Top Ten Private Storage Networking Companies

A brand new Website deserves a brand new Top 10 list, we always say.

Its not a new concept, of course. We borrowed the idea for a Top 10 listfrom our sister publication, Light Reading. (They, in turn, pinched itoff some TV guy.)

Welcome, then, to our Top 10 Private Storage Networking Companies. These are the companies we think are most likely to makeit to the equity finish line – either via a fat IPO or a nice juicyacquisition. Finding most of them wasn’t hard, given that for themost part they’re the companies that are causing the biggest buzz inthe storage networking industry.

Several themes emerged during the research for these rankings. No fewer than five of the companies we picked are building systems that combine FibreChannel and IP technology. Three of them cite Brocade Communications Systems Inc. (Nasdaq: BRCD) as their number onecompetitor. Four say they’re gunning for EMC Corp. (NYSE: EMC).

Not all the list’s leitmotive are positive. Despite the buzz aroundCereva and 3Par, both companies are reportedly suffering from the fundingmalaise that is rampant in the tech industry as a whole – hence their placeslower down our league table.Of course, the idea here is not to launch this list and sit back to watchit gather dust. Unlike our indolent colleagues over at Light Reading, we planon making regular updates to our Top 10 list – moving companies up,down, or even off the list based on their general performance (or when theyget bought, IPO, or go bankrupt).

How do we choose these outfits? Successful startups stand on three legs[Editors’ note: eh?]: strong technology, smart money, and proven management.What you see here is our pick of the ten companies that most evince thesequalities in the storage networking market.

You can help. Send suggestions for moves, adds, and changes to[email protected]

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The RulesThere are only a few, making it easy for us to stick by them (except when we think there’s a good reason not to).

Rule #1

You guessed it – companies must be privately held. We’ll deal with public companies later, or the market will do so for us. (Those folks are even tougher than we are.)

Rule #2

The Byte and Switch Top Ten list is an editors’ pick process. The editors of
Byte and Switch, along with the storage-savvy editors of Light Reading, make the final call on which companies make the cut. Our verdict is final until we decide to change it.Multiple email nominations of your favorite company, particularly those named after you or your daughter, will be studiously ignored. (We’re studious about everything around here.)

Rule #3

The list is dedicated to storage-networking systems, components, and services players – the people covered by the Byte and Switch Storage Networking Taxonomy, a pretty broad field.

Rule #4

There is no Rule #4. (OK, we copied this one from Light Reading. [ed: They copied it from Monty Python™.])Rule #5

Just as with the Light Reading list, to be included, companies must explain not only what their product does (the fluffy stuff) but also how it does it (the muscle).

Vendors that decline to explain their technology fundamentals in terms that make reasonable sense won’t get very far with us, because we know they wouldn’t get very far with you either.

Rule #6

Smoke from vendors will be run through a charcoal filter before being unceremoniously expelled into the atmosphere. If this influences the next Papal election, so be it.Disclosure: Neither Light Reading Inc., the publisher of Byte and Switch, nor any of our editors owns equity, stock options, or warrants in any of the companies listed, even though we might like to in some cases. (It’s that darned editorial integrity thing.)

Bill Gates II?

Whatever you think of Bill Gates, it’s hard to deny that dropping out of Harvard to create Microsoft Corp. (Nasdaq:MSFT) was a pretty canny idea.

Could it be that the storage networking market has its very own Bill-Gates-in-the-making? Tom Isakovich is 23 and the CEO of TrueSAN Networks Inc., havingdropped out of Stanford University to build the company he created in hisdorm room. (He has a marginally better haircut than Bill, but Byte & Switch

is still classifying it as a risk factor).

Getting dotcom déjà vu? Relax; Isakovich has plenty of experienced folkon his team. He’s also garnered some top VCs to invest, is shipping aproduct, and has paying customers (a SAN trifecta! Hoorah!).TrueSAN’s VP of engineering, Paul von Stamwitz, has 20 years experiencein IP networking – from AdaptecInc. (Nasdaq: ADPT) among others – and is seen as a “pioneer” of IP storage. (He's said to wear a coonskin hat.)The equally Teutonic-sounding COO, Mark Birnkrant, has 16 years behind him in the storage industry, alarge chunk of it spent as head of NEC Corp.’s (Nasdaq: NIPNY)storage unit (see SAN Startup Fills Positions).

TrueSAN's product, Paladin, is based on a SAN switch fabric built rightinto a server that supports distributed parallel processing. This approach,the company claims, delivers an order-of-magnitude better capacity andperformance than competing solutions from

EMC Corp. (NYSE: EMC) and Network Appliance Inc. (Nasdaq: NTAP).

It alsoallows TrueSAN to support network-attached storage applications, as well asSANs. And it's scaleable: Customers pay for processors in add-onincrements – as many as 128 can be supported in one platform. The switch fabricisn’t the company’s own; it’s using QLogic Corp.’s (Nasdaq: QLGC)SANbox 8- and 16-port Fibre Channel switches. (see Startups Ready Big SAN Switches ).

Paladin will go head-to-head with a similar product from Cereva Networks Inc., but isfurther ahead, in that it's shipping now (see Cereva Details Storage Switch).

“TrueSAN clearly has the first-mover advantage in carrier scale storage,” says William Hurley at The Yankee Group.Not only that – it’s got a couple of strong financial backers behind it,including Merrill Lynch & Co.Inc. (NYSE: MER) and CreditSuisse First Boston, which recently contributed to its $30 million secondround of funding.

TrueSAN plans to hit the road again in October to look for morefunding – although it claims it’s not relying on this, as it already haspaying customers (see TrueSAN Secures $30M in Funding), a rare phenomenon in this youngmarket. Itscustomer base includes Personify, an e-businesssoftware maker; MercyHealthcare, a U.S. healthcare provider; and Russo & Hale LLP, an ITlaw firm in Silicon Valley.

Isakovich's modest goal is to do to EMC what Dell Computer Corp. (Nasdaq:DELL) once did to IBM Corp.

(NYSE: IBM). Maybe he will – but only provided he steers clear of the DOJ.

Big BlueArc

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

Pirus Maniacs

Pirus Networks nabs theNo. 3 spot on the list for a combination of reasons. All of them good.First off, the company is well funded ($45 million to date) by some credible names,including Bessemer VenturePartners and Charles River Ventures (see Pirus Scores Another $27 Million).

So much for the money – what about the technology? Pirus is developing acarrier-class, NEBs-compliant storage networking switch that supports IP,gig Ethernet, and Fibre Channel – and that should gain it admission to oneof the sweetest spots in the market: the storage networks beingbuilt by startup SSPs and incumbents alike.

But where Pirus really comes into its own is in the personneldepartment. Specifically, its CEO’s name sounds like a yummy ice cream: RichNapolitano. We think this is ever so important. (Tip: When being introducedto Rich, try replying, “No thanks, I'm on a diet!” Just for chuckles.)

Pirus’s closest startup competitor is probably Cereva Networks Inc. – anotherof our Top Tenners.

Pirus is higher up the list because, unlike Cereva, its switch isdesigned for heterogeneous networks, where it can be used to hook up storageunits from different vendors. Cereva, on the other hand, is selling aswitch’n’storage-bundled package. Byte and Switch believes that the majorityof service providers will prefer a product that can “play the field” andinteroperate with their installed equipment.Cereva has also been showing signs of wear and tear recently (seeCereva: Stalled, Not Stopped) – and it sounds like a lite beer (“Camarero! Dos Cerevas, por favor!”).

In terms of public company competition, Pirus will go mano a mano

with Brocade CommunicationsSystems Inc.’s (Nasdaq: BRCD) newSilkworm 12000 switch (see Brocade Unveils Big SAN Switch). However, Pirus seems fartherahead, development-wise, than Brocade, and actually demo’d its switch amidstthe prostitution and gambling of this year’s N+I show in Vegas (see Pirus to Demo SAN Switch).

Loaded Ride

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!

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.Viva Cereva!For a company that’s supposedly still in stealth mode, there’s certainlybeen a lot of news about CerevaNetworks Inc. (our sister publication, Light Reading, has alreadywritten four ripping yarns about this company).

Early on, the news was all good: capital G, double O… whatever.Cereva was founded by someone called Bopardikur (giving it a hugecompetitive advantage, right out of the gate), it managed to bag $110million in funding (see Cereva Details Storage Switch), and lined up a Who’s Who offinancial backers: Comdisco Ventures, Global Crossing Ventures, Goldman Sachs & Co., Intel Capital, Matrix Partners, North Bridge Venture Partners, OakInvestment Partners, and WorldView Technology Partners (see Cereva ).

Recently, however, the tide has turned somewhat. The company isreportedly having problems securing a much-needed next round of funding($110 million just doesn’t go as far as it once did, apparently), and whileMr. Bopardikar is still at the company (phew!), its first CEO, Alan G. Lutz,left in May. There have also been various mixups overbeta customers (now you see them, now you don’t), and, in perhaps the mostserious setback yet, the company has even removed the funky music that oncewelcomed visitors to its Website.

So what the Tom Thumb is Cereva working on? Essentially, a big SAN switch with built-in server and storage capabilities, plus a natty operating system – one that will come with iSCSI interfaces, to judge from thefollowing announcement: Cereva: Stalled, Not Stopped.

Are they stalled? Are they stopped? Well, they're stuck in the middle of the list for now. Could go either way.EMC Hammer

3PARdata is yetanother stealthy startup squaring up to EMC Corp. (NYSE: EMC) in thehigh-end storage market – and it means business, with a product ominously code-named "Scaffold."

This could mean any number of things. Scaffold, of course, is another word for gallows. It was also a frighteninglybad 80s rock band led by Michael McCartney (brother of Sir Paul). The name

could also refer to buildingscaffolding – modular, flexible, strong, and so on. But that would beboring.

Unfortunately, we can’t say for sure which of these theories is right, as 3PARdata was too busy thinking up mysterious code-names to speak to us (the company is still in stealth mode).

We did find out enough to build a bare bones sketch of what they are up to, however. Unlike its closest competitor – Cereva Networks – 3PARdata is focused on just the storage array, not the switch. This is the device that holds all the stored data, typically on RAID disks.“3PARdata is bigger, faster, cheaper, and much smarter than anything EMC’s got,” says James Berlino, storage analyst at Merrill Lynch & Co. Inc..

The “smarter” part is what makes 3PARdata hot: It’s in the virtualizationsoftware game. This new technology enables companies to interconnect incompatiblestorage arrays from multiple vendors, so that applications view thearrays as one giant pool of available storage. It comes in really handy forlarge companies or service providers – those that are expanding their storageinfrastructure fast – because it means they can consolidate their existingstorage devices with new, best-of-breed hardware and still manage the wholething from one console.

3PARdata has plenty of competition here, though. Veritas Software is making alot of noise about this market, and several startups are writingvirtualization software, including Lefthand Networks,

Yotta Yotta, and Pirus Networks.

“It’s hot because it’s necessary,” says Mark Cree, general manager ofthe storage router business unit at Cisco Systems Inc. (Nasdaq: CSCO). And it’s necessary from Cisco’s pointof view as it helps the network grow, which means Cisco can sell more switches.Incidentally, the word is that Cisco’s investing in3PARdata, but no sign of this yet (see All Eyes on Cisco).

Frankly, 3PAR needs the money. The company got a second round of fundingworth $16 million way back in May 2000. But it now has about 100 employees,giving it an annualburn rate of between $17.5 million and $22.5 million – depending on howmuch it's spending on frapuccinos. In other words, it's about to run out ofmoney. In fact, 3PARdata might be further up the list if itweren’t for this financial uncertainty.Much of this Fremont, Calif.-based company’s Street cred comes fromits tip-top management team that includes staff from all the storageheavyweights. Plus, David Scott, 3PARdata’s president and CEO, is a wellknown face in the industry with 17 years experience in the storage world. Hewas most recently general manager of the Hewlett-Packard Co. (NYSE: HWP)global storage business and held just about every position leading up tothat top job.

Vice president of engineering and cofounder, Jeff Price joined 3PAR from Sun Microsystems Inc. (Nasdaq:SUNW) where he was responsible for the development of the 1000-6000 seriesservers. During his tenure the revenue for the server product line grew more than ten fold. His partner in crime, Dr Ashok Singhal, was chief architect forservers at Sun and is now at 3PARdata as chief technical officer andcofounder.

To Infinity and Beyond?

There 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?

“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!Whatta Lotta Yotta

What's to like about Yotta Yotta?

What’s not to like? Its marketing, specifically:

YottaYotta's core team comprises talents from Myrias ComputerTechnologies, a Canadiancompany said to have been on the edge of a supercomputerbreakthrough 15 years agowhen its financial backing was pulled.

Wayne Karpoff, who was president of Myrias, is now CTO at Yotta Yotta.Brian Lake, who wastechnical director at Myrias, is now director of software development.They've hired some outside talent, most notably Ned Menninger, VP offinance, who was previously a strategic businessdecisions manager at Microsoft Corp.