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Can a 'one-trick' software firm survive in era of converged engorgement?

Staff-owned software SAN appliance firm DataCore on why it's the last man standing

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SAN virtualisation start-ups mushroom

Around this time, SAN virtualisation start-ups and technologies emerged, all being SW or H+W that ran in the SAN fabric, at its edge or in a storage array controller to virtualise multi-vendor SAN storage and present it as a a single virtual pool. IBM had, and still very successfully has, its in-fabric located SAN Volume Controller. HDS had its virtualising USP array. Israeli start-up StoreAge ran in an appliance in the fabric. EMC had its Invista product. Cisco had something going with Incipient's iNSP SW which ran in Cisco fabric switches. FalconStor had its technology. Brocade had its Rhapsody product

Effectively they all bombed – except HDS's USP, IBM's SVC and... DataCore.

StoreAge was bought by LSI for $55m in October 2006 and put inside Engenio, its storage array business, calling it Storage Virtualisation Manager. HP signed on as an OEM but then, for reasons that are still not clear, the deal collapsed, the StoreAge SW was effectively abandoned (background here) and Engenio was sold to NetApp.

EMC's Invista quietly slid away and died. FalconStor moved into data protection with deduplication, virtual tape libraries (VTL)and continuous data protection (CDP). Rhapsody disappeared. Incipient just faded away, leaving a website shell.

There is only one viable software SAN virtualisation product available today and that is SANsymphony. HDS has pressed on with the USP but this is primarily a storage array which can virtualise other storage arrays. NetApp has its V-Series which does the same thing; provide the vendor's storage bring in competing vendor's storage. IBM's SVC was completely separate from storage products and was the only in-fabric pure SAN virtualisation product left. It is now appearing as part of the StorWize V7000 array's functionality and, if the promise of FCoE is realised, will have a limited future, possibly, as an in-Fibre Channel fabric SAN virtualisation device.

Last SW SAN appliance man standing

So, effectively, again, DataCore's SANsymphony is the last SW virtualising appliance left standing. How has DataCore pulled off this trick, survived and prospered, though not to an IPO or to being acquired, when everyone else – except big hardeware vendors HDS, IBM, NetApp and latterly EMC also with VPLEX – has given up the SAN virtualising ghost?

Firstly, the product is good; it does what it says it does on the box. DataCore nodes can be clustered and full continuous data protection (CDP) is provided. Secondly, DataCore has been good at tactical selling alliances, teaming up with fast networked storage vendors like Xiotech (X-IO now) and Texas Memory Systems, each with HW to sell and no data management or controller software, but not to the exclusion of forgetting its reselling and system integrator channel. It's done the OEM thing, but also not to the point of becoming utterly dependent on OEMs so that when they went away so did its business

Thirdly, and fourthly, in El Reg's view, DataCore has survived because the majority of the shares are not owned by the backing VCs, and the company is run by and its culture looked after by a group of long-term employees. It has the atmosphere of a family business with no grandstanding, privileged, executive office suite grandstanding by the execs. This isn't a Harvard Business School textbook example of how to run a lean, mean, ruthless corporate efficiency machine using the Mark Hurd rule book.

'Family' business

Nope, folks, think of the Bonanza TV Series back in the '90s and the Cartwright family in their Ponderosa Ranch. Look at DataCore – founded, settled and operating in Miami, well-clear of the hyped-up IT startup silicon valley, or the Boston-New York east coast IT axis. This is Fort Lauderdale too, a million miles away from any trace of Miami Vice froth; think Miami Nice instead.

The key event in this reading of DataCore's independence and longevity was in 2005, a hard year revenue-wise, when the DataCore execs and many of the staff raised cash again and bought out some investors to gain control of the company. In 205 and 2006 the venture capital backers lost interest, so Teixeira, Aral and other employees mortgaged their houses and bought them out, with only one left. Two VCs put invested $35m later, in 2008, and received a preference share stake.

Another point is that EMC (Invista). Brocade, LSI and the other hardware vendors that exited the general SAN virtualisation market did so because it wasn't a big enough market for them. HDS and IBM had their own customer bases sewn up and it was to difficult for Brocade, LSI and EMC, with Invista, to make any sort of worthwhile progress. DataCore perhaps had less high of a hurdle to get over, from the investment ROI angle, and its staff were more committed to their product than EMC or Brocade or LSI, where storage virtualisation was a minor thing in their overall scheme of things.

Revenues and IPO

DataCore's revenues are skewed towards Europe, with two-thirds of its business coming from that geography, with 10 per cent from Asia-Pacific and just 24 per cent from the USA. This is the opposite of most US storage start-ups, indeed of most US IT start-ups. It has given DataCore a revenue bedrock that US market-focused competitors haven't been able to tap, which must have limited their revenue growth and hastened their exit from the market.

This revenue skew came about because of the dot-com crash, which found DataCore selling direct in the USA and encountering sales resistance with customers reluctant to buy from a small and unknown company. It set up a distribution channel in Germany in 2007, which was very successful with growth rates of 80 per cent a year or higher. It extended this beach head with an office in France, more in Germany and also in the Netherlands. AS a result there are some 500 hospitals in Europe that use SANsymphony. Today all of DataCore's sales are through the channel by the way.

Aral said: "I believe we've hit critical mass in Germany, Switzerland and Austria, and will hit it soon in other European countries. We're beginning to see large iconic deals in France and we have good hopes for Italy and Spain."

"The great problem for us has always been the US. There we're seeing headway … In the US there is a great deal of confusion in the storage market. The channel is not trusted in the same way as in Europe. Many channel members are vendor-specific." "

Would DataCore go public now? The execs say that they take a three year or so view, with a $100m annual revenue run rate being the level at which an IPO would be conceivable.

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