DataCore Sings Virtual Song

While the industrys heavy hitters try to sort out the best way to virtualize enterprise storage, startup DataCore Software Corp. is looking to win a spot on the low end (see DataCore Tunes Up SANmelody).

DataCore upgraded its SANmelody storage management software today, adding integration with EMC Corp.’s (NYSE: EMC) VMware and Microsoft Corp.'s (Nasdaq: MSFT) Virtual Server.

So, while enterprises debate whether it’s best to use storage virtualization from Hitachi Data Systems (HDS) or IBM Corp. (NYSE: IBM) or wait for EMC to offer it, DataCore is chasing smaller companies already running EMC's or Microsoft's virtual servers (see EMC Takes Storage Router for a Spin).

According to DataCore CEO George Teixeira, when companies virtualize their servers, they will have more need to virtualize the storage attached to them.

“We’re the other half of the virtualization story,” he says. “If you have virtual servers you need virtual storage. The big boys tried to make virtualization complicated, and there was lot of resistance to it. Things like VMware and Microsoft Virtual Server changed the mindset, and let people know it’s simple to use virtualization.”SANmelody 2.0 adds Auto Grow, DataCore’s term for thin provisioning that lets users create virtual volumes on a system even if the space is not physically available. It also supports iSCSI failover among two PC servers over an Ethernet connection. Pricing starts at $1,000, but features such as auto grow and iSCSI failover cost extra.

DataCore isn’t alone in placing virtualization in its management software. FalconStor Software Inc. (Nasdaq: FALC) and StoreAge Networking Technologies Ltd. offer virtualization, usually bundled with other vendors’ products (see FalconStor's Feelin' It and StoreAge Touts Partners in Spaid).

Analyst Mike Karp of Enterprise Management Associates says the challenge for these companies is more marketing than technical: These products can succeed only if small companies become aware of the benefits of virtualization.

“Smaller companies that have growing data needs can get as much value out of virtualization as large companies,” Karp says. “But that slice of the market might not even be aware of virtualization.”

Making them aware is a major piece of DataCore’s battle for survival. DataCore also sells an enterprise product called SANsymphony, but it was the addition of its lower-end SANmelody last March that helped the Fort Lauderdale, Fla.-based company get through what Teixeira calls “the dark days” of late 2003 (see DataCore Sings a SANmelody). That’s when DataCore began reducing staff as it shifted from an unsuccessful direct sales model to a channel approach (see DataCore Sacks Some Sales Staffers). The company reduced headcount from 150 employees at the end of 2003 to 60 today.It also relieved its debt load, buying out all but one of its venture capitalist firms. It wasn’t a good sign of the startup’s health when VCs gave up their stake for a fraction of the $80 million they'd invested since 1998, but Teixeira says the buyout gave the company a fighting chance.

Flagship Ventures remains as an investor with one seat on the board, but DataCore employees own 60 percent of the company (see DataCore Builds Board). “In the fourth quarter of 2003, we had three VCs on our board and basically the VCs controlled the company,” Teixeira says. “No matter what we did financially, we wouldn’t have gotten our rewards. Now we don’t have VC money for marketing, but we’re at break-even or better.”

— Dave Raffo, Senior Editor, Byte and Switch