Startups Look to iSCSI Surge

Growing customer lists, new partnerships, and interest from major vendors are making it clear iSCSI SANs are on the right track, according to a group of startups that have been selling IP SAN since its infancy.

EqualLogic Inc., LeftHand Networks Inc., Intransa Inc., RASilient System, Sanrad Inc., and StoneFly Networks Inc. have spent more than a year trying to lay the groundwork so they can cash in when the market finally takes off.

So has that time been well spent? Right now, the answer seems to be yes. Although theyre private companies and it’s impossible to tell exactly who’s making traction, industry sources agree that at least three -- LeftHand, EqualLogic, and Intransa -- are starting to cash in.

Judging by customer wins and partnerships, LeftHand -- the group’s graybeard -- appears to be in the lead. It’s been shipping product since November 2001 when it rolled out a system based on a proprietary Ethernet protocol, and began shipping native iSCSI in October 2003 (see LeftHand's Latest Deal and LeftHand Picks Up iSCSI). LeftHand claims more than 750 of its systems have been installed, sparking a 350 percent year-over-year revenue growth (see LeftHand Reports Progress).

LeftHand's growth vindicates its strategy over the past eight months of selling its software on partners’ hardware instead of manufacturing its own arrays. LeftHand has signed up Crossroads Systems Inc. (Nasdaq: CRDS), MPC Computers, Silicon Mechanics, and Verari Systems Inc. to run its SAN/iQ software on their storage systems.EqualLogic and Intransa have been catching up fast. Both started shipping IP SANs in June of 2003. They also both completed funding rounds last summer and rolled out new products in the fall. Both also say they are looking for profitability next year.

EqualLogic says it has 200 customers and has been making inroads with colleges and universities (see EqualLogic Goes to College). It pulled in $20 million in funding in June, and in November expanded its product line by adding one lower-end and four midrange systems (see EqualLogic Scores $20M and EqualLogic Expands SAN Line).

Intransa claimed its 125th customer in August, the same month it grabbed $25 million in funding (see Intransa Scores $25M). Intransa also has the biggest global presence of the IP SAN startups (see Intransa Appoints EMEA GM and Storage Vendors Look East).

Intransa CEO Avi Katz says he is looking for at least 60 percent growth each quarter to hit profitability by the end of 2005. He’s also been seeking a Tier 1 OEM deal to drive sales but hasn’t been able to land one. Intransa has a good relationship with IBM Corp. (NYSE: IBM), but Adaptec Inc. (Nasdaq: ADPT) has a better one and won IBM’s OEM deal for an iSCSI SAN (see Intransa Picks IBM). Undeterred, Intransa last month rolled out its IP5500, a higher-end version of its entry-level IP3500 system.

Of course, the startups could be shut out a year from now. At least one financial analyst expects Network Appliance Inc. (Nasdaq: NTAP) to remain the dominant force in iSCSI, at least through next year. Kaushik Roy of Susquehanna Financial Group

forecasts NetApp to hold 40 percent of the IP SAN market next year, mainly because its products offer more flexibility than iSCSI-only vendors.“Although competitors and new entrants are targeting iSCSI, they may have more difficulty providing the multifaceted offering that NetApp is aiming for across NAS, iSCSI and Fibre Channel,” Roy wrote today in a research note.

NetApp CEO Dan Warmenhoven identified iSCSI as one of the major drivers of his company’s revenue last quarter, as it diversifies its product line from pure NAS to block-and-file storage (see NetApp Sales Up).

Other big players are circling, too. EMC Corp. (NYSE: EMC) CEO Joe Tucci says iSCSI will begin to sell well in the second half of 2005, a signal that EMC will increase its IP SAN presence (see Tucci Touts ILM). IBM has already begun shipping an IP SAN system that it gets from an OEM deal with Adaptec, which is looking for similar deals with other major storage vendors (see IBM Slips iSCSI Into SAN).

— Dave Raffo, Senior Editor, Byte and Switch