Ellison's storage Pillar sits at fork in the road
Finance, founding and two choices
Comment Larry Ellison founded Pillar Data on the premise it would become the next EMC or NetApp, and go through an IPO or be bought. On its way there it sees a new system that could replace 100 NetApp filers coming by 2012.
This perspective on Pillar was given by its CEO and CFO at a customer summit in Phoenix, Arizona on March 10. CFO Ned Hayes said: "We aspire to go public at some point in time and we look at the IPO market very seriously from quarter to quarter." He also said Pillar faced a fork in the road, with an IPO on one side, and being bought by a large incumbent on the other.
Who? Any one of Dell, EMC, HDS, HP, IBM, Netapp etc with Pillar's Axiom technology and products replacing the existing mainstream product set. A Pillar spokesperson said the firm wasn't actually talking to any incumbent about such an acquisition.
Currently the IPO route is depressed in terms of numbers of IPOs, valuations of companies and the returns for investors after IPOs. It's not a good time right now, but Larry is in this for the long term. Hayes was giving out a message that Ellison does not want to pawn Pillar off to the market at the first opportunity but wait until the market comes to him wanting to buy it at a valuation he agrees with.
Hayes said Larry Ellison has pumped several hundred million dollars into Pillar through Taco Ventures in the past decade. It has not been funded like a standard start-up with four to six sequential rounds of funding from groups of investing organisations en route to a relatively quick IPO flip so they can get their return. Larry wants a proper valuation for Pillar and the funding support is there if the recession proves to be a double-dip one. Hayes said: "We have Larry's capital and can wait."
There is only one investor so board-executive relationships are simple and direct.
Ellison, we heard, did not buy Sun for its storage, the majority of which is OEM'd from HDS and LSI. Larry hates OEM deals and, pretty soon after the acquisition finalised, the HDS USP resale deal was canned. How long has LSI got? Oracle wants to build a great system to run Oracle and its clients, and the 7000 line is the one Oracle seems to be focusing on. Pillar wants to build a great storage system to run applications in general.
We can surmise that several hundred million dollars is north of $200m but not as much as $500m, otherwise 'half a billion dollars' would have been mentioned. Let's settle on $300m as a round number. The target is to get it to become self-sustaining. Cash flow break-even will occur this year or next. A customer asked Hayes how close Pillar was to its target gross margin (GM) - the reply was that "we're on the right trajectory. First sales generally have a lower GM. Later service, upgrade sales and repeat business have a better GM generally. Next-generation platforms are moving away from proprietary hardware to off-the-shelf components. That gets us much closer to our target GM." Pillar recorded its highest GM in 2009.
My thinking here is that Pillar needs the new development project kit to reach its target GM and that's not going to happen until 2012 or so.
The total addressable market for Pillar is said to be $30bn now, composed of hardware (HW), software (SW) and services, and $40bn in a few years time with a near-15 per cent compound annual growth rate, outpacing the storage market. Top line growth in 2010 is set to be 50 per cent upon 2009. Repeat business is said to be 60 per cent a quarter.
The company cut costs in 2008 when the recession struck and went down to a 325-person headcount. It's now up to 340 people and wants to hire more. Hayes said it is developing a new platform with radical, massive improvements in its storage characteristics.
Next page: Paso and Napa
The strategy is to copy Oracle Sun 7000?
Hmmm...use industry standard parts instead of proprietary, for unified storage requirements? Oracle is already doing this with Amber Road, aka the Sun 7000 series, aka the ZFS Storage Appliance. The lines of differentiation between Pillar storage portfolio and Oracle's strategic storage portfolio via Sun are diminishing, not widening.
Dear Anonymous Coward
Oh for god’s sake! Instead of flip-flopping between the IBM DS 5020 results and the Sun 6180 results to present the best numbers, I’d suggest looking at the data from a single storage array perspective.
If you review the IBM DS5020 results, the revised (revised on March 11, 2010) SPC-1 Price-performance numbers indicates $8.46/SPC-1 IOPS. (http://www.storageperformance.org/benchmark_results_files/SPC-1/IBM/A00081_IBM_DS5020-Express/a00081_IBM_DS5020-Express_SPC1_executive-summary-r2.pdf).
If you review the Sun 6180 results from October 2009, the SPC-1 Price-Performance numbers indicate $4.70/SPC-1 IOPS. However, the price used in this calculation uses a 38% discount! Now, if you don’t discount the system (like the IBM DS 5020 results), you get $7.60/SPC-I IOPS. (http://www.storageperformance.org/benchmark_results_files/SPC-1/Sun/A00084_Sun_6180/a00084_Sun_6180_executive-summary.pdf)
The Axiom SPC-1 Price-performance number is $8.79/SPC-1 IOPS from results that were generated in January 2009. Since then, Pillar has released Slammers (storage enclosures) that have improved its performance by over 50%. Additionally, the price of the configuration that is listed has been changed significantly in favor of a lower Price-Performance number.
If my math is correct the IBM DS5020 would cost $18.80/GB and the Axiom 600 would cost $13.50/GB for the physical storage capacity of the configuration. Therefore, I am not sure how you inferred that the $/GB for the IBM DS5020 was half of that of the Axiom. Pillar also offers an 80% utilization guarantee without any performance degradation of the system. This is done by providing unique quality of service for the various LUNs and FileSystems (Yes – the Axiom supports NAS and SAN from a single virtualized storage pool) based on priority and access patterns.
Another thing to note is that the IBM and Sun storage systems which are OEM’ed from LSI uses 8Gbps FC front-end connections, whilst Pillar’s Axiom used 4Gbps FC front-end connections.
The Axiom Storage System (unlike the IBM DS5020 and Sun 6180) was architected with the intent of providing storage in a multi-tenant environment. The SPC-1 performance test provides a single workload and does not provide a varying workload like a multi-application environment. Moreover, the offerings from IBM and Sun would get pegged on performance if other storage operations such as rebuilds, snapshots and remote replication were to take place during the SPC-1 tests. The Axiom has a distributed intelligent architecture, which allows the system to isolate rebuilds to a storage enclosure and utilizes the Cache and CPU of the Slammers to perform quick operations.
Pillar Data = 800lb albatross
The Pillar architecture is ridiculously inefficient -- here in 2010 a measly 226 IOPS per spindle at 22 milliseconds response time (SPC-1) is really awful. That Pillar had to short stroke the disks to get even this level of crappy performance is absurd.
Consider, IBM achieved 224 IOPS/spindle in 2004 with SVC version 1.2 -- using Intel 1U off-the-shelf servers and back-end "Bricks" from LSI Logic (DS4000 -- 2002 vintage).
Consider further...LSI's current array hardware (Sun 6180/IBMDS5020) does 330 IOPS per spindle (50% more IOPS) and does them at 11ms. (twice as fast as Pillar) -- and does them USING A FULL DISK STROKE.
And oh-by-the-way, the LSI/Sun 6180 costs half as much per IOPS and half as much per GByte as Pillar.
Put another way...Sun's LSI-based system can deliver equal capacity, IOPS and response time using about half as many spindles as Pillar -- so there's the green aspect.
Pillar's performance efficiency is bad because it's architecture is fundamentally flawed. Eight years and half a billion dollars of Larry Ellison's money have resulted in what is arguably the worst performing architecture in it's class. Pillar's miniscule market share reflects this.
From the CEO's comments, it appears that Pillar is looking to "fix" it's architecture at both the low and high end primarily by replacing HDDs with SSDs.
Do Pillar and Oracle actually believe people are going to put expensive SSDs behind the least efficient SAN architecture on the market?
Will customers be amenable to paying huge dollars (and fat SSD gross margins) to Pillar for the privledge of plugging them in behind Axiom -- then losing 40% of their IOPS and adding several milliseconds of response time in the process?
Not bloody likely.