Microsoft Gives Tacit Approval

NEW YORK Wide area file services (WAFS) and WAN optimization are rapidly becoming a game of partnerships, and Microsoft Corp. (Nasdaq: MSFT) today declared its support for startup Tacit Networks Inc.

Microsoft and Tacit expressed their mutual admiration at a news conference that included little news, but allowed executives of each company to stress the benefits of working together.

Microsoft hasn’t made the same financial commitment as networking companies Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR) did by buying startups in this space (see Cisco Chomps FineGround, Cisco Acts on Actona, and Peribit Deal: More to Come). It didn’t even forge an OEM deal or invest in Tacit as did SAN switch vendor Brocade Communications Systems Inc. (Nasdaq: BRCD). (See Brocade Invests in Tacit.) But the product manger for its Windows Server Division made it clear that Microsoft sees a market in streamlining data delivery to remote sites.

”We wanted a nimble player to work with,” Microsoft’s Radhesh Balakrishnan said when asked about the choice of Tacit as a partner. “They are betting on Windows as a platform. If this is the Wild, Wild West, we want to be an early player.”

Balakrishnan says Tacit is the WAFS play most supportive of Windows, and server-based WAFS is a better fit for Microsoft than network-centric WAN optimization. While other WAFS vendors’ products work with Windows files, Tacit cooperates most closely with Microsoft developers on features for its next-generation Longhorn server.Tacit is already planning Microsoft Exchange server acceleration as part of a series of services scheduled to ship in July, and it is working on a management console application that natively integrates into Windows Storage Server 2003 (see Tacit Enhances Branch Office Solutions).

On the other hand, Balakrishnan says he considers Cisco a WAFS rival because the technology it acquired from Actona Technologies Inc. and FineGround Networks is not based on Windows.

Tacit licenses Windows software, so Microsoft makes money off sales of the startup’s Windows-based appliances. Microsoft salespeople also frequently accompany Tacit’s on calls, to add marketing heft.

Industry insiders believe WAFS and WAN optimization products fit better as integrated products than as standalone offerings. That theory helps explain a recent surge in deals. Besides Cisco’s two WAFS acquisitions over the past year, Juniper Networks bought Peribit Networks for $337 million, Brocade signed an OEM deal and invested up to $7.5 million into Tacit, and Hewlett-Packard Co. (NYSE: HPQ) signed an OEM deal with Riverbed Technology Inc. (see HP in Deal With Riverbed, Sources Say).

Tacit’s reasons for cozying up to Microsoft are obvious. Besides Microsoft’s size and might, a bulk of the servers in remote offices run Windows.“You’ll see Microsoft and Tacit become tighter and tighter in this battle,” Tacit president Chuck Foley says. “With the big players out there, we needed a bodyguard to help us out.”

Although Tacit sells appliances based on Linux as well as Windows, Foley says more than three-quarters of Tacit’s customers since late 2004 have bought Windows-based appliances. He says Tacit has approximately 100 customers.

“The remote office as it is today is a Windows problem, it’s not a Linux problem or a Unix problem,” Tacit CTO and founder Shirish Phatak says. “Windows is the platform of choice for remote offices.”

— Dave Raffo, Senior Editor, Byte and Switch