Isilon's Focused on Feds

Isilon Systems wants Uncle Sam. It's aiming to make the government a prime customer by enlisting retired generals and a founding administrator of the Environmental Protection Agency for advice and contacts.

Isilon CEO Steve Goldman says that even though his firm has no federal customers yet, the prospects are huge. "The U.S. government is the single largest purchasing entity on the planet," he maintains. "Federal business could be 10 to 20 percent of our total revenue within the next couple of years."

Like the entertainment and broadcasting verticals, Goldman says the federal sector has growing needs for mission-critical digital content, particularly with new security and record-keeping projects underway. Also, a lot of agencies are willing to take a chance on a startup -- especially if the introduction is made by someone they know.

That's where Isilon's appointment of William D. Ruckelshaus to its board of directors comes in. Ruckelshaus, who has no direct personal investment in Isilon, is a director at Madrona Investment Group, which helped finance Isilon and backed Dantz before its acquisition by EMC Corp. (NYSE: EMC). (See Isilon Raises $15.5M, Supplies LexisNexis and EMC Dances With Dantz.) But he's also a corporate honcho with a jaw-dropping government background.

A lawyer with degrees from Princeton and Harvard, Ruckelshaus, 73, was active in the Indiana House of Representatives in the 1960s and later became the first administrator of the EPA. He was also an acting FBI director and then deputy attorney general at the Justice Department in 1973. He followed then-attorney general Elliot L. Richardson's footsteps by refusing to dismiss Watergate special prosecutor Archibald Cox during Richard Nixon's "Saturday Night Massacre" -- a move that cost him his job and helped grease the wheels of impeachment.Ruckelshaus has spent much of his career running companies. He was CEO of Browning-Ferris Industries (now part of Allied Waste Industries Inc.) from 1988 to 1995. He serves on the boards of Cummins Inc., Nordstrom Inc., and Weyerhauser.

If anyone can help Isilon with advice, messaging, and contacts, it's Ruckelshaus. But the startup is also forming its own Federal Advisory Board, made up of four retired generals -- one from each branch of the services, and all having three or four stars to their name.

Isilon's also working toward opening a field office in Washington, adding to its New York and San Francisco branches.

Clearly, Isilon's serious about getting government business, and it's not alone. Other suppliers are also devoting special resources to this sector, including EMC, Decru Inc., and GlassHouse Technologies Inc. (see Decru Adds VP of Federal Ops, Tech Data, EMC Target Federal Gov't, and GlassHouse Wins GSA Contract).

Interest in this market's a no-brainer: According to research firm Input, the IT storage-related budget for various federal agencies grew from $121.1 million in 2003 to $134.3 million this year (see Fed Storage Spending Lifts Off and Input Estimates Fed Computer Spending). And the firm forecasts the Fed sector to grow by double digits for the next five years.As more companies flock to the federal watering hole, at least one analyst sees a downside risk. While not familiar with Isilon's program, analyst Shawn McCarthy of IDC says government storage spending figures are actually dropping. The reason? Lower pricing on equipment and increased competition. "That doesn't mean a company with a good product shouldn't try to enter the government sector, but they've got their work cut out for them" he notes.

Mary Jander, Site Editor, Byte and Switch