Top Ten Private Storage Networking Companies

Get a drink, sit down, brace yourself. Its time for the first "seismic adjustment" of the Byte and Switch Top 10 list.

Thank you for all the emails about how great this list is; but we don’t do it for the thanks, we do it for the thrill. And you’re not supposed to like it (well... if you must). You’re supposed to write in and tell us what’s up – so let’s hear you!

Since our launch a couple of weeks ago (time flies, eh?!), and the initial publication of this list, several interesting things have come to light.

It turns out our former number one company, TrueSAN Networks Inc., isn’t quite as “true” as it makes out. The majority of TrueSAN’s system comes from third-party suppliers, leading us to conclude that it's more of a systems integration company than an original equipment manufacturer. And as companies that integrate equipment rarely lead markets, TrueSAN has been knocked off its pedestal at the top of the list.

Taking TrueSAN’s place is Pirus Networks – our new number one. Word has it the Pirus Maniacs have just scored another $10 million from a U.S./Japanese venture fund called Jafco Ventures bumping up its funding to date to $55 million.Other key moves include a new entry at number ten from the Kleiner Perkins Caufield & Byers portfolio. Zambeel Inc. is the first virtualization play on the list and has great credentials.

This spells bad news for Yotta Yotta though, which has been relegated to the Bit Bucket to make room for Zambeel. Sorry guys, that company song has got to go.

Creeping up the list to number six is 3PARdata Inc., having just scored a monstrous $100 million in third-round funding. This has naturally catapulted it up ahead of rival Cereva Networks Inc., which slips down to the number seven spot.

And that’s it for this week – if you are still on the list you can breathe again, for the time being! Anyone who feels misunderstood, use the message boards to explain why. The companies we are picking are those that we think are the most likely to make it through this economic slump to a fat IPO or a nice juicy acquisition.

How do we choose these outfits? Successful startups have three things in common: strong technology, smart money, and proven management. What you see here is our pick of the ten companies that most evince these qualities in the storage networking market.This list is going to move with the market. As new startups with hotter technology and more funding break cover, they will inevitably replace others that are slowing down. For these poor wretches fate holds a place in the Bit Bucket, a dark and lonely place. But it’s not a bottomless pit from which there is no return. Companies in the Bit Bucket are still ones to keep an eye on, and with more funding or significant customer wins, it is possible to reclaim a place in the Top 10.

You can help by sending suggestions (after reading Top 6 Top 10 Rules) for moves, adds, and changes to [email protected].

Table 1: Top Ten Private Storage Networking Companies

On Fire!

Updated: 7/13/01Pirus Networks is the clear leader of the pack, jumping up two places to take the new number one spot.

Our reason for elevating the Pirus Maniacs is twofold. Insiders at the company inform us it has just signed an extra $10 million in funding from a U.S./Japanese venture fund, Jafco Ventures, which is impressive in an environment where financing is tight.

The company is also rumored to be signing a deal with a U.S. bank that’s been trailing its PSX-1000 multiprotocol SAN switch. This is a big deal for Pirus, as it plans to go head-to-head with Brocade Communications Systems Inc. (Nasdaq: BRCD) and will need a major customer endorsing its technology to get its foot in the door with other customers (especially those already signed up with Brocade).

For the previous Top 10 article about this company, see: Pirus Maniacs

Big BlueArcNew: 6/13/01

Everything about BlueArcCorp. is BIG: the money – more than $100 million in funding to date (see

BlueArc Wins $72M Round); the product – a monster box that uses specialized chips todeliver throughput approaching 2 Gbit/s; but most especially... thebuzz.

Simply put, analysts and pundits – including Gorgeous George Gilder – are goingplumb loco over BlueArc’s Si7500 NAS device, which connects Fibre Channelstorage arrays to servers over gig Ethernet networks. International Data Corp. (IDC)analyst Robert Gray recently described BlueArc's system as "2 to 10 times asgood as today's products."

BlueArc will compete head-to-head with storage behemoths like EMC Corp. (NYSE: EMC)and Network ApplianceInc. (Nasdaq: NTAP). Right now those companies have yet to say how they’ll counter the threat from this feisty new competitor. In the meantime,BlueArc’s story has put it center stage in the NAS market – hence itsposition at No. 2 on the list.

Note: BlueArc recently published some test results of its product.View them here: http://www.etestinglabs.com/main/reports/baiomtr.pdfNot so True

Updated: 7/13/01

TrueSAN Networks Inc. loses its place at the top, dropping down two places to number three. The company has been doing the whole enchilada in storage networking months and months before anyone else. While all the other startups are still tinkering in the lab, TrueSAN has been out knocking on doors and winning customers, which is never a bad thing.

However, it turns out TrueSAN was never really in the lab in the first place. The company is teetering on the edge of being a systems integration firm. Its Paladin system can switch Fibre Channel and gigabit Ethernet traffic within the same fabric, hold multiple terabytes of data, and perform NAS and SAN virtualization through parallel processing – and all from one box.

But there is a catch. All this capability comes from buying off-the-shelf components – including a switch, HBAs, and chipsets – and patching them together into one system. The majority of hardware in TrueSAN’s system is sourced from QLogic Corp. (Nasdaq: QLGC). To its credit, TrueSAN’s software does a very good job of binding all these components together, which is why the company has customers and maintains a high position on this list. However, history teaches that to become an outright leader in any market a vendor must develop and own its technology. Hence the drop.TrueSAN is sticking to its rationale for not focusing on inventing hardware. Tom Isakovich, President and CEO of the company, told Byte and Switch: “That space is rapidly commoditizing.” He adds, “Hardware-oriented storage systems startups will have to fight EMC on pricing, and, unfortunately, most do not have the software to compete with EMC and improve their margins.”

For the previous Top 10 article about this company, see: Bill Gates II?

Loaded Ride

New: 6/13/01

Looking for a brand new Maxima, loaded, with low financing, andonly $1,000 down? Check out Nissan.On the other hand, if it’s an IP storage switch supporting gigabitEthernet, Fibre Channel, and SCSI interfaces that you’re after, it’s Nishan SystemsInc. you want.

Actually, it’s not really Nishan’s technology that wins it the No. 4 placeon this list and sets it apart from the IP SAN hoi polloi (there are, afterall, many startup companies now vying for a slice of this lucrativemarket). Rather, it’s the fact that, unlike its competitors, Nishan hasalready landed a doozy of a contract – with IBM Global Services (see

Nishan Systems Inks IBM Deal).

That’s quite a coup. IBM Global Services is making a big push into theoutsourced storage services market (as is its arch-rival, AT&T Solutions). Nishan’s reseller agreement could let it ride IBM’s coat tails all the wayto the bank.

The contract is especially notable given that Big Blue’s otherreseller gigs are with mondo public companies like Brocade Communications SystemsInc. (Nasdaq: BRCD), CompaqComputer Corp. (NYSE: CPQ), and McData Corp. (Nasdaq: MCDT).Nishan is a minnow in comparison.

Little wonder then, that at a jointlyheld IBM/Nishan meeting recently to announce the deal, Nishan’s presidentand CEO Aamer Latif had the look of a man who’s just found the winninglotto ticket in his pocket.Nishan is also doing well on the money front with over $90 million infunding.

Now if they can just find a place to add a cup holder…

Lower the Drawbridge!

New: 6/13/01

SANcastle Technologies

is setting forth with a switch to make CiscoSystems Inc. (Nasdaq: CSCO) weep. Not only that, it starts shipping itnext month. A good enough reason to put this young upstart on our list if ever there was one.At N+I in June, SANcastle took the wraps off its GFS-8 Global Data Fabricswitch – which sounds like a bold move, and is (see SANcastle Announces 1st Product).

The product sits between the LAN backbone and the SAN backbone andprovides bidirectional integration of Fibre Channel and gigabit Ethernetnetworks without the need for disruptive technology changes, the companysays.

Essentially this product is a service provider’s flexible friend (not unlike Gumby) – fortwo reasons. First, it can connect Fibre Channel SANs over an IP backbone or,alternatively, Ethernet/IP LANs over a Fibre Channel backbone.

Connecting a Fibre Channel SAN over IP enables enterprises (or service providers) totie together remote islands of storage over existing wide area networks. Thedownside to this approach is that they have to trust their data to IP –

which is not known for reliability. The iSCSI standard for transportingstorage data over IP is expected to address these issues, although it’sstuck in the approvals process right now.

Connecting an Ethernet/IP LAN directly to a Fibre Channel backbone, on the otherhand, provides a more reliable path for data. It also boosts performance.The Holy Grail that Cisco (and all the IP SAN startups) are striving foris to get storage traffic running over IP and to eventually collapse the twoseparate networks into one giant IP network. SANcastle’s switch has set theball rolling in this direction.

It’s up against some steep competition. Brocade Communications SystemsInc. (Nasdaq: BRCD), Gadzoox Networks Inc. (Nasdaq:ZOOX), McData Corp. (Nasdaq:MCDT), InrangeTechnologies Corp., and all the other major Fibre Channel players are buildinggigabit Ethernet ports into their Fibre Channel switches. None are shipping yet,though. And Cisco is adding a Fibre Channel blade to its Catalyst 6000 LAN switchthrough a deal with Brocade. This isn’t expected until the end of the year.When these products ship, the LAN and SAN switches will plug together withoutthe need for a SANcastle box in the middle.

SANcastle's switch can also map gigabit Ethernet VLAN (virtual LAN) tags to Fibre Channelzones. These are the two addressing methods networks use to allocatebandwidth and storage space, respectively, to particular customers. Byplugging them together a company can provide multiple customers on the samenetwork with private bandwidth and storage – without other customers seeingthat information.

SanCastle has partnered with several big cheeses in the market, includingBrocade, Anritsu, EDS Corp, and Compaq Computer Corp. (NYSE:CPQ), and has an impressive management team running the show.

President and CEO, Dave Davenport has more than 20 years experience in thestorage market, most recently as VP of worldwide operation for Hitachi Ltd.’s (NYSE: HIT;Paris: PHA) storage division. And Dennis Talluto, who heads up technologyplanning, was previously in charge of Nortel Networks Corp.’s (NYSE/Toronto: NT) optical storage group.On the funding side, SANcastle received a second round of $20 millionlast summer. The round was led by Genesis Partners andthe ConcordVentures, previous investors in SANcastle. They were joined in thisfunding round by J.P. Morgan &Co. (Nasdaq: JPM). The company is cautiously looking for a third round,says Terri Glenn, director of marketing at SANcastle.

Interestingly, the company’s headquartered just down the road from Ciscoin San Jose, although Glenn says this is purely coincidence. “Companies thatusually acquire, aren’t right now," she notes, with a certain gleam in her eye. "It’s not so easy for them to target usanymore." Gone are the days, apparently, when astartup dreamed of being acquired by Cisco.

In the Money

Updated: 7/13/01

3PARdata has moved up a place to number six, on account of its whopping $100 million in third-round funding announced recently. The new money comes from several top VCs, guaranteeing it a move up the list (see 3PARdata Snags $100M).Switching places with rival Cereva is good news for 3PARdata, but it must now demonstrate how to turn this money into profit – and it’s still a considerable way off from releasing a product.

For the previous Top 10 article about this company, see: EMC Hammer

Running Low?

Updated: 7/13/01

Cereva Networks slides down a place to number seven, as the news about 3PARdata’s funding win – all $100 million of it – is bad news for them.Both companies are going after EMC and will need a huge amount of staying power to take on the storage giant. Essentially, this means plenty of cash reserves to stay in the fight.

Cereva has reportedly been trawling for more investment for some time and was forced to lay off 65 employees a couple of months ago to keep afloat. Can it really have burned through that entire round of $110 million from the start of the year? It certainly sounds like it. Without further investment soon, things are beginning to look shaky in the Cereva camp.

For the previous Top 10 article about this company, see: Viva Cereva!

To Infinity and Beyond?

New: 6/13/01There are now about 25 storage service providers jumping up and down, shouting, waving their arms in the air, and generally doing whatever they can to attract customers’ attention. That’s about 18 too many. In other words: We smell a shakeout.

Scale Eight Inc. is unlikely to be amongst the shakees. It has an ambitious plan to go public at the end of this year and is already profitable.

So it’s earned the No. 8 spot on our list. If they’d called themselves “Scale Seven”… Who knows where they'd be?

Scale Eight’s MediaStore service promises customers access to as much as 800terabytes of storage space as an alternative to buying expensive boxes from EMC Corp. (NYSE: EMC).Not quite an infinite amount then (which is what the sign that looks like anumber 8 turned on its side represents, in case anyone’s interested).

Its patent pending global storage system stores, manages, and serves filesacross any number of locations – enabling management of geographicallydispersed files, the company says."It's not a company per se, but a model that could find a chink inEMC's armor," says John Webster, an analyst with New Hampshire-based datastorage research firm Illuminata Inc.

It takes a minute to get your head around Scale Eight’s service, but,essentially, customers have to buy its Global Storage Port, a small devicethat sits on their LAN. They then install its cunning Global File System(8FS) software, which makes the box appear to be connected to whateverstorage system it’s accessing.

Scale Eight storage can be accessed via two methods:

For access to files via a LAN, one of these Global Storage Port devicesis deployed on the customer LAN, and transparently accesses Scale Eightstorage centers as needed. The device appears to servers and applications asa standard NFS/CIFS (Network File System/Common Internet File System) fileserver. Its deployment and service initiation typically require less thanan hour, the company boasts.

For access to files via the WAN, Scale Eight automatically generates an8RL (authenticated URL) for each file, which enables files to be served fromScale Eight storage centers directly to an end-user browser. These storagecenters are MTVi Group, Akamai Technologies Inc.

(Nasdaq: AKAM), and ExodusCommunications Inc. (Nasdaq: EXDS), which are all involved in resellingScale Eight’s services.Clever or what? Because of this patent-pending stuff, the VCs and analystsreckon Scale Eight has a headstart and will go the distance. Its challengewill be to convince potential customers that its service is better andcheaper than its competitors, which are popping up like daisies (seeStorage Services Sprout in Europe).

Scale Eight CEO Richard Watts sold his previous company ConvergeNet, astorage and networking company, to Dell Computer Corp. (Nasdaq:DELL) in 1999 for $340 million. Scale Eight’s founder and CTO, Joshua Coates, was anengineer at Inktomi Corp.(Nasdaq: INKT) and is considered a genius among scaleable clustering experts.

Another important feather in its cap is its VC roster – Oak InvestmentPartners, CrownAdvisors, InterWestPartners, and CenterPoint Venture Partners. It’s raised $31 million in two rounds from these folksand hopes to get a final round under its belt by the end of the thirdquarter 2001, before testing the IPO waters.

It’s worth noting that Gartner/Dataquest estimates the SSP (storage service provider) market will beworth $8.8 billion by 2003. A pretty fat piñata, in other words.

Three’s company?New: 6/13/01

“Forget TCP/IP,” for connecting pools of storage servers together, Troika Networks CEO AlanSkidmore told Byte and Switch, “It’ll never work.”

Well, there’s a statement. So what does Troika propose instead?

Troika makes “intelligent” HBAs (host bus adapters) that use a newprotocol called Virtual Interface (VI) to connect servers together on anEthernet network. Troika will compete with Emulex Corp. (Nasdaq: EMLX), QLogic Corp. (Nasdaq: QLGC),and JNI Corp. (Nasdaq: JNIC) –

all of which also are planning VI implementations.

Troika’s first product is designed for installation in TCP/IP server“clusters,” where servers are strung together and managed as a single systemon an Ethernet network.Skidmore claims his adapters improve application performance on thesenetworks by using VI to bypass the server OS and TCP stack – eliminatingthe overhead caused by processing TCP communications. He says thenumber of instructions requiring CPU processing is reduced to 50 with VI –from 7,000 with TCP.

Getting the applications vendors to add VI code has not been a problemfor Troika so far. IBM Corp.’s(NYSE: IBM) DB2 database is supported, as is Microsoft Corp.’s (Nasdaq:MSFT) SequelServer, Oracle Corp.’s (Nasdaq: ORCL) database applications, Veritas Software’s clusteringcode, and NetworkAppliance Inc.’s (Nasdaq: NTAP) data filer applications. As far ashardware adoption of VI goes, Intel Corp. (Nasdaq: INTC) is aninvestor in the company, which bodes well for VI’s chances of being widelyimplemented on server hardware platforms.

Today the product supports Ethernet only, but Troika is migrating toVI-over-Fibre Channel this year and VI-over-Infiniband by the end of 2002.

Its customers include storage heavyweights, Hitachi Ltd. (NYSE: HIT;Paris: PHA) and Network Appliance, and Troika has partnered with Vicom Systems and Consan.

Financially comfortable, Troika landed a third round of $41 million inJune 2000 from Draper FisherJurvetson, Dynafund Ventures, Windward Ventures, Amerindo Investment AdvisorsInc., Intel, and Network Appliance, bringing its total capital raised to$54 million.Troika has two challenges. The steepest is to make the young VI awidely adopted protocol over standards already in use. Alan Skidmore has 20years experience in the storage business, with BMC Software Inc. and Compaq – and to judge from the above list of partners, investors, and companies portingtheir products to VI, that experience is paying off.

The other is the company’s name, which makes it sound like a pig farm inRussia.

Oink!

“Virtually” Assured

New: 7/13/01Zambeel Inc. sneaks in at number ten as a new entry on the list. It's obvious why when you check out these stats.

The company plays in the virtualization space, which is just about the hottest sector of the market right now.

Plus, it's backed by VC-extraordinaire Vinod Khosla, a partner at Kleiner Perkins Caufield & Byers. Think: Redback Networks (Nasdaq: RBAK) and Juniper Networks (Nasdaq: JNPR). Kleiner Perkins was the lead investor in Zambeel’s first round, which raised $26.5 million earlier this year.

Khosla personally got involved with this crew, hiring their new CEO, Darren Thomas, from Compaq Computer Corp. (NYSE: CPQ). Thomas was VP of Compaq's enterprise storage division for 15 years, and he has big plans for Zambeel. “We can do in one year here, what it will take them three years to do at Compaq,” he told Byte and Switch (see Khosla's Back, Backing Stealth Startup).

He revealed that Zambeel is building a file-based NAS device that will deliver both scaleable capacity and performance. The problem with the NAS boxes out there today, according to Thomas, is scaleability: “They scale in terms of capacity but not performance."The product will be out in beta form in September, with first production expected by the end of the year.

The name, in case anyone's interested, comes from an Indian fable about a Prince who has a magical little bag, called a Zambeel, and no matter what he needs, it’s in the bag. The concept of an infinite resource, like the little bag, appealed to Waheed Qureshi, the CTO and co-founder of Zambeel.

Note: Zambeel is a slightly better name for a company than "Sport Billy," a western version of the fable. Sport Billy is a hero from another planet with a kitbag full of anything he can think of – the contents are miniature when inside the bag and grow when taken out. Weird or what?!

Sour Note

Updated: 7/13/01After less than a month on the Top Ten List, Yotta Yotta gets bumped into the Bit Bucket. It’s lost its place to Zambeel Inc. – a hotter company that’s backed by virtuosic venture kapitalist, Vinod Khosla (see Khosla's Back, Backing Stealth Startup). It must be said, also, that the Yotta Yotta Song didn’t help them any.

For the previous Top 10 article about this company, see: Whatta Lotta Yotta