David Scott, 3PAR CEO

Nobody can accuse 3PARdata Inc. of taking the easy path to SAN success.

No, 3PAR takes the bold approach of targeting enterprise SAN customers, which means it must convince them to pay $1 million or so to buy a startups product instead of turning to EMC Corp. (NYSE: EMC), Hitachi Data Systems (HDS), or IBM Corp. (NYSE: IBM) to store their most important data. And 3PAR tries to beat the big boys by offering utility computing and virtualization – two technologies that have received a lot of attention without much actual implementation.

The jury is still out on how well this well funded ($153 million) startup is succeeding. In three years of shipping its InServ Storage Servers, 3PAR claims only 100 customers. “But they’re large customers,” 3PAR CEO David Scott says. “No mom-and-pop shops. We don’t target SMBs that are all the rage today. We go after the other end of the spectrum. A couple of our customers have 150 Tbytes of capacity.”

Among 3PAR's customers are a few online companies, such as eHarmony, Priceline.com, and FreshDirect (see Cogent Revenues Jump in Q2, 3PAR Books Priceline.com, and 3PAR in FreshDirect).

Scott says these kinds of companies embrace utility computing, which allows them to add and pay for storage as their needs grow. But he admits the concept of utility computing has also confused many potential customers, despite a lot of talk from major players such as IBM, Hewlett-Packard Co. (NYSE: HPQ), and Sun Microsystems Inc. (Nasdaq: SUNW).For its part, 3PAR takes the concept of utility computing seriously and considers its technology a differentiator in the segment. It uses thin provisioning – a form of disk virtualization that only allocates physical capacity as data is actually written – as the core of its utility offering. Thin provisioning lets customers set up a volume without buying the full amount of storage required.

Thin provisioning isn’t unique to 3PAR. Network Appliance Inc. (Nasdaq: NTAP) and others use the term, and some, such as EMC, call it "oversubscribed volumes" (see NetApp Makes Virtual Upgrade). But 3PAR was the first to build its business model around it (see BigBand Strikes Up $15M).

We recently sat down with Scott to talk about the state of play for a startup battling storage giants. Read on...

Byte and Switch: What kind of reaction do you get from customers when talking about utility computing?

Scott: Utility computing suffered a very bad rap of unmet expectations. Our customers are usually relieved to find a company actually delivering.Byte and Switch: Does virtualization have the same rap?

Scott: Virtualization applies to so many technologies. There’s disk virtualization, LUN virtualization, and file virtualization. A lot of people default to talking about disk virtualization as LUN virtualization. IBM’s SVC and EMC’s Invista do LUN virtualization. We’ve been delivering disk virtualization for three years, and it gives you different benefits than LUN virtualization.

LUN virtualization is good for heterogeneous remote replication and data migration. Disk virtualization addresses a completely different set of problems. You can optimize performance by spreading a single volume over servers, or hundreds of disk drives.

File virtualization tries to solve a different problem. We partner with [NAS vendor] ONStor for file virtualization.

Byte and Switch: Over the last year we’ve heard the term thin provisioning a lot more from storage vendors, including Network Appliance. Do you expect it to become a common feature in storage systems?Scott: It’s one of those truly disruptive technologies. The storage market leaders’ model is based on stuffing customers with as much disk capacity as they can. Lower utilization rates are better for their business. We typically raise utilization rates from around 25 percent to 100 percent. For market leaders to follow that, that’s a big impact to their business models. They’ll probably be dragged kicking and screaming into that. They will end up marketing it, but they’ll make it as difficult as possible to manage.

Network Appliance introduced an extra layer in its management stack. I call their thin provisioning "fat provisioning in a string corset." It takes a lot of work tugging at the strings to make the corset thin.

Byte and Switch: Even so, will customers tend to trust the established players over a startup when it comes to enterprise storage systems?

Scott: You know you’re winning when the only objection your competitors can throw out there is "startup viability" and try to use price. That’s the situation we’re in. It’s all a bluff, like Texas hold'em. They’ve seen the flop, they go all in, scream about viability, then drop their pants on price. In the customers’ eyes, we’re sitting there with an ace-high straight flush.

Byte and Switch: You’ve been shipping product for three years and have $153 million in funding. How close are you to being profitable?Scott: We expect to be cashflow positive within a year.

Byte and Switch: Will you need more funding?

Scott: We’re funded to turn the corner without having to raise more, but if we see an opportunity to grow the business we might consider more funding.

Byte and Switch: You’ve embraced virtualization and utility computing. Let’s talk about some other emerging technologies. When will you support 4-Gbit/s Fibre Channel?

Scott: We’ve seen very little practical demand for 4-gig yet. We’ll move there when the customer demand is there, but we expect it to be a year to 18 months away.Byte and Switch: How about iSCSI?

Scott: We’re protocol agnostic, and you can expect us to support iSCSI. I can’t think of a single customer of ours who’s suggesting it today. People are using iSCSI to attach stranded servers, but in the main data centers, we’ve seen only strong demand for Fibre Channel. It’s a question of timing. As our customers in the data center look to consolidate attached storage, we’ll see requests.

Byte and Switch: What did you do before you joined 3PAR in 2001?

Scott: I spent 18 years at HP. I was GM of their XP storage business. I was there when the moved from reselling EMC to Hitachi. It gave me a great view of all high-end products. I left just before the Compaq merger.

— Dave Raffo, Senior Editor, Byte and Switch0