Storage startups: Everyone's throwing money at you...
But if you want true love, you need to differentiate
Blog The storage industry and IT as a whole are experiencing an interesting transformation and, as is happening in many other fields, everything is accelerating and it’s becoming very difficult to keep riding the wave for a reasonable length of time.
Last week I had a conversation with Andy Warfield (Coho Data's CTO). Most of our chats are about IT infrastructure but sometimes we veer onto other (more philosophical?) aspects of IT management and how he and his team are facing some interesting challenges. This time around I jotted down a few ideas for a post and I ended up thinking a lot about all the startups struggling to make a dent in the storage industry…
The problem is differentiation
It is incredible to see how many startups are now in the storage space. I don’t know if this will keep up but, in the past, VC money wasn’t a problem and after one or two successful startups doing something innovative and interesting many copycats followed suit! Examples are everywhere. Here are just a few:
- After Nutanix and Simplivity the market has been flooded by all sorts of Hyper-converged products.
- After the first successful general purpose All-Flash array (e.g. Pure Storage) we now have a countless breed of All-Flash players.
- And the list goes on (not only for storage, of course.)
It really looked like a “me-too” kind of game, and I’m not saying that most of them aren’t good… it’s just that in many cases the differentiation is minimal. After a while, large vendors start to reckon that there is something new and, if there is real money in it, they react. A reaction that is much faster than in the past, which results in acquisitions or perhaps in an evolution of an existing product.
The argument could be that a startup is leaner and faster and leads to more innovation than the behemoths, but does this still hold true?
Look at EMC for example – a few days ago it launched a new storage platform called Unity (an evolution of VNX). Well, I could be wrong, but it sounds modern, very good on paper and quite affordable. With this storage appliance they can easily target the same end users pitched by startups selling storage appliances that are so easy to use and that look transparent to the VMware SysAdmins. And the EMC appliance doesn’t need to be the ultimate appliance of its kind, in this case good enough is usually sufficient to win – price, presence in the field, and many other aspects do the rest. And the same example can be seen with many other products by EMC (or other vendors).
For a startup it is much more complicated. If you are one of many, without a noticeable and indisputable differentiator, it is difficult to introduce yourself, sit at the table with the potential customer and start talking… and usually a startup doesn’t have the power to sit at many different tables for months at the same time.
Why should you buy from a small startup if there is no outstanding difference? Very few startups make a successful exit these days (IPO or acquisition) - for the vast majority it’s hard-going…
Listen and react
IT infrastructure is quickly evolving, maturing and creating new opportunities. In many cases it’s not about technology, it’s all about how it is applied.
For example, I quite like the story about Avere systems. Its always had a great product, (a scale-out caching appliance for HPC and Big Data applications) but was struggling in the beginning because it marketed the product as a front-end for other NAS boxes. It was competing with its potential partners!
Hard to sell for many different reasons. But then it started supporting object storage in the back-end (AWS/Google/Azure APIs) and now it's skyrocketing. Its solution is unique, solves a problem, and it is no longer in competition with others (being supported by cloud providers instead) and thus much easier to sell! And I could say about the same for Coho Data too. It has always had fantastic technology but this is a really crowded market and scale-out, VMware integration, NFS data stores, and ease of use are great but not unique. Lately, it's been working hard on some cool stuff (e.g. AWS Lamda-like code and containers running into the storage system) and refocusing a lot on high-end customers, integration with container orchestration tools, OpenStack and other cutting edge infrastructure components with an eye on Big Data.
Its technology (and the implementation) makes a real difference here and results have started to come in quite rapidly, with a fast rising percentage of their revenues (now in the range of 20 per cent coming from these projects instead of the classic Vmware infrastructures… and I think this is quite a change.
Closing the circle
I meet with a lot of storage startups all the time. I love all of them – their spirit and ideas – but it’s clear right from the beginning which are doing something different and which aren’t… I’m not saying that following the trends like a sheep isn't good at times but then, when the market becomes crowded, it is harder to stand out and be successful (or make a good exit).
In many cases it’s not (only) about technology. In fact this is hardly the problem; the real challenge comes from the ability to listen to end users and find a (creative) way to help them solve their problems. Sometimes it’s a problem that is perceived but difficult to explain (or solve) completely because they are not aware of the technology available that can help them. Unfortunately, I’ve never worked for a startup so you may think that this analysis starts from the wrong basis, but I’ve worked many years with end users. They have problems that need solving, and if you have a solution they are willing to listen. But if the solution isn’t brilliant, and doesn’t show a differentiator, it’s highly likely the comparison with others will boil down to parameters like $/GB… and the startup will be struggling.
[Disclaimer: I’m working with Coho on a project… I talk with them on a weekly basis and this is probably why I mention them more often then others lately].