FalconStor Software: Page 3 of 4

"If virtualization is all [FalconStor] is known for, people should look deeper," says Dan Tanner, an analyst with Aberdeen Group Inc. "They should be known for the way they leverage their virtualization capability with strong software tools."

FalconStor's latest software, IPStor 3, is more user-friendly than earlier versions of the software, analysts say. The new software allows customers to deploy these storage services for existing disks and data, whereas previous versions required them to convert their data to FalconStor's virtualization architecture first (see FalconStor Broadens Appeal).

"They really haven't changed their strategy at all, but they're looking to put a different spin on their services," says Nancy Marrone, an analyst at The Enterprise Storage Group Inc. "Virtualization hasn't taken off, but the services that virtualization provides have."

While analysts say a shift of focus is definitely a step in the right direction for FalconStor, other factors will also determine whether it will be one of the so-called virtualization companies to pull through. Some observers question whether it will be able to match the performance of hardware-based solutions in the long run. Purpose-built high-speed boxes -- like Pirus Networks's switch and those being developed by Maranti Networks, MaXXan Systems Inc., and Rhapsody Networks -- not only have a performance advantage; they're also simpler to install, since they're preconfigured, according to analysts.

"I'm not aware that [selling a software-based product] has been a huge detriment to their success," Marrone says. "But FalconStor will probably need to move towards hardware-based applications."