and operating platforms. Shaath acquired the company in 1991.

KOM is entirely funded via organic financing based on revenues. While this allows the company to minimize its risks, it also inhibits the speed of growth and expansion, and KOM hopes to raise money in the next six to twelve months.  KOM is also investigating potential acquisition candidates as its solution enhances the existing storage infrastructure of multiple large players. A number of patents protect KOM from these larger players producing similar technologies.

KOM’s long-term exposure to the archive storage market has provided insight into the needs and requirements of clients and customers across various industries. The competitive landscape has continued to change over the course of time. Over the years, several companies would either adopt the KOM approach by attempting to duplicate its product offerings, or they would just disappear, dissolve, or get sold off.  KOM aimed to patent its technology to protect its innovation and customers to ensure that it would be around for the long haul.  Companies such as EMC and VMware are its major competitors.

KOM’s universal archive storage solution (KOMpliance) creates a secure storage repository to protect and preserve the digital files and assets of an organization regardless of the storage hardware it uses. The transparent file system interface leverages the organization’s existing computing knowledge. KOMpliance is based on enterprise-class servers powered by Windows Storage Server and deployed using a range of storage resources.

As 99% of the knowledge required to use KOMpliance is knowledge that a customer already has, there is no learning curve. A number of the competing solutions offer proprietary interfaces to their archive solutions, which force the clients to upgrade or change their existing applications, acquire expensive connectors, and re-learn how they conduct their day-to-day operations. But KOM allows users to use servers they are familiar with. Customers pick the storage they want to use (including excess capacity that they already own) then KOMpliance turns it into a secure encrypted repository that will retain, protect and preserve the files, keeping them accessible at all times. The main differentiator for KOM is the decoupling of data storage and access from the physical hardware to enable support of any storage technology.

The U.S. computer software development industry involves approximately 50,000 companies with combined annual revenue of $180 billion. But software is only one piece of archive storage and has not been identified as a sub-segment of a particular market, but is rather a combination of storage management software and disk-based storage. These markets could be as large as $14 billion by 2013 for software alone and over $60 billion for a combination of storage and software. The estimated market size of just the archive storage market is approximately $23 billion in 2010.

KOM targets small to medium businesses in industries such as medical facilities, the public sector, defense and aerospace, police and law enforcement, education, universities and school boards, and financial services. Clients include NASA, the Department of Defense, the U.S. Navy, Lockheed Martin, DND Canada, NORAD, Volkswagen, BASF, LEGO, Experian, Merrill Lynch, Deutsche Bank, Mount Sinai Medical Center, Angel Medical Center, Cleveland Clinic, Mayo, and Baylor Health.

The company has had a long history in the archive storage and solutions business. KOM has several OEM relationships that account for about 50% of its business. These include companies like Hyland Software, CommVault and Computer Associates. It has partnered with Dell and HP to build the core hardware that the solution is delivered on. In addition, the KOMpliance solution is delivered on a Microsoft Windows platform, which in most facilities is the de facto standard on their existing servers.

KOM is profitable with revenues nearing $10 million. The company focuses on customers of all sizes. As archiving has traditionally been more exclusive to large enterprises that can afford it, KOM is lowering the barriers so even smaller companies can avail of these services. The company’s growth strategy focuses on increasing market awareness and expanding its market reach. KOM also plans to expand the KOMunity Partner Program and expand its intellectual property portfolios.

Recommended Reading:
Acquisition Strategies at EMC and VMware
Deal Radar 2008: Mimosa Systems

This segment is a part in the series : Deal Radar 2010

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lovely post on blog, really great & innovative strategy

arun Wednesday, February 24, 2010 at 11:45 PM PT

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