Hewlett Packard Enterprise Co. will pay $374 million to acquire Zerto Ltd., a venture-backed startup that helps enterprises protect their workloads against outages and streamline public cloud projects. 

HPE detailed in its announcement of the deal today that Zerto is expected to contribute $130 million in annual run-rate revenues at “software gross margins.” HPE anticipates that the deal will become accretive to its adjusted operating profit starting in the 2023 fiscal year.

Zerto raised about $180 million in funding prior to the deal. The Boston-based startup provides a software platform that enables companies to recover applications within minutes if they go offline because of a technical issue or ransomware. 

Moreover, the platform promises to improve companies’ recovery point objective, which is often just as important as the amount of time it takes to bring a workload back online. The recovery point objective is a measure of how much information is lost during an outage. For example, if an application experiences a malfunction and the most recent backup of the application’s data was created a day earlier, any data added by employees less than a day before the malfunction would be impossible to recover. 

Historically, backup products’ recovery point objective was such that administrators could expect a few hours’ worth of data to be lost during an outage. HPE says Zerto’s platform, in contrast, enables organizations to recover data created as little as a few seconds before an application failure. That reduces information loss and thereby mitigates the business impact of outages.

The startup improves data restoration using a technology it calls continuous data replication. The technology allows Zerto to create a copy of an application’s data every few seconds, which means that if there’s an outage or a ransomware attack, administrators can simply bring up a data copy from right before the incident. Creating so many backups would normally require an impractically large amount of storage space, a limitation Zerto addresses by removing duplicate information in backup files to free up capacity.

Acquiring the startup will enable HPE to target the lucrative data protection market more effectively. Spending on data protection-as-a-service products is expected to grow from $7.7 billion in 2020 to $15.3 billion by 2024, according to International Data Corp. research cited by the company. 

The deal is also set to give HPE a bigger presence in another key area: the cloud migration software segment. The same continuous data replication that Zerto harnesses to create backup copies of applications can be used to copy workloads from on-premises infrastructure to the cloud. The startup’s platform supports all three major public clouds.

“Hybrid and multi-cloud mobility is further extended with support for VMware on public cloud with support for Azure VMware Solution (AVS), Google Cloud VMware Engine, and Oracle Cloud VMware Solution,” Tom Black, senior vice president and general manager for HPE’s storage division, detailed in a blog post. “This enables organizations to easily failover or migrate applications to the public cloud as one unified experience.”

HPE plans to integrate Zerto’s technology into its Data Services Cloud Console, a recently introduced cloud platform that administrators can use to manage their companies’ storage infrastructure and the information it contains. HPE built the platform as part of a broader strategy focused on expanding its software-as-a-service portfolio. Software-as-a-service solutions often generate higher-margin revenue than infrastructure products, HPE’s core focus area, and as such can help the company boost its profitability.

As part of the same strategy, HPE last month acquired Determined AI Inc., a startup with software for training machine learning algorithms. The terms of that deal were not disclosed.

HPE expects to close the acquisition of Zerto in its fiscal fourth quarter. The Zerto team will join the company’s storage division. 

Photo: HPE