You know the tech sector is in the doldrums when the hot topic in Silicon Valley has a name like "business continuance." Dry as it may sound, technology for recovering lost data has leapt to the top of corporations' shopping lists since September 11. Suddenly, analysts are predicting explosive growth for the unglamorous backup-and-recovery business, and a startup called Avamar Technologies happens to be at the field's technological forefront.

Formerly known as Undoo, the company has been developing its software in Irvine, California, since 1999 and will release its first product this fall. Why so long in the making? What may seem like mundane technology is actually based on some rarefied computer science. Through a technique called commonality factoring, Avamar's software shrinks stored data like a trash compactor shrinks trash. Its algorithms organize data in blocks and eliminate redundancies--like 5,000 copies of an emailed memo, only one of which is needed for backup.

In tests, the software has compressed data to 1/20 its original size, Avamar claims. At that ratio, a company could squeeze 100 terabytes of data (10,240 times the size of your PC's 10-GB hard drive) onto a 5-terabyte array of disks. That's a big leap beyond the two-to-one compression ratio of magnetic tape--the preferred backup medium of most companies--and a powerful lure for technology managers. "It's reducing the management complexity, which resonates with customers," says Avamar's cofounder, Jedidiah Yueh.

Predictions of tape's demise have grown as fast as disk prices have shrunk. Last year, storage expert Richard Lary proclaimed that by 2004, a 3-inch hard drive could cost less per gigabyte than a tape cartridge. Still, some companies cling to tape because disks are crash-prone. Avamar's software can run on thousands of interconnected servers worldwide; if some fail, others can reconstruct lost data.

Small companies like Alacritus Software and EVault are pushing tape-replacement software, too. But Avamar's toughest rivals may be storage giants like EMC and Veritas Software. "The traditional guys will go after this market," says Steve Duplessie, founder and senior analyst at the research firm Enterprise Storage Group. To compete, Avamar is pursuing deals with big hardware makers that can distribute its software with their boxes.

Avamar has raised $22.5 million from Benchmark Capital, CMGI @Ventures, and other investors. Benchmark installed CEO Stephen Hansen, who was formerly chief operating and finance officer at GeoCities, a personal Web-page service. After taking that company public in 1998, he helped sell it to Yahoo for $5 billion. For Mr. Hansen, backup and recovery might not be as exciting as the dot-com business, but it's likely to last longer.