Local tech firms partner, back up each other

FORT COLLINS – Privacy Networks hopes to unlock a national market with its new PrivacyVault product, and it’s starting locally.

The Fort Collins Technology Incubator company recently announced partnerships with two local information technology companies to offer a suite of e-mail security and storage products. Front Range Internet Inc. and Information Technology Experts – ITX – have both signed on to resell Privacy Networks products, including PrivacyVault.

Privacy Networks launched PrivacyVault in June as an additional component of its E-mail Integrity Suite for managed service providers or for direct users, released in February. PrivacyVault automatically indexes, secures, compresses and archives e-mails, allowing users to save and retrieve them instantly.

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The product is available as software, a managed service or as a prepackaged product from a managed service provider. Privacy Networks’ suite also offers encryption, spam and virus filtering and mobile forwarding products.

“This announcement is really about the validity of the company, its products and our market,´ said Dan Ganousis, vice president of sales and marketing for Privacy Networks, of the new partnerships. “The last three months, for us, has been the proof in the pudding.”

ITX and FRII join companies such as Denver-based 3t Systems and Greeley-based WhatWire that can offer their customers the protection of one or all of Privacy Networks’ offerings. Last year, Privacy Networks landed a deal with Hewlett-Packard Co. to be included in HP servers in the Asia-Pacific market.

In each case, the companies partnering with Privacy Networks have had other options for e-mail products.

ITX has been using Englewood-based MX Logic to meet the security needs of its clients. Bruce Hottman, vice president of ITX, said he’s known of Privacy Networks for some time.

“We weren’t looking for a partner,” he said. “What really turned it was the maturity of the products now.”

Hottman was especially interested in PrivacyVault because it gave options that were not previously available with an e-mail security solution: e-mail storage and backup.

“There’s only so much disk space you can have and manage on a network,” Hottman said.

With PrivacyVault, all e-mails – both received and sent – are automatically stored and indexed. IT staffers no longer have to bemoan or bedevil employees who max out their e-mail inboxes. All e-mails will be retrievable without taking up space on hard drives or on local networks.

“It’s something we’d like to roll out and start offering at the start of the year,” Hottman said. The company will begin using the product internally before it offers it to its customers.

ITX has not conducted a customer analysis to see how many users would pick up PrivacyVault, although Hottman said that e-mail storage and retrieval is a concern for many of the company’s clients. He estimates that a user base of 1,000 that would be likely to pick up the product.

Mutually beneficial relationship

Perhaps even a bigger boon to Privacy Networks will be its relationship with FRII, which boasts more than 27,000 local accounts. But the relationship is mutually beneficial.

“We see this as a rather strategic move for us because it adds to the storage and backup products we’re releasing,´ said Bill Ward, president of the Fort Collins-based Internet service provider.

FRII offers its own e-mail integrity product called MailArmory. Ward said that wouldn’t keep the company from also offering Privacy Network’s e-mail solution.

Ward said he’s been familiar with Privacy Networks since its founding in 2003.

“We have decided to go with them rather than buying other products,” Ward said. “There are quite a few solutions, but only a few that address the same issues as PrivacyNetworks.”

One issue is that many solutions are aimed at Fortune 500 companies, not small to medium-sized businesses. Enterprise solutions can cost upwards of $50,000.

“I think we’ll be able to make it much more affordable,” he said.

The company hopes to launch Privacy Networks’ products in early November, but has not yet determined the pricing. Of FRII’s 27,000 accounts, about 70 percent are commercial customers.

“We see the ability to be at 10,000 accounts (with PrivacyVault) in the near-term – the next 12 months,” Ward said.

“There’s many reasons that customers would think about and want to have this type of product,” he said.

EIS compliance issues

Ward added that the benefit of not having to store e-mails on a local hard drive will likely interest all types of customers, residential as well as commercial. For commercial customers, the major benefits will come in the form of legal compliance and retention of information.

Professional service providers, including CPAs and law firms, all have a need to retain information, Ward explained, but for different reasons. What makes PrivacyVault attractive is that the information is not only stored and indexed, but also encrypted to meet strict compliance issues. Not even FRII will have access to content – only the user will be able to retreive that information.

Ward finds the market for e-mail archiving and storage an interesting one because it is being largely driven by federal and state legislation. Several pieces of major and minor legislation in the past few years have changed the way companies view electronic information storage – more simply referred to as EIS.

Federal laws such as the Sarbanes-Oxley Act, Gramm-Leach-Bliley Act and the Health Insurance Portability and Accountability Act have all had a major affect on how companies in a variety of industries handle electronic information. Other bills have set out to determine how public electronic information should be handled, kept and accessed.

“A majority of records are stored digitally now,” Ganousis said. “People have been very laissez faire about it.”

Even for small and medium-sized businesses, such legislation can have resounding effects.

“Everybody needs it,´ said Privacy Networks CEO Steven Berens, of e-mail archiving and retrieval. “It’s business insurance at a very reasonable rate.”

Litigation has become a huge issue when it comes to documentation. E-discovery – the process of producing electronic information and communications in a timely manner – now takes quite a bit of time and money. Many companies are storing information and e-mails on backup tapes.

Ready for next stage

Privacy Networks’ position in the e-mail archiving market could differentiate it from the broader e-mail security market, which is broad indeed. According to research company International Data Corp., the worldwide market for e-mail archiving applications is expected to grow by more than 220 percent during the next four years, reaching $1 billion by 2009.

Company executives see the progress already made by PrivacyVault as a new stage for the incubator company.

“The egg has cracked,” Ganousis said.

The company expects to double its staff within the year, with an emphasis on increased sales and marketing. It recently hired a West Coast sales representative.

It’s been a very active year for Privacy Networks.

Last October, Privacy Networks landed its first round of financing led by Aweida Venture Partners. The company not only received $2.4 million, but also an important partner in the software industry.

“One of the most valuable things that comes with this funding is having one of the great venture capital firms with us,” explained Privacy Networks founder Todd Massey in a Business Report interview last year.

Privacy Networks also put in place an experienced management team, with Berens joining in January and Ganousis in June.

The company is now embarking on a second stage of funding. The $3 million to $5 million Series B round will fund global expansion.