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Howard Marks
Howard Marks
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LSI buys OnStor, VCs take Bath

In a continuation of the busy storage industry M&A season LSI has snapped up midmarket NAS vendor ONStor for $25 million in cash. While I'd consider selling DeepStorage Labs for $25 million a success; the venture capitalists that put over $130 million into OnStor over its 9 year life it was just a way to get away with something. At $25 million it may be a good deal for LSI but the waitresses on Sand Hill Road will take yet another hit on their tips.

In a continuation of the busy storage industry M&A season LSI has snapped up midmarket NAS vendor ONStor for $25 million in cash. While I'd consider selling DeepStorage Labs for $25 million a success; the venture capitalists that put over $130 million into OnStor over its 9 year life it was just a way to get away with something.

To me this is just another indication of how hard it is to make money in the midmarket NAS business.  On the one hand midmarket NAS vendors have to convince SMB customers that their products are worth the extra cost over prosumer NAS boxes from Buffalo, drive vendors Seagate and Western Digital, along with network vendors dLink and Netgear not to mention EMC subsidiary Iomega.

Once they've cleared that hurdle, and entered the midmarket, they have to convince the guy running 10-100 Windows and/or Linux servers that he needs a dedicated NAS to replace the general purpose server he's been using as a file server and that he shouldn't buy the Celerra or NetApp filer all the enterprise folks are buying or a Windows Storage Server box from Dell or HP.

OnStor also tried for years to sell NAS gateways, which makes sense to engineering types after all you're going to need block storage so why not use a gateway in front of it and have a single pool of storage. Of course the people that think that way are the same ones that will slap a server running OpenNAS or NexentaStor in front of their Clariion rather than buy a gateway.  Most NAS customers want their appliances to come with storage so they have one throat to choke when it doesn't work.

Howard Marks is founder and chief scientist at Deepstorage LLC, a storage consultancy and independent test lab based in Santa Fe, N.M. and concentrating on storage and data center networking. In more than 25 years of consulting, Marks has designed and implemented storage ... View Full Bio
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