Robert M. Dutkowsky, President, CEO & Chairman, Egenera

"Opportunity will help us decide what the next level is."

March 3, 2004

9 Min Read
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Bob Dutkowsky likes to be where the action is. Less than six months after making headlines in a high-stakes merger, he started work at Egenera Inc., a blade server startup with ambitions for an IPO this year.

He'll be busy. Egenera's take on blade computing has put it in the spotlight of IT startups. Its BladeFrame suite of diskless processing modules linked by a proprietary high-speed connection and augmented by virtualization software have caught the interest of a roster of blue-chip customers and helped it score $124 million since its start in 2000.

The most recent funding of $30 million is part of a spate of big fundings this year, marking an uptick of investor interest in light of new market activity (see Egenera Generates $30 Million, It's Raining VC Money, and Window of Opportunity).

Blade servers fall into the networked storage orbit because they promise to further data center consolidation and the spread of grid and utility computing, where storage plays a vital role. Both areas are earmarked for growth (see Grid Networking, page 7). So expectations are high for Egenera, and Dutkowsky's in the hot seat.

But he's used to that. As CEO of J.D. Edwards and Co., an enterprise software firm where he worked from January 2002 until July 2003, he was embroiled in a headline-making and eventually successful acquisition battle when PeopleSoft Inc. (Nasdaq: PSFT), seeking to acquire J.D. Edwards, hit resistance from Oracle Corp. (Nasdaq: ORCL) and its CEO Larry Ellison.PeopleSoft succeeded in buying J.D. Edwards for $1.8 billion in July 2003. Dutkowsky left the company on wings of gold – with $2.6 million in severance, according to filings with the Securities and Exchange Commission (SEC).

But Dutkowsky, 49, doesn't want a rest. He's eager to help Egenera to its next level – hopefully IPO, though he's not ruling out acquisition, at which he's an old hand.

Before joining J.D. Edwards, Dutkowsky was CEO of Genrad, a company that specialized in circuit board testers and was bought by Teradyne Inc. (NYSE: TER) in October 2001. He was an executive VP of markets and channels at EMC Corp. (NYSE: EMC) from 1997 until 1999, and in 1999 he became president of Data General after EMC acquired that company.

While Dutkowsky's hopped from one to another top executive post in true serial-CEO fashion, he does have longevity in his past, having spent 20 years at IBM Corp. (NYSE: IBM). Among his jobs there, Dutkowsky was executive VP of worldwide sales and marketing for the RS/6000 midrange server series. He also held jobs as a marketing exec for IBM in the Asia/Pacific region.

It will all come in handy at Egenera, which is clearly at a crucial juncture. As we caught up with Dutkowsky after just two weeks on the job, he seemed chipper – feisty, even, with lots to say about the market in general and Egenera in particular.Click on the links below for specific portions of the interview:

— Mary Jander, Site Editor, Byte and Switch

Byte and Switch: Why did you join Egenera?

Dutkowsky: If you look at my background – over 20 years at IBM and four years at EMC, you see I've been part of some very large organizations and some midsized ones. One of the things I've found is you can get deeply engrossed in the success of a business if the company is a little bit smaller. I'd like to take a company and help it get to the next level.

Byte and Switch: Okay, but why Egenera? After all, you probably had your pick of startups to join.Dutkowsky: You're right. I had some choices, but so did Egenera. The first day with Vern [Brownell, former CEO and cofounder who remains executive VP and CTO], I saw that my skills with customers in the marketplace could help this company really grow in all dimensions.

Having been in the industry for 25 years, I've seen you have to be passionate about the company you're part of. The technology kind of comes and goes, but you have to be able to put passion and energy into the success of any enterprise. This company is passionate about technology, customers, what it does in the market. Call it culture. It's a place I thought I could really add value to.

Byte and Switch: What attracted you about the blade server market?

Dutkowsky: Well, I don't think of it that way. I view the world through the eyes of the customer. Customers don't think of things like blades and storage and applications and middleware and operating systems. They think of business process. They want to take steps to make business processes efficient and give a competitive advantage. If they can't see competitive advantage they don't spend.

Byte and Switch: It's a competitive market.Dutkowsky: Big competition. But if you look at all the breakout technologies in the IT world, they always happened through smaller companies that were not encumbered by a large installed base they had to protect. It's always in small, entrepreneurial freethinking kinds of companies, not the larger players.

Take IBM for example. Great company, great technologies, great presence – and 100 years of legacy positioning with customers around the world. IBM can't go in and say, "Throw out those AS/400s and mainframes." They have to transition all those customers.

Egenera technology obsoletes all the IBM and HP and Sun equipment at more attractive cost of ownership – and we don't have to worry about the legacy.

Two hundred percent growth in 2002 and 2003 [ed. note: claimed by Egenera], that's what you get when a customer looks at technology and they get excited and get the value of it.

Byte and Switch: So being a startup is an advanage?Dutkowsky: This is classic disruptive technology. It changes the game. It changes the way the customer thinks about how they're going to run the infrastructure. You can't have disruptive technology and an installed base at the same time. The cognitive dissonance is too great. One day, you're going in there saying Unix is the best thing in the world. Next you're saying it's not good, you need Linux.

IBM, Sun, and HP, they are always looking for better return on investment. If the customer takes the time to look at us and understand what we have, we win.

Byte and Switch: What's the storage angle for Egenera?

Dutkowsky: Egenera lets customers get optimum NAS and SAN. The BladeFrame attaches to the storage equipment and simplifies the management of that asset as well as others in the data center.

Byte and Switch: Where do you see most demand for this kind of product?Dutkowsky: Where we've focused Egenera so far primarily is the financial services space, in healthcare, and in the Internet computing space – AOL is acustomer, for example.

Byte and Switch: What do those businesses have in common?

Dutkowsky: First, they were early adopters in the Unix world and also are early adopters of Linux. Obviously, Egenera deeply supports the Linux initiative. But mission-critical applications have to run 24x7. Linux and 24x7 don't go hand in hand unless you mix a little Egenera in there.

Byte and Switch: What about Windows? Isn't there a need for help there, too?

Dutkowsky: It's an important platform. I think when the 2003 Server really gets into the market in a more robust way, Windows will become just as important as Linux.Again, the common thread is 24x7. A few years ago, if email went down, who cared? You'd just reboot. Now, if the email system goes down, commerce stops. Most email is on Windows, so it now fits into that criticality list.

Basically, we're looking for the customer who wants to move into a Linux or Windows 2000 environment and is open to change.

Byte and Switch: What about specific regional markets?

Dutkowsky: We're predominantly U.S.-based today, which makes sense because of where we started. We are growing coverage not only in the U.S. but in Europe, Asia, and Japan, Australia, New Zealand, and South Africa. Outside of the U.S., we have most of our coverage with channel partners. We have direct coverage in some markets and business partners in some markets.

Byte and Switch: Who are your channel partners?Dutkowsky: Resellers. They have no legacy to protect. You don't have to justify to them the change we bring to the marketplace, to the customer data center.

Byte and Switch: What do you think of the economic outlook for IT right now?

Dutkowsky: My sense is that it's beginning to thaw, but we're not in the tropics yet. It's thawing around mission-critical applications and around environments where customers are saying, "How can I get the biggest return on investment in the next thing I do?"

Byte and Switch: How big is the blade server market?

Dutkowsky: In the research I read on joining Egenera, it looked to me like the potential global server market was almost $50 billion in 2003, $35 billion if you take out the mainframe and just count Unix, Linux, and Windows. We run both Linux and Windows, a market that's in the $10 billion range.Byte and Switch: So where is Egenera in the scheme of things?

Dutkowsky: Customers tell us we have an 18- to 24-month lead over IBM, Sun, HP. They talk about virtualization, but we have been delivering in the market for two years. The other guys come in with chartware and we come in with product.

Byte and Switch: You have a lot of merger experience. Is that a possibility, besides an IPO, for Egenera this year?

Dutkowsky: Anything is possible. I learned a long time ago never to say never. But we're focused aggressively on IPO later this year.

The board brought me in to take the company to the next level. Opportunity will help us decide what the next level is. The worst thing for a company is to get forced into something. We want to never get into getting our hand played for us.If we grow revenues, invest in technology, have a world-class service and support organization, expand our footprint around the globe... We have the world at our feet. Then we can decide what is the right thing for us to do.

Byte and Switch: Don't you see any other startups with a similar value proposition?

Dutkowsky: Well, I'm paranoid. It's great what we've got, but we've got to keep moving. It's like Satchel Paige said, "Don't look back, 'cause somebody might be gaining on you."

Somewhere in a garage, a guy and a dog are trying to reinvent the Egenera special sauce. But we've got some other tricks up our sleeve. We will not rest on our laurels.

Byte and Switch: Any hints about what those tricks are?Dutkowsky: Nope. But they're running in our labs.

— Mary Jander, Site Editor, Byte and Switch

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