Tim Leisman, President & CEO, Storability

When Tim Leisman joined Storability Inc. in February 2002, the company, like virtually every other storage service provider out there, was suffering from what appeared to be a lethal identity crisis (see our report on SSPs: RIP).

Before the bubble burst, analysts had expected an ever-growing number of dotcoms with little technical expertise to shove the storage service provider (SSP) market into the $10 billion-range by 2005. When the dotcoms shriveled and died, so did the SSP business model. The companies that had subscribed to the model were forced to change their ways, or were forced out of business altogether.

That's where Leisman came in. He had barely gotten his jacket off before announcing that the startup had to sell off both its professional services unit and its managed services business, and that it would be a pure software company (see Storability Gets 'Compaqted'). Storability, which at the time was burning about $2 million per quarter and bringing in almost no revenue, also dramatically cut its headcount, letting go 100 of its 120 employees. (The company is now back up to a headcount of about 50.)

While a number of Storability's competitors like StorageNetworks and StorageWay, which had also been attempting an identity change – fell by the wayside, Leisman's company managed to remain standing (see StorageNetworks Succumbs and C&W Buys StorageWay for $2M). Even better, Leisman claims, the company is growing strong in its new capacity as a storage resource management software vendor.

"If there's one thing that has worked to our advantage here, it's that we focused on perhaps the least sexy part of this issue," Leisman says. "This isn't the sexiest thing, and these companies used to like to spend money on sexy ideas. But we're helping them solve their problems, and they are real problems."Forget about sexy. In a crowded market, the question for Storability will be whether or not its software products are even attractive. With only 20 customers for its software priced at $100,000 and up, the company still has a lot of convincing to do.

Before joining Storability, Leisman was president and CEO of Infinite Content, a business-to-business software company. Prior to that he was the senior VP and general manager of Compaq's Outsourcing Strategic Business Division, and spent 18 years in various positions at Digital Equipment Corp. Leisman met with Byte and Switch senior editor Eugénie Larson at the Storage Decisions conference in Chicago last month to discuss how Storability has managed to fight off the Grim Reaper – and what he thinks the future holds.

Click on the links below to read the interview:

— Eugénie Larson, Senior Editor, Byte and Switch

Byte and Switch: So how have you guys survived the shakeout?Leisman: Well, you know what? A major challenge for many companies is how expensively they could discover [their storage devices and software]. If there's one thing that has worked to our advantage here is that we focused on perhaps the least sexy part of this issue. We allow you to create a very robust and very efficient way of discovering what you've already got: backup software, databases, SANs, NAS, DAS, blah, blah, blah. There are so many different things in each one of those categories. They're so deep... This isn't the sexiest thing, and these companies used to like to spend money on sexy ideas. But we're helping them solve their problems, and they are real problems. So I think that we're real fortunate that we have customers that get the value proposition.

Byte and Switch: What's the biggest problem you're solving for your customers?

Leisman: The biggest issue has been heterogeneous management, and the biggest issue there has been the under-utilization of assets, right? And we play right into that. That's what we're really, really good at. And that seems to be what people want to spend money on right now.

Byte and Switch: When you came on board, Storability had a very different business model. Why do you think the company and other SSPs were either forced out of business or had to fundamentally change their business?

Leisman: You run into a lot of issues with storage services. Like, this data is going to sit outside my firewall. First of all, security is huge, right? Secondly, do customers buy that way? Most of the time when companies buy solutions, they have to be end-to-end. Your clients, your servers – it's a logical unit to buy, so to speak. And I don't know that storage is a logical unit to buy. I don't know if you can really serve it up utility-fashion. You're dealing with the lifeblood of a company's information... I think it was an interesting value proposition for a dotcom, because they needed to get their infrastructures up instantly, right? So they would go into those kinds of environments.Byte and Switch: And then the dotcoms disappeared.

Leisman: Yes. Even when it came to the stuff we were trying to do, which was to manage services, I don't think it was a logical way of offering value... And that's a challenge, right? So we were able to make some progress with an outsourcer like Qwest, by supporting their customers on their behalf. But the end-user traction, it just wasn't there.

Byte and Switch: How did people react to you coming in as this new CEO, and making all of these dramatic changes and laying off a huge chunk of the employees?

Leisman: Well, we moved most of those people to other jobs.

Byte and Switch: Really?Leisman: Yeah, so we sold the managed services products, but they took the people with the product. And we sold the customer services business off, and the company that bought it took all the people.

NEXT: 'Are We Going to Shut the Doors?'

Byte and Switch: But I'm sure there were some concerns in the company over all of the changes you were making?

Leisman: Well, I think that everybody was very, very concerned that this thing was going to sink. We were burning almost $2 million a quarter with no revenue, almost. So the biggest concern the employees had was, "Are we going to shut the doors?" So we sent a lot of people who were working here before over to StorageTek, which is a nice place. They're pretty happy. So I think it was very well received. And we didn't take a long time to do this. It took four or five months, right? And we still have a relationship with all of these people, because it's our technology out there, right?

Byte and Switch: What about the people remaining with Storability?Leisman: Well, the software people were elated, because they had been sitting over here in a corner, right? So they were ecstatic, because all of a sudden they had been validated... It was a scary place. Most people thought this place was going to shut down, you know.

Byte and Switch: You guys may have managed to stay afloat, but a lot of your competitors went under. What do you think you've done differently from, say, StorageNetworks?

Leisman: Well, I think the challenge for those guys was that they did have a couple large customers, but I think they forced themselves into a more evolutionary approach of "This is Plan A, and this is Plan B." We took a more radical approach in the sense that we said, "Hey, we're going to stop doing this now. And all the people associated with the services, we're going to move them to other companies, and we're going to go software..." I think you have to do that. Some companies can't handle the focus issues of multiple business models... Focus is a good thing in any company, big or small, but for a small company, it's a life-threatening issue... Just keeping the focus on. We were very, very clear on that.

Byte and Switch: Do you think there's any chance that the SSP market will ever come back?

Leisman: Sure. But it's going to be grid computing, utility computing. It's going to be a bigger thing, right? So it's going to be global services, media, some turnkey business processes, something like that. But it's not just going to be this little storage thing that's disconnected from everything we just talked about, right? So I think it's an absolutely important part of any service offering. I just don't think storage carved out as a separate thing makes any sense, personally.NEXT: Up the Storage Stack

Byte and Switch: You're talking about a broader utility computing model. That seems to fit in with your recent acquisition of ProvisionSoft, which in addition to storage automation offers server-provisioning capabilities as well. [See Storability Mops Up ProvisionSoft.] Are you guys planning on moving up the stack?

Leisman: We didn't purchase ProvisionSoft so much for the storage or server provisioning as much as for the underlying automation technologies. They have this policy engine, right? And it allows you to do server provisioning or any kind of workflow you want to do. The jewel to us was this automation capability. We can use that for lots of things. So we have server provisioning. We didn't buy it for that. But we're going to see what's going on, and see what the customers want.

Byte and Switch: And that could include server provisioning?

Leisman: It's technology that we have. It's in our product today. So I'm sure some of our customers are going to want to use it. But that's not what we're leading with, by any means.NEXT: Moving the Goalposts

Byte and Switch: You recently landed another $7 million in funding, bringing your total to $66 million. [See Storability Snags $7M.] Is that enough to get you to breakeven, or will you be looking for more money?

Leisman: I think that at this point, everyone is looking at how much money it takes to get to breakeven, and at where they want to make investments. We're so close to cash-flow breakeven. Nobody gets that close.

Byte and Switch: But you said that last year, too, right?

Leisman: What?Byte and Switch: Last year, you said you'd reach cash-flow breakeven this year, and this year, you're saying it will be next year. Are you going to come back next year and say it's another year off?

Leisman: I hope not. I think the difference is customers. Last year, customers didn't budget for us. This year, customers have budgeted for us. This quarter is the first time ever that people have called us out, and said: "We're taking out an RFP [request for proposal] on storage management, and we want you to participate." This has never happened to us... We're probably a quarter or maybe two behind where we thought we were going to be.

Byte and Switch: So that means you're not planning on looking for any more funding?

Leisman: We're always looking for more money. But it will be different, partly because there's so much opportunity for us to invest. That's the only reason we look for more. It's not about, can we get there. We're in the hundreds of thousands of dollars from breakeven. Not millions. Hundreds of thousands... So we're very comfortable that we're going to get there. That's nice.

NEXT: Traction ActionByte and Switch: How many customers do you have right now?

Leisman: We have about 20 customers now. And the average contract is about 300 to 400K, and we have a multimillion-dollar sale to Deutsche Bank that we couldn't talk about last time I talked to you. That was a big one, right?

Byte and Switch: Do you have any other big contracts coming up?

Leisman: Yes. Yes. I think that within the next two months we'll be making an announcement. What we're finding is, you sell the stuff, they want to install it, they want to run it for six months, and that's fair to them, right? But it also means we've got lots of stuff we'd like to talk about, but can't yet. And these are big names. As soon as we can talk about it, we'll do that. It's a challenge. Big companies really don't like to talk about how they spend their money – especially in this part of the world. They're afraid that buying our software will irritate other vendors that they have relationships with. EMC is an example.

Byte and Switch: EMC?Leisman: Well, on one level, we're actually very synergistic to them. We recently signed a very, very large customer, and the reason that they bought us was that they thought it was complementary with EMC... So that's good for us.

Byte and Switch: What are you planning to invest in, going forward?

Leisman: We've got proof of traction for the product. Customers want to buy the stuff, so now we're going to scale. We're going to probably double our sales organization. We'll increase it by 50 percent in the next two months... [to] about 20 people.

Byte and Switch: How have you gone about enticing customers to sign up with you?

Leisman: We started out by really validating the technology to go to market with two really large multimillion-dollar services sales. We sold Compaq our technology, we sold StorageTek our technology... So now you go out and you try to get your first user, and that's the hardest thing for a small company. So then we thought, OK, let's move to an indirect line. So you do enough direct to get your partner to believe that they should buy the technology for a Fortune 500. So we've started to "operationalize" that... The traction was a little slower than we anticipated for the channel business, and it took more resources away from our direct effort. So there was a bit of a drop-off. But that's behind us now.— Eugénie Larson, Senior Editor, Byte and Switch