Arsenal Digital Solutions, a fast-growing provider of data protection services, is being acquired by IBM.

Big Blue plans to make Arsenal and its approximately 100 employees part of its information protection services group.

Data storage and protection is a $17 billion a year annual business, and growth continues as more data is produced and increasing government regulation requires more backups as well as security. Demand for data security services is growing at some 16 percent a year, according to analysis firm IDC.

IBM’s RTP campus already numbers more than 10,000, making it the largest such group of employees in the global technology giant.

Financial terms were not disclosed. The deal is expected to close in the first quarter of 2008.

The Arsenal team will remain based in Cary and will report to Mike Riegel, vice president of information protection services for IBM. Riegel is based in the Triangle.

“We have the full intention of all Arsenal Digital employees coming across to IBM,” a spokesperson for Big Blue said. “This is very positive for IBM.”

In 2006, Arsenal reported its sixth straight year of growth in double digits for revenues and customers. The company said 2006 was its “strongest year” but did not provide specific financial information.

Its growth was reflected in the amount of data its technology protects – from 12 to 20 petabytes (1015 bytes) in one year. According to Arsenal, that amount of data is equal to 6 million feature-length movies.

Frank Brick and Steve Horan of Arsenal were among the winners in the annual Ernst & Young Entrepreneur of the Year competition for the Carolinas. Brick is chairman and chief executive officer, and Horan is chief financial officer at Arsenal. They were selected in the technology category. The company partners with other firms to offer digital data hosting and other services.

“As organizations grapple with stringent government regulations and the continuing explosion of business information, they seek a trusted provider of products and services that will meet their needs on a global scale,” Brick said in a statement. “Arsenal delivers a comprehensive information protection portfolio that is adaptable to address businesses of all sizes. Our on-demand capabilities, together with IBM’s global reach and industry-specific knowledge, position us as a strong competitor in this rapidly growing market.”

Brick joined Arsenal in 2002, Horan in 2000.

“Information protection is not optional for businesses today. Continuity of data, applications, and infrastructure means survival in a world that operates around the clock, regardless of a company’s size or industry,” said Philippe Jarre, vice president of IBM Global Business Continuity and Resiliency Services, in a statement.

“IBM’s leading business continuity and resiliency services, combined with managed services from Arsenal, give IBM the most comprehensive range of information protection services, and provide clients the ability to back up and protect their information in a way that is integrated with their business continuity plan,” Jarrie continued.

Arsenal, which was founded in 1998, operates with partners across five continents. The firm blends proprietary data security and hosting technology with a business plan that relies on partners for providing actual data-service facilities. IBM was attracted to Arsenal’s ability to deliver “scalable, on-demand services” coupled with automated infrastructure management.”

IBM said the acquisition of Arsenal and its technology will bolster its own IBM Tivoli data protection services and IBM Systems Storage offerings.

IBM’s Global Technology Services group is the largest business unit within IBM, generating more than $32 billion a year in revenues.

IBM already operates more than 150 data centers worldwide.