Storage Soup

Jun 4 2018   7:27AM GMT

Cloudian makes moves, keeps up with changing object storage market

Carol Sliwa Carol Sliwa Profile: Carol Sliwa


The flurry of activity surrounding on-premise object storage specialist Cloudian suggests how rapidly the market has been moving during the last year.

Cloudian CEO Michael Tso said 2017 was the startup’s best year, as revenue grew by a factor of 3x and the customer count soared past 200. He said 89% of Cloudian object storage sales came through value-added resellers by the fourth quarter, and the trend continued into 2018 – a significant jump over the 25% in third-party sales in 2015 and 36% in 2016.

“That really is a signal to me that the product is ready for a broader channel,” Tso said.

Cloudian launched in late 2011 with a focus on prominent Japanese telcommunications/service provider customers NTT East, NTT Communications and Nifty that needed multi-tenant, geographically distributed storage after the Fukushima earthquake.

Tso said he expects Cloudian to become profitable over the next few years, with a possible IPO down the road. But he said growth is more important than profitability right now.

“Our board and our investors are telling us to grow just as fast as we can and don’t worry about profitability,” he said. “I think if we stopped growing as aggressively as we are, we either would be able to be profitable this year, or if I look at the numbers carefully, maybe we could have been profitable even earlier. We are looking at a potential IPO probably three to four years down the road. We are not really in a hurry. We expect to be profitable before that.”

Cloudian is concentrating on partnerships with channel and OEM partners to grab a significant share of the storage market. The object vendor followed its 2016 OEM deal with Lenovo with an EMEA-based joint reseller agreement with Hewlett Packard Enterprise in late 2017.  In 2018, Cloudian partnered with Machine Box on a machine-learning option and made available a Cloudian object storage “HyperStore Test Drive” for Google Cloud Platform.

Also, late 2017 conversations with Cisco Systems led to a significant investment earlier this year from Digital Alpha, a private equity firm started by former Cisco executives. Digital Alpha made a $25 million equity commitment to Cloudian and set up a utility financing facility of up to $100 million.

“The goal for the $100 million is to set up a separate company that would purchase appliances and solutions from Cloudian and be able to provide those to the end user through a paper drink consumption model,” Tso said. “They will add more gear when you need it, and they’ll remove gear when you’re trying to take it away. It’s just like the way cloud works except it’s cloud being put into your own data center, because our product is only sold into on-prem environments.”

Cloudian expanded in March with the acquisition of Infinity Storage, an Italian file-based software-defined storage vendor. Cloudian already used Infinity’s technology in its HyperFile appliance that combines file and object storage.

“They make an NFS/CIFS front end that can move data into object storage or into the cloud,” Tso said of Infinity Storage. “We partner with every one of the gateway companies  out there, but we weren’t really happy with any of their solutions. The problem with a lot of products out there is that they’re not in the kernel space. File systems have traditionally always been done inside the kernel. It’s really the only way to do it that’s really robust, but it’s very hard. We spent a year testing pretty much every vendor in the market, and we eventually came on this small company based out of Milan. They’ve been doing it for over 10 years.”

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  • cloudguy
    Well, Mike Tso and his team at Cloudian have been making many positive moves to improve the company's market positioning and increasing customer acquisition through its partner channel. 

    The innovative thing Cloudian announced this year is their intention to offer a complete pay-as-you-go software and hardware consumption model using a $100M in debt financing from Digital Alpha Advisors. The details of this on-premises storage consumption model have not been forthcoming since the March announcement. 

    Mike Tso now indicates that there will be a separate company set up by Cloudian to acquire the Cloudian HyperStore software and storage appliances from Cloudian and Cisco as part of the service. This new model could be a game-changer for on-premises object-based storage consumption for SMB customers by turning their need for unstructured data storage into an operating expense.

    Why hasn't someone else already done this? Hard to say, but most of the vendors in the object-based storage software space have not had the financing to consider doing it. That said, the larger players who bought their entry into the object storage market like Western Digital (Amplidata) and IBM (Cleversafe) have yet to offer their customers a complete software and hardware on-premises storage consumption model.

    Talk of going public in three or four years is dependent on Cloudian breaking $100M in annual revenue. With current annual revenue of around $25M, Cloudian would need to quadruple its annual sales in three or four years. That kind of increase is not out of the question if their on-premises storage consumption model catches on with the SMB market. Cloudian needs thousands of customers not just hundreds of customers to pull this off.  
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