Following a year of large storage acquisitions, it looks like 2011 might be more IPO-friendly for storage vendors.
Two weeks after solid-state storage vendor Fusion-io went public, clustered NAS provider BlueArc Friday registered with the Securites and Exchange Commission (SEC) for a public offering. Nexsan already has an IPO filing on the books and SAN vendor Xiotech’s CEO Alan Atkinson said he is looking to follow Fusion-io’s lead and go public.
BlueArc has gone this far before. It filed for an IPO in 2007 but never followed through because of poor market conditions.
BlueArc, which benefits from an OEM deal with Hitachi Data Systems, has never had a profitable quarter and has lost a total of $230.3 million since it began shipping its storage systems in 2001. Its annual revenue was $74.2 million in 2008, $65.9 million in 2009 and $85.6 million last year, and it lost $19.6 million, $15.8 million and $9.4 million over those years.
In the three months that ended April 30, 2011, BlueArc had revenue of $24.7 million and lost $4.3 million.
The BlueArc filing said the vendor has more than 750 customers with more than 2,000 of its systems deployed.
SAN vendor HDS sells BlueArc’s SiliconFS file system with its storage arrays to give HDS platforms NAS capability. HDS accounted for 41% of BlueArc revenues last year and 45% of its revenues for the quarter ending April 30. BlueArc’s filing said its contract with HDS must be renewed every year. However, Judging from public statements HDS has made, it is happy with the BlueArc relationship.
BlueArc’s filing said it hoped to raise up to $100 million in the IPO. That’s small change compared to some of the storage transactions over the past 12 months. EMC acquired BlueArc competitor Isilon for $2.25 billion last year. Also over the past year, Hewlett-Packard bought 3PAR for $2.35 billion, Dell acquired Compellent for $820 million, and NetApp picked up LSI’s Engenio storage division for $480 million.
The people who run Xiotech are closely watching Fusion-io these days.
That’s because the rollout of its Hybrid ISE solid state storage system this month has increasingly brought Xiotech into competition with PCIe flash card vendor Fusion-io. Xiotech is also looking to go public eventually, and Fusion-io’s IPO this month raised $237 million.
Xiotech CEO Alan Atkinson said Xiotech will ship every unit of Hybrid ISE it could build this quarter, although he didn’t say how many units were built. “This will be the most successful product launch in Xiotech history, and the first of several products on our roadmap in quick succession that will work together,” he said.
Atkinson said part of the success of Hybrid ISE is due to the awareness of the flash market that Fusion-io created with its products and the attention its IPO created.
Xiotech takes a different approach to SSDs than most storage array vendors. Instead of using SSD as cache or plugging SSDs into traditional arrays, Xiotech puts a set amount of SSD capacity along with hard drives in its storage bricks. Each brick has 20 hard drives and 20 SSDs to provide 14.4 TB of usable capacity, and uses what Xiotech calls Continuous Adaptive Data Placement to move data between hard drives and multi-level cell (MLC) SSDs to optimize I/O performance.
Atkinson said Hybrid ISE is shipping mostly into new markets for Xiotech. The new customer base includes Fortune 500 firms, particularly financial services companies looking to accelerate database performance. “That’s not shocking,” Atkinson said. “That’s where Fusion-io is selling, and that’s where the SSD market seems to be.”
Like Fusion-io’s products, Hybrid ISE appeals more to the people who manage applications than traditional storage admins. Along with Oracle databases, SSDs in storage are a good fit for virtual desktop infrastructures (VDIs).
Atkinson said Xiotech’s advantage is that Hybrid ISE is easier to set up and manage than PCIe cards. “Fusion-io goes to the apps guys and says ‘We can make your stuff look really fast.’ And it’s true,” he said. “But the administration of that is pretty difficult. They have to take a small LUN, open the servers up, put a card in, and roll their own DR solution because there’s no built in replication that looks like disk. And they have 800 gig as a target. That means they have to re-architect things.”
The storage vendor landscape has been re-architected the past few years as the most successful smaller companies have been gobbled up by the big guys. 3PAR, Compellent, DataDomain, EqualLogic, and Isilon all started around the same time as Xiotech but Xiotech is still on its own while the others have been absorbed by Hewlett-Packard, Dell and EMC. And most of those deals have been for billions of dollars.
Atkinson, who sold software vendor WysDM to EMC in 2008 before joining Xiotech, said it’s good to be among the few smaller storage system companies left standing.
“For a private company, those types of acquisitions raise your profile,” he said. “It makes it easier for us to look at a public offering, which is the path we’re on. There’s a dearth of companies in that space and storage has demonstrated itself to be hot. There’s a real appetite in the [financial] community for storage companies.”
During many of my discussions with IT managers and directors who would be classified in the mid-tier enterprise space (over 1,000 employees), it has become clear that few have deployed storage systems using solid state drives (SSD) with internal tiering. This surprises me given the performance improvements gained by using SSDs as the highest performing tier.
When I ask why they have not installed these types of tiering storage systems, I get some interesting responses:
• A belief that SSDs would be too expensive for their environment;
• They were unaware of tools to figure out how much capacity should be in SSDs to maximize performance; and
• Tiering storage systems were believed to be solely high-end enterprise solutions.
The value of tiering storage to improve performance while automatically managing the movement of data based on patterns of access has been demonstrated, and there are case studies available from vendors. The performance improvement is measurable and most vendors with offerings have tiering monitoring and reporting tools that can show the positive effects.
Additionally, analysis tools can help determine the correct amount of storage capacity in SSDs to maximize performance based on the workloads. Most analysis has shown that on average about 4% of capacity in SSDs can provide the greatest gain.
Using storage tiering as an immediate improvement for storage demands in server virtualization environments is a great benefit in the mid-tier. In this market, server virtualization is moving to primary business applications and the performance of storage can become a critical bottleneck. Articles on storage tiering are available at the Evaluator Group web site.
The real problem here is the ineffective marketing messages from the storage vendors. The message about the value, costs, and tools is not being received by the people that need to hear it. Some of the questions I ask include where the IT directors and managers get their information. The vendors looking to sell to the mid-tier need to be more targeted with their message and use a different approach than with the enterprise data center customer. The presentation of the information also needs to be in the context of what the mid-tier IT person is trying to address with a storage purchase. The value is real and demonstrated but the vendors have not made this point.
For any vendor who wants to accelerate successes with tiered storage systems in the mid-tier environment, a focused, special effort is required. Otherwise, another vendor may take that business.
(Randy Kerns is Senior Strategist at Evaluator Group, an IT analyst firm).
EMC CEO Joe Tucci isn’t publicity shy, but he almost certainly wishes he could have avoided his front-page exposure in the Wall Street Journal this week.
The Journal Thursday led a story on corporate jet abuse with Tucci’s use of EMC jets. The Journal claimed EMC jets made 393 trips over four years to areas where Tucci has vacation homes – Cape Cod, Mass., the New Jersey shore and the Florida keys. That comes to more than 98 flights a year to those sites.
The newspaper estimated the cost of EMC’s flights to those airports at $3.1 million, while noting that EMC puts the cost at $664,079.
A follow-up story in the Boston Herald today quotes an email from an EMC shareholder who took exception to Tucci’s jet-setting on the corporate dime:
“In exceptional cases, we sometimes speak out with other share owners about executive excesses,” wrote Clark McKinley, spokesman for the California Public Employees’ Retirement System, in an e-mail. “As far as I know now, this is one of them.”
The Herald story said CPERS owns 5.4 million shares of EMC stock.
Tucci, 63, ranks 15th on Forbes’ 2011 corporate compensation list with $31.63 million in salary, bonuses and stock gains. He has been paid $86.79 million over the past five years, according to Forbes.
In the high performance computing (HPC) world, Lustre serves as a clustered file system meeting needs for extremely large numbers of files and extremely large file sizes. The problem is, Lustre has been used primarily for “build your own” storage systems with questionable support.
Xyratex has moved to solve this problem for HPC customers with the ClusterStor 3000. The ClusterStor 3000 is a scale-out Lustre storage system that can support tens of petabytes in capacity and from 2.5 GBps to 1TBps throughput in performance. The ClusterStor 3000 ships with Lustre integrated, as well as full support and an integrated management tool.
ClusterStor 3000 customers will have a fully supported, high performance storage system that uses the Lustre file system. The ClusterStor system also includes ClusterStor Manager, a single administrative interface that simplifies configuration and management tasks instead of requiring admins to manage individual element as in previous Lustre deployments.
Xyratex last year signaled its commitment to Lustre when it acquired ClusterStor, a startup including founding members of the Lustre team Peter Braam and Peter Bojanic. Braam and Bojanic remain at Xyratex.
Xyratex has a long history of delivering components and systems to OEMs for a wide range of products. Its OEM partners include NetApp, IBM, Dell and EMC. Offering the ClusterStor 3000 is a major step for Xyratex because it matches a need in the market for HPC storage with a complete system based on a fully supported version of Lustre.
Like Xyratex’s other products, ClusterStor 3000 will be sold through OEM partners. None have signed on yet, but Xyratex executives expect it to hit the market late this year. Xyratex positions ClusterStor as competitive to Lustre-based systems from DataDirect Networks and NetApp’s Engenio division.
(Randy Kerns is Senior Strategist at Evaluator Group, an IT analyst firm).
Understanding storage technology can be difficult enough without vendors adding to the problem with odd product positioning. Yet vendors often make things worse when talking to customers or prospective customers.
I recently had conversations with two IT professionals that brought to light this issue. The first one was looking at backup software for an optimization project. The IT pro I talked to wondered why one vendor had two products with many common characteristics and if both would be continued. He was concerned that one product would be dropped or put into maintenance mode with no additional upgrades. The concern was justified because he intended the backup software to have a long usage period in the data center.
The salesman was not particularly enlightening about the vendor’s long-term plan, and no public information was available to clear up the situation. In this case, acquisitions had led to the two offerings. The vendor had different messages for each product and no message about the two in a combined plan. This reminded me of a Dilbert cartoon strip called “Battling Business Units” showing internally competing businesses that did not play together.
The second example involved the purchase of a disk storage system. In this case, several products were being considered to bring to a short list for final evaluation. One vendor had two products that might satisfy this customer’s needs, but there was much overlap between the two systems. This IT pro wondered how a vendor could continue both products. Investing in a storage system with training and operational procedures could be compromised if he bought the system that would eventually be dropped.
Again, acquisition had led to the vendor having two products and the messaging around positioning and continuation was not clear enough to remove the concern. Maybe it was another case of Battling Business Units. In any case, there was not enough coordination between the units to notice these obvious questions.
While working with IT in evaluations (see Evaluator Group for evaluation guides), I find that the type of information IT pros need from vendors is often missing or conflicting. This requires them to spend time on issues besides the product and the underlying technology.
Some vendors may embrace the Battling Business Units scenario and the internal competition it brings out with the philosophy that the best team will win. But it is not in the best interest of an IT customer making decisions.
By the way, Dilbert is not really a comic strip. It’s a documentary.
(Randy Kerns is Senior Strategist at Evaluator Group, an IT analyst firm).
Quantum acquired startup Pancetera Software today, giving it virtual server backup for its DXi data deduplication family right away. In the long run, Pancetera can also add intelligent storage management for virtual environments to Quantum’s StorNext file system.
Quantum paid $12 million for Pancetera, which came out of stealth last August with its Pancetera Unite virtual appliance designed to optimize virtual machine backup. It added SmartMotion software in April, enabling Unite to push data from virtual machines directly to any NAS target without requiring staging servers with dedicated backup software.
By owning the technology instead of forging a partnership, Quantum is looking to develop new products for protecting and managing storage connected to servers running VMware.
“This gives us immediate value for DXi and virtual environments, and it will allow us to have unique roadmap items with DXi,” Quantum CEO Jon Gacek said. “The reason we went with an acquisition instead of an OEM deal is we can combine this with StorNext to develop solutions to manage storage – not just backup, but storage – in virtual environments.”
Gacek said Quantum will immediately offer Pancetera software with DXi systems sold for virtual environments. “We’re in deals now where we know that software will make the difference,” he said.
He said Quantum will also sell Pancetera to existing DXi customers, but he’s not sure if it will make Pancetera software available as a widescale standalone product. “We haven’t decided if we want to enable its value to our competitors’ customers,” he said. He said he expects Pancetera technology with StorNext to hit the market in an appliance for virtual data in 2012.
“Virtualization creates a lot of unstructured data,” Gacek said. “StorNext with Pancetera gives us the ability to get inside of a VMDK, and you can imagine some of the things we might do.”
Quantum tried attacking the VMware backup problem with OEM partner PHD, licensing its esXpress product in 2009. But that relationship fell apart last year. Gacek said the OEM deal didn’t give Quantum enough control over the technology.
Quantum is hiring most Pancetera employees, including founders Mitch Haile (CTO) and Greg Wade (VP of engineering) and CEO Herik Rosendahl.
“The issue for them was, they were going to be hard-pressed to convince companies to buy that kind of software from a startup,” Gacek said. “But the software is complete. We like how it can be supported and it fits well with what we’re doing with DXi.”
VMware is the only hypervisor that Pancetera supports. A Quantum spokesperson said there has been no decision yet on whether it will expand it to other hypervisor platforms.
Gacek, who replaced Rick Belluzzo as CEO in April, said the acquisition and the hire of Ted Stinson as senior VP of worldwide sales Monday shows “we’re in growth mode and we’ll be aggressive about making change.”
I was recently teaching a class on storage technology and systems to a group of IT professionals. I’m always interested in finding out what they know about storage products and what they hear about the market.
I discussed with the class a story I recently read about an IT director commenting that he was interested in “best of need” products rather than “best of breed.” His argument was that he wanted a product that fit his requirements and only those requirements. A best of breed product probably had more capabilities than he needed, probably with extra costs. The comment was “why pay more for something I don’t need.”
The other IT people in the class echoed the sentiment and added one more important point. Storage systems have a limited lifespan of four or five years, and in that limited time they may not get to the point of deriving value from those best of breed capabilities. The sentiment was to buy only what you need.
The implications here are significant. Vendors marketing best of breed solutions may be missing the mark with some customers. There is the implicit assumption by customers that a product represented as best of breed will cost more. The other implication is that customers will buy a product with capabilities they may not need because of potential future requirements. But this may not be the case either because of the limited lifespan of storage in the data center.
Understanding customers’ needs and marketing to meet those needs may be a better approach by vendors. They should also highlight how and why a particular product can excel in that environment. Other important considerations for the customer should be addressed as well – such as reliability and support.
The IT professionals I work with continue to impress me. They sort through the messages and focus on their business and what it takes to meet their requirements.
(Randy Kerns is Senior Strategist at Evaluator Group, an IT analyst firm).
EMC is preparing to launch a baby Symmetrix VMAX system called the VMAXe, which lacks mainframe connectivity and fills the gap between the vendor’s midrange VNX unified storage platform and the enterprise VMAX. EMC is positioning the new system squarely against Hewlett-Packard’s 3PAR and IBM’s XIV storage systems, other enterprise SAN arrays that are not built to connect to mainframes.
EMC is planning to make the system generally available this month and officially launch it in July. While its customers and partners are still under non-disclosure agreements, we’ve seen EMC documents that lay out the underlying technology, hardware specifications and the vendor’s positioning of the product.
EMC still recommends the VMAX for customers that need more capacity, data at rest encryption, hardware compression, SRDF remote replication or the ability to attach to a mainframe.
“VMAXe gives us a specific competitive advantage against some of the industry’s newer arrays, especially if you have any IBM XIV or HP 3PAR in your accounts,” read an EMC document for its sales team.
The EMC documents say the VMAXe can also compete with higher-end NetApp FAS arrays and entry level enterprise systems from IBM and Hitachi Data Systems.
The VMAxe uses a special build of the Enginuity operating system that powers the VMAX, and is 100% virtually provisioned – EMC’s version of thin provisioning. It supports FAST VP automated tiering and ships factory configured with a base software bundle that includes Timefinder for VMAXe for cloning and RecoverPoint splitter instead of SRDF for remote replication. Open Replicator and Open Migrator software are also available for moving data from competitive arrays onto the VMAXe.
EMC claims a VMAXe can install in less than four hours, and that 1 TB of storage can be provisioned in less than three minutes.
The VMAXe hardware supports up to four engines and 960 drives. An integrated system bay holds one engine and 150 drives, and a fully populated system has two additional drive bays with 180 drives apiece. The VMAX supports eight engines and 2,400 drives. VMAXe uses a quad-core engine while VMAX uses a six-core engine.
Among other differences, VMAXe has 96 GB of memory cache per engine compared to VMAX’s maximum of 128 GB, VMAXe has 64 Fibre Channel and 32 Ethernet ports while VMAX supports twice as many of each, and VMAXe scales to 1.3 PB usable capacity compared to VMAX’s 2 PB.
The VMAXe also comes with pre-selecting drive tiering configurations. A single-tier system is all 450 GB 15,000 rpm Fibre Channel drives, a two-tier system comes with 97% 2 TB SATA drives and the rest 4 Gbps FC 200 GB Flash drives, and a three-tier system has 65% SATA, 32% Fibre Channel and 3% Flash. The system’s host connectivity options include 8 Gbps Fibre Channel, Gigabit Ethernet (GbE) and 10 GbE iSCSI, and Fibre Channel over Ethernet (FCoE).
EMC estimates the VMAXe will cost about 15% to 20% below smaller VMAX configurations and 5% to 10% below a three-engine VMAX. The VMAXe cannot be upgraded to a VMAX.
Whenever there is talk of storage acquisitions – which is just about all the time these days – the name of Brocade comes up. The switch vendor was believed to be high on Hewlett-Packard’s shopping list until HP bought Ethernet switch vendor 3Com instead in late 2009. Since then, talk surfaces every so often that Dell might pick up Brocade for its Fibre Channel and Ethernet networking gear.
Canacord Genuity financial analyst Paul Mansky raised the issue again today when he put out a report suggesting that Dell may be ready to drop as much as $5.5 billion on Brocade. Mansky wrote the acquisitions of EqualLogic, Compellent and Perot Systems gave Dell storage, servers and services but left it without the networking piece of the IT stack. Outside of some low-end Ethernet switches it develops, Dell gets most of its networking devices through OEM deals with Brocade and Juniper Networks.
Dell is looking to move from a PC-centric company to an enterprise player. “ … given [that] networking will most likely be among the most critical sources of intelligence helping to re-shape the horizontal/physical layers into a virtual/vertical stack, not owning this [networking] technology puts Dell at risk of simply hopping from one commoditized business into another,” Mansky wrote.
Mansky maintains Brocade is the right target for Dell because Juniper is mostly a service provider and that is not Dell’s business, while other alternatives such as Extreme Networks and Force 10 don’t have enough market share to be worthwhile. Brocade is also the only vendor among those to have a foothold in storage. “Brocade owns Fibre Channel (70% share), exceptionally tight support for which is a must (our view) in a converged world,” Mansky wrote. “Net, Fibre Channel is high ROI, legacy Ethernet is low investment and converged products (recently introduced) are the growth engine.”
Mansky believes Dell should act now as the PC market is expected to decline at a faster rate and Dell has $7 billion in cash. He said a price of $10 per share is possible for Brocade, bringing the deal to $5.5 billion.
There is a risk for any storage vendor that buys Brocade. Such a deal could prompt competitors to push sales of Cisco FC switches, taking away much of Brocade’s revenue. A year ago, that risk was less for Dell because its partner EMC could be counted on to continue to support Brocade as well as Cisco. But the EMC-Dell storage partnership has fallen apart and EMC is a close ally of Cisco. However, as Mansky pointed out, Cisco has angered IBM and Hewlett-Packard (as well as Dell) by getting into the server business. That makes those vendors more likely to stick with Brocade for its storage products, which make up most of its revenue.