Alain Andreoli, CEO, Xiotech

"We're a small, agile, nimble fish in a big ocean."

December 15, 2004

7 Min Read
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Just over a year ago, Alain Andreoli took over as president and CEO of Xiotech Corp., leaving behind a job as head of worldwide sales for switch maker McData Corp. (Nasdaq: MCDTA). (See McData Sales Boss McExits and Ex-McData EVP to Head XIOtech.)

Andreoli admits he knew little of the Eden Prairie, Minn., private company before its board of directors contacted him about the job. He did know competition was fierce for a systems company knocking heads with Dell Inc. (Nasdaq: DELL),

EMC Corp. (NYSE: EMC), Hitachi Data Systems (HDS), Hewlett-Packard Co. (NYSE: HPQ), IBM Corp. (NYSE: IBM), and Sun Microsystems Inc. (Nasdaq: SUNW).

Now that hes settled in, Andreoli firmly believes he made the right move – and not just because he’s the boss. “Implementing our business model is much easier than being in the switch business,” he says. “We are carving a business in a huge market – in excess of $10 billion. We’re a small, agile, nimble fish in a big ocean. In the switch business, you are struggling in a $1.5 billion fishbowl with two other sharks.”

We caught up with Andreoli recently to discuss his year on the job. It's been a busy one: He's built out Xiotech’s sales channel while trying to establish an international presence (see XIOtech Launches Channel Program and Xiotech, Bell Microproducts Partner). He hired Maranti Networks Inc. founders Kuldeep Sandhu and Santosh Lolayekar to head a new development team in May, then added Dell storage chief Karl Schubert as CTO in June, and former Adaptec Inc. (Nasdaq: ADPT) VP Mike Stolz as marketing EVP in August (see Xiotech Hires Maranti Founders, Dell Storage Chief Joins Xiotech, and Xiotech Rolls Out Drives, New EVP ).

On the product side, Andreoli came to Xiotech a few months after the company released its Magnitude 3D system, the one that fixed the single point of failure issue that limited sales of the company's first storage controller (see XIOtech Fixes a Failing). During Andreoli's tenure, Xiotech's added the Magnitude 3D Edge entry-level SAN, a Windows-based NAS system, and a replication appliance to go with its flagship Magnitude 3D system (see XIOtech Launches Entry-Level SAN , Xiotech Launches New NAS, and Xiotech Replicates).Andreoli says Xiotech is on track to reach its goal of $100 million in revenue this year, up from $80 million in 2003. He also says the company spun off by Seagate Technology Inc. (NYSE: STX) and propped up by VC firm Oak Investment Partners

in 2002 is on track to become public by 2006, if not sooner (see XIOtech Snatches Rash of Cash and Seagate Airs XIOtech Finances). But Andreoli stresses that Xiotech won’t take the IPO plunge until the time is right.

“Once you are public, it’s over,” he says. “There’s no mercy. You have to show every quarter that profit is going up, the top line is going up, and you lose a chance for investment.”

Is there anything he doesn’t like about the job? Well, he finds it cold in Minnesota – even after spending years in Colorado with McData, NTT/Verio Inc., and Storage Technology Corp. (StorageTek) (NYSE: STK). But professionally, he’s warmed to the task.

“The only thing that keeps me up at night is we’re still too small,” he says. “How can we grow faster?

Click on the links below for specific portions of this Byte and Switch interview:

— Dave Raffo, Senior Editor, Byte and Switch

Byte and Switch: How would you describe your first year on the job?

Andreoli: When you’re new, you don’t know what you’re going to find. I really didn’t know what to expect beyond the surface when I got here. What I’ve found is a lot of technology and a company that has carved a niche in the mid-market where all the growth is right now.

Internally, the company was in need of a sense of urgency. It had gone through a lot with Seagate and Oak, and it needed a catalyst to let it go and create excitement. We’ve been maniacal about employee satisfaction. We do employee surveys every quarter. I wanted to unleash [employees'] potential and fire in the belly. I don’t know if their bellies are burning yet, but they’re more active than a year ago.

As for a business plan, we needed a long-term strategy. We built something that is very clear for the long term, and that will make us a bigger play a year from now.Byte and Switch: Is your belly burning?

Andreoli: I’m very happy here. The only problem is the winter in Minnesota. But that allows us to have engineers who are committed; they work long hours during the winter. People here are committed to the company for the long term and have a big belief in building something.

Byte and Switch: What changes did you make over your first year?

Andreoli: We’ve made dramatic changes in our time-to-market strategy... We went to automated testing versus manual testing, and we developed innovative ways to work with our team in India, where we’ll have 50 people by the end of next year.

Byte and Switch: Are you happy with the results of your tenure so far?Andreoli: The only thing that keeps me up at night is we’re still too small. How can we grow faster?

Byte and Switch: Do you have an answer to that?

Andreoli: We’re going to leverage the channel. Last year, 12 percent of our sales revenues were indirect. This year, 57 percent are indirect. The time of one-vendor providers is gone. We all have to become solutions providers. Also, we want to continue to grow internationally. We expanded into Europe last year. Now we’re looking at the right partnerships for Asia.

Distribution is a formidable challenge. The more progress we make in the channel, the more we allow mid-tier VARs to add value for their customers with our solutions at the core. But we don’t want to have 20 VARs with every customer. We want to be differentiated... to be alone with the customer.

The company is moving into our next phase of development. There’s no limit to what we can do. We want to be the best in class, make the right M&A moves, and be the most relied-upon company.Byte and Switch: You claim 35 percent revenue growth over 2003 on the strength of your Magnitude 3D system. Why do you think it has it been so successful?

Andreoli: This product we have now has incredible resilience. We have several hundred systems installed, and they all work. We’ve improved our time to market, and when we get a product out, it is most resilient.

Byte and Switch: In your last job you were in charge of worldwide sales for McData. How much different is it being CEO?

Andreoli: I’m not going to talk about my previous job [laughs], but I’m delighted to have this team around me. It's much easier implementing our business model here than it is in the switch business.

We are carving a business in a huge market – in excess of $10 billion. We’re a small, agile, nimble fish in a big ocean. In the switch business, you are struggling in a $1.5 billion fishbowl with two other sharks.Byte and Switch: As a systems vendor now, having three switch sharks in a fishbowl works in your favor. How is your relationship with the switch vendors?

Andreoli: We already had a great relationship with Cisco before I came here. We probably make up double-digit percentage of their [storage] revenue. We have a nice relationship with Brocade, and you know many of my former [McData] people moved there, so that’s interesting. And McData is defending its position on the high end, making inroads on the low end, and offering us good pricing conditions.

Byte and Switch: Have you considered striking OEM deals with Tier 1 storage vendors, the way Dot Hill, Engenio, and Xyratex

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