Mark Delsman, VP Business Strategy, Adaptec

When it comes to gobbling up small companies and jumping into new markets, few storage vendors have been as aggressive as Adaptec Inc. (Nasdaq: ADPT).

In the past two years alone, Adaptec acquired virtualization software company Elipsan, storage subsystem manufacturer Eurologic Systems, RAID component vendor ICP Vortex, and NAS vendor Snap Appliance Inc. for a total bill of more than $150 million. (See Adaptec Gets Virtual With Elipsan, Adaptec Adopts Eurologic, Adaptec RAIDs Old Europe, and Adaptec's $100M Snap Decision.)

Thanks in part to all this, Adaptec was among the first to deliver SATA and iSCSI products, along with its OEM Fibre Channel arrays. It's now got a wide offering of storage products, and it put together several solid earnings quarters until hitting a bit of a roadblock in its most recenet quiarter(see Adaptec Takes Action,Adaptec Posts Q4 Profit and Adaptec Wants Channel Change).

So what's next? That's what we recently asked Adaptec VP of Business Strategy Mark Delsman when we spoke with him to get an update on new technologies, acquisitions, and where Adaptec is going in storage.

The geeky Delsman, who joined Adaptec seven years ago after stints at Maxtor Corp. (NYSE: MXO), Seagate Technology Inc. (NYSE: STX), and other storage companies, enthusiastically talked about transitions his company's making into new technologies and relationships through acquisitions or OEM deals. Some of these have gone well: Adaptec's SATA drives, for instance, have found their market niche. Other changes haven't gone as smoothly: While Adaptec is considered an early leader in IP SANs, it's waiting, along with iSCSI startups such as EqualLogic Inc. and LeftHand Networks Inc., for the market to materialize.Delsman's not worried. He views the machinery of the market from an engineer's perspective, and it's clear he sees forces at work that, in his view, are grinding toward inevitable success for IP SANs. In the interim, Delsman's clear that Adaptec will be on the lookout for fresh opportunities – including OEM deals with Fibre Channel suppliers that would rather not develop their own iSCSI.

Delsman also expects big things from Adaptec’s $100 million acquisition of Snap, announced July 14 and completed less than two weeks later (see Adaptec Completes Snap Buy). Despite the hefty price tag, Delsman says Snap’s product line will fill a need for Adaptec.

“We didn’t have a NAS story... They certainly fit very well for us. We expect them to add $40 million in revenue over the next 12 months.”

We also probed Delsman for details of Adaptec's approach to SATA, SAS, FATA, Our Lady of Fatima, blades, software, and a range of other topics. Click on the links below for specific portions of the interview:

— Dave Raffo, Senior Editor, Byte and SwitchByte and Switch: Adaptec has a presence in many storage areas – external RAID, SATA and SCSI controllers, iSCSI, software, and now NAS with the Snap acquisition. What's the central business strategy?

Delsman: Adaptec’s been around 23 years now. A lot of our expertise has been in storage I/O. We were one of the founders of the SCSI spec and came to have a big leadership role in the SCSI market.

The next step was really adding data protection around that, taking the RAID market and trying to do a lot of what we did in SCSI: consolidating, adding features, turning it into a predictable thing in the marketplace. Now internal storage is moving external for the right reasons – scaleability and the ability to manage it as a whole entity instead of individual entities of storage.

In the external environment we find things are not standardized, there are still custom platforms. We made a decision a few years back that we needed to aggressively move into that marketplace. We want to add standardization, drive what we've done in internal components to the external market and [give] Adaptec an end-to-end storage message.

Byte and Switch: What do you see as the hot trends in storage over the next few years?Delsman: Well, the last three or four years we’ve had tight IT budgets, even though they seem to be a little looser this year. As data continues to expand at an incredible rate, an IT manager has to make sure dollars go to the right places. Reference data has expanded at over 90 percent CAGR. You have to make sure you pick the right storage for right areas.

I think we’ll see an increase in [concern about] picking the right type of storage for the right application. We’re also seeing people matching data to the appropriate devices over its lifecycle. You may have transaction data first, then it becomes reference data as its lifetime goes on, and you need to move it to a reference platform. Maybe it's only needed for compliance after a year or so and it has to be moved to a device where you can reference it only for compliance.

Byte and Switch: Adaptec has been aggressive with acquisitions in recent years. Will there be more acquisitions soon, or are you finished for now?

Delsman: We certainly have been on a rapid number of acquisitions over the last two years, but that’s always been part of Adaptec’s history. Some are about consolidation of the market, consolidating products into our line to grow the marketplace. Another type is strategic investments in external storage. We’ve been very aggressive in adding to our intellectual property.

Are we finished? We certainly have enough to work on now. We have our hands full. But I’ll never say we’re finished. We believe we know how to do acquisitions at this point, how to get good value out of them. I do believe we have all the significant pieces to pursue the vision I mentioned earlier.Byte and Switch: Are you happy with the Eurologic acquisition?

Delsman: It was a real key for us to gain momentum in external storage. It’s worked out well. We grew the business 27 percent in the first 12 months. At the end of our fiscal year [in March], we did about $57 million in external storage, which we were very happy with. Being able to grow the business 27 percent and add $57 million to our bottom line, I think those were excellent results. And we expect that to continue to grow.

Byte and Switch: What about Elipsan?

That was key from a software perspective. It gave us iSCSI features. It also gave us snapshot and virtualization for external storage. There’s no revenue stream I can quote because it’s integrated into our product, but the February launch of our iSCSI storage array contained Elipsan software. It’s out in the market and shipping. We expect great things out of that team as we move forward.

Byte and Switch: What do you hope to gain from the recent acquisition of Snap?Delsman: When we looked at our external storage product line, we had good breadth in external JBOD, Fibre Channel, iSCSI, and SATA. We had very good coverage for the block storage portion of the market, but we didn’t have a NAS story. We looked around and asked, why not look at the volume leader in the market? Both [Adaptec and Snap] look at the market in a similar way far as products are positioned – scale from the lower-cost entry point and then build a larger system as your needs expand. [Snap] certainly fits very well for us. We expect them to add $40 million in revenue over the next 12 months.

Also, they have a strong channel presence. We have very strong OEM relationships – Snap has been focused on the channel. Satisfying an OEM takes a large amount of your focus; it’s hard for a smaller company. They bring a storage name in the channel business to the party. On the other side, we have the ability to go talk to our OEMs about adding Snap technologies and solutions we can offer.

Byte and Switch: Has the SATA market taken off more quickly than you expected? [See SATA Saturates SANs.]

Delsman: Whether it’s our external storage or our internal PCI-based SATA RAID boards, both are showing good adoption, and SATA is well established by this point.

Actually, the transition was smoother than I anticipated. Whenever you change an interface – changing connectors on boards and making that type of transition – it seems to take longer than you think it should. But two things have caused this market to take off quicker than you see in most types of transitions: features that SATA provides over parallel ATA, plus the understanding that SATA drives can be used for reference storage.Byte and Switch: How do you see the SATA landscape? Is it best for secondary, archival, or primary storage?

Delsman: Whether it's primary or secondary storage really depends on what your usage model is for storage. I don’t see SATA in the role of data center transactional processing, but I see it as where that data migrates to.

The only time it fits as, quote, "primary storage" is in a small business or workgroup where it doesn’t have a real high usage profile. Certainly SATA doesn't fit in the corporate data center doing transaction processing. If SATA drives were built for that, they’d cost the same as Fibre Channel drives!

Byte and Switch: How do you see SATA/SAS/Fibre Channel shaking out? [See Mixed Drives in the Mix and Cheaper Than Fibre Channel, Faster Than Tape.]

Delsman: We’ve got an exciting transition here. We’ve had three types of drive interfaces – parallel ATA, parallel SCSI, and Fibre Channel, all used in somewhat different ways. The advent of SATA has allowed us to move more into enterprise applications, nearline or archival storage, because it allows hot plugging and expanded features.The interesting thing about SAS is it’s a superset that includes SATA. You have an opportunity with storage enclosures that will handle either type of drive. Adaptec is building a SAS backplane enclosure, and whoever configures it with drives can decide to populate it with SATA or SAS drives. You have different price points, different objectives, but with the same drive enclosure.

Now we have the ability to quickly configure or reconfigure a storage box to match the right type of data. No matter what type of fabric interface is on the front end, it will be a popular solution for the plumbing on the storage box.

Byte and Switch: Adaptec is among the early players in iSCSI. Where do you see that market going? [See Panel Prompts iSCSI Love-In, B&S Insider Scopes IP SANs, Adaptec, NetApp Team on IP SAN, and Adaptec Accelerates.]

Delsman: We’ve been developing iSCSI since before it was called iSCSI. We think it has a significant place in the market and a lot of growth associated with it over the next couple of years. We see it as complementary to Fibre Channel. It will extend the marketplace and the interconnect in the market place. Fibre Channel is the exposed part of the iceberg, where the rest of the SAN market hasn’t been served yet.

I see iSCSI and IP SAN filling in parts of the SAN where Fibre Channel hasn’t penetrated: small businesses, remote offices, departments. It’s easy to expand. As an example, you can start an IP SAN by plugging an iSCSI storage box into an unused Ethernet port on one of your servers. It's really direct-attached storage, even though it’s using an iSCSI connection.That can be the first step. A small business that’s done this can add a second IP SAN by adding an inexpensive Ethernet switch and another server. If they need more performance, they can add an iSCSI host adapter. You take a minimal initial investment and expand it very easily. That’s different from Fibre Channel, which is a much larger upfront investment and requires much more skill and expertise. We believe they are separate markets and iSCSI will allow us to expand the market significantly.

Byte and Switch: What is Adaptec’s iSCSI strategy?

Delsman: We started with the HBA TCP acceleration portion of it. We have a second-generation iSCSI ASIC sampling with major OEMs. This ASIC has two Ethernet ports, full offload, IPSec, and also does RDMA [Remote Direct Memory Access], which is the next big step in the iSCSI protocol. [See Siliquent Segues (Sibilantly) to 10-Gig.] It’s a sophisticated chip.

In February we released the first external iSCSI storage box. [See ISCSI Shakin' Goin' On.] It’s certainly in the early phases, but we’re forecasting a lot of growth in iSCSI through that type of device. It has iSCSI-to-SATA drives, it’s a 1U, 1-Byte device. We view that as the first of a whole family of IP SAN devices.

Byte and Switch: Will that sell through OEMs?Delsman: We would sell it through OEMs and the channel. We haven’t announced OEMs yet, but you’ll see that soon.

And with the acquisition of Snap Appliance, their recent NAS devices are block- and file-based. [See Snap Appliance Intros New Products.] That extends our iSCSI offering very quickly – anybody looking for different capacity points or different form factors will have that available.

Byte and Switch: While a handful of vendors have made traction selling IP SANs, TOE/initiator startups are dropping like flies. [See Xiran Gets Crossed Out, Nvidia Buys iReady, and Trebia Croaks.] Will that market ever develop?

Delsman: I absolutely believe more targets have to be out there. When you look at the host bus adapter side of this, a lot of customers aren’t going to need TCP/IP acceleration. They can do the TCP stack in software. But if they find the processor is working too hard doing TCP, they have the option of upgrading performance with the HBA. We don’t see it as mandatory, but it gives you a much broader range of options in IP SANs.

That also backs my model of starting with iSCSI plugged into an unused Ethernet port and growing as your IP SAN expands. If you have a server that has a number of storage connections, your processor will be very busy, and offload is a great way to get back to full-rate performance.The new ASICs are the next steps for iSCSI. They add IP stacks so you can run the security protocol. I view security in IP SANs as no different than Fibre Channel or any other fabric. Security today is about isolating your network from the outside network. You run Fibre Channel in a separate Fibre Channel network. People today would run iSCSI on a separate iSCSI network. But IPSec is one improvement you’ll see.

Another thing is RDMA, which allows transactions to occur buffer-to-buffer from target to host, so the processor doesn’t have to be in the middle of doing the I/O. [See RDMA Rumbles Along.] The concept has been around for years under different names, like a lot of work in the InfiniBand early days. It results in shorter transactions, and the communication between processors will help improve performance. The ASIC being sampled now has the capability of doing both – IPSec and RDMA. Towards the end of the year, I would imagine you would see it in the market place.

Byte and Switch: When will we see more major Fibre Channel systems vendors get into iSCSI? Will that happen, perhaps, through OEM deals?

Delsman: There’s a lot of early-stage positioning going on. In the second half of the year, you’ll see OEMs come out with their announcements, which will kick [iSCSI] into gear. Some of our competitors with HBAs will also come out with product, which will also help. We’re expecting iSCSI to move from the early stage with small sales to become a very significant component by the end of the year.

Byte and Switch: Are the successful Fibre Channel systems vendors dragging their feet on selling IP SANs?Delsman: I think the market is demanding iSCSI now. I think those who view it as way of expanding their market instead of threatening an existing market will be quick to offer this type of product.

There are a whole range of solutions and services around Fibre Channel in the data center, and that’s been a core for some of the vendors associated with Fibre Channel. But for workgroups and small businesses that are not going to pay for Fibre Channel SANs, iSCSI will allow the market to expand. We do know a number of OEMs evaluating iSCSI systems now. You will see announcements later this year.

Byte and Switch: What about the less expensive hybrid Fibre Channel drives we’ll see soon? [See FCIA Endorses Hybrid Drives,Cheaper Than Fibre Channel, Faster Than Tape, and EMC and HP Spin Disk.] Do you have plans for them?

Delsman: HP called it a FATA [Fibre Attached Technology Adapted] drive. I can see where it might play for them. They have Fibre Channel enclosures, and it’s not easy for them to re-plumb them. Certainly to me it seems to be a hybrid type of drive that won’t have a lot of volume associated with it, where a SAS/SATA combination will be a mainstream, high-volume drive. I could see the one with standards – SAS/SATA – will be the most popular.

Byte and Switch: How does Adaptec look at blade servers?Delsman: We see the blade market as an expansion market that will grow over time. The fabric interconnect between blades is an interesting area for our storage components. The idea with blades is getting the drives out of blades and getting remote boots off blade devices. We don’t have any announcements in that area, but expect to see some from us.

Byte and Switch: What is Adaptec’s software strategy?

Delsman: Obviously, storage has taken a more important role, not only for us but for other storage vendors. I mentioned the drive to standardize or commoditize storage platforms. I think that’s inevitable, and we intend to drive that as much as possible.

We view our software in four major areas. The first is RAID software, and our RAID software ships with every Intel server. The same RAID base extends out to PCI RAID cards and external storage. The second bucket is the management software. We believe managing external storage in the fabric should be just as easy as managing direct attached storage. We’ve been developing unified management software called Adaptec Storage Manager. We view that as an important part of expanding the market.

With the addition of Snap we have GuardianOS, the operating system running in larger Snap appliances. [See Snap Appliance Intros New Products and Snap Upgrades NAS Software.] It makes a unique platform for other storage applications. Now we can run other applications on top of the NAS device. Snap runs virus protection backup software, for instance.From the Adaptec side, we’re offering snapshot backup virtualization software. You’ll see both product lines expanding rapidly as we move forward. So we’ll be able to differentiate our products through RAID, storage management, GuardianOS, and storage applications that we will be able to provide from GuardianOS.

Byte and Switch: In April, Adaptec CEO Bob Stephens talked about an OEM deal with a Tier 1 server vendor. When will details of that deal be announced?

Delsman: We’re looking to be able to talk about it in the fall. The issue is the Tier 1 server OEM needs to be shipping their product before they can announce it. It’s coming along nicely, and I believe it will be a proof point for our external storage strategy.

Byte and Switch: There’s a lot of speculation that it’s IBM. Adaptec has a close relationship with IBM, which seems to be getting stronger. [See Adaptec, IBM Get Cozier.]

Delsman: We have great relationships with all the top OEMs. Over 60 percent of our business is OEM. Certainly IBM is a very good and significant customer for us – over 20 percent of our business last quarter. But if IBM is 20 percent, and 60 percent of our business is OEM, that leaves 40 percent with other guys.We always have had a very good reputation with IBM, and that’s one of reasons we’ve been able to spin out two of their RAID teams and made them part of Adaptec – and we’ve gotten supplier contracts from that. Most recently, we bought their RAID team in Rochester, Minn., and the earlier one goes back a couple of years to their xSeries server team in Raleigh, N.C., that we spun out of IBM. [See Adaptec, IBM Ink $200M RAID Deal