Top Ten Summer Tweak

Summertime, and the livin' is... easy? Well, not exactly, Mr. Gershwin. It's almost August, New York City is humid as hell, Wall Street is wracked with financial chaos, and the effects are being felt everywhere. In the storage networking industry especially, the shakeout among startups is well and truly underway.

As we predicted, Cereva Networks Inc. has got plenty o'nothin'. The company was rumored to be auctioning off its assets, but apparently even that's proving to be difficult (see Cereva's Fire Sale and Cereva Is Cerover).

Cereva built its product as a tightly integrated system, so breaking it apart and selling off portions of the technology is an awkward task. Even if it manages to break up the product into workable pieces, are these any better than the point products built specifically to do each task that are available from other vendors? There are no takers yet, so maybe not.

Then there's multiprotocol SAN switch startup Acopia Networks Inc., which, just six months after closing a $10 million first round, is now without a CEO. Sources close to the company say Dan Boudreau walked out, as he does not believe Acopia can live up to its mission in the current climate. Can't blame him, really. (See Acopia Founder Quits.)

Other startups in this market will do anything just to stay in business, even if it means laying off half the workforce. SAN Valley Systems Inc., Acirro Inc., and TrueSAN Networks Inc. are the latest to swing the axe (see SAN Valley Hacks Headcount, Acirro Sheds Staff, and TrueSAN Swings Axe).The first bankruptcy filing from a storage networking startup occurred in June. Sanrise Inc., the storage service provider that raised over $200 million in venture funding, is doing its utmost to stay alive through a Chapter 11 reorganization, but is unlikely to survive, analysts say (see Sanrise Files Chapter 11).

And the list of struggling startups is growing daily. Still, there are one or two wily ones shifting tack while there's still time. StoneFly Networks Inc. is a good example: It's now selling a low-end iSCSI router instead of trying to build a much more expensive, long lead time, giant SAN switch. Phew! That was a close one (see StoneFly Takes Second Crack).

There are still pockets of hope among the other startups on our list too check out NuView Inc., which zips in at No. 5, replacing Acirro.

For all those currently on our Top Ten, bon chance! It's going to take all your powers to battle through this one.

Table 1: Top Ten Private Storage Networking Companies

InterSAN Inc. storms into pole position on this list, having made no secret of its plan to become the de facto software platform for managing storage networks.

This kind of posturing is fine – as long as whoever's talking the talk is also walking the walk. InterSAN's investors clearly believe the startup is still on track to pull off its mission, as they poured $17.8 million into the company in May. This round raises the total amount invested in InterSAN to $28 million (see InterSAN Lands $17.8M).

Raising a round of this size is particularly impressive given today's climate of tight-fisted VCs.

InterSAN is in what venture capitalists call the sweet spot of the market. It's shipping software that manages host bus adapters, storage arrays, and Fibre Channel switches from almost all the major vendors in the market, eliminating the headache of managing all of these devices separately (see InterSAN Attracts Major InterEST, InterSAN Hooks Up With Hitachi, InterSAN Supports LSI Logic, InterSAN Supports QLogic, and InterSAN Supports Inrange).

So far, InterSAN has announced one revenue-generating customer: financial services company Northern Trust Corp. InterSAN officials say it has a number of Fortune 500 companies evaluating the product, and it hopes to close that business this quarter.The company has also recently announced a professional services partner program and has signed up two significant players - CTS and GRP - on this front (see Services Firms Check Out InterSAN).

There are a host of other startups and public companies chasing this space, so InterSAN will have to work its socks off to stay above the fray (see Policy-Based Storage).

Its closest rival right now appears to be CreekPath Systems Inc. (see CreekPath: SAM It Am). But this former storage service provider (SSP) has yet to announce any customers, so InterSAN has the edge, at least for now.

Swooping back up to No. 2 is BlueArc Corp., recovering from a plunge to the subterranean depths of No. 8 in former weeks.

Are we just pinging this company up and down for fun, or has it actually done something to deserve this rollercoaster ride?In a word, it's moved up on the list because of customers. Back in December 2001, BlueArc could talk about nothing else but its giant Linux cluster deal with Lawrence Livermore National Laboratory (LLNL). If this sort of thing interests you, you might like to take this slightly used 1972 AMC Gremlin for a spin.

Thankfully, it has other customers now, too – close to 30, in fact, with units installed in sites ranging from a Fortune 100 pharmaceuticals company to the largest film and media empire in America. We are sworn to secrecy on the names of these customers, but we have spoken to most of them: They have the product, and they are certainly paying for it.

BlueArc did let it slip that its largest single order is with none other than Lawrence Livermore National Labs – over 115 terabytes!! Wowwwww, man. (See Livermore Labs Back for More BlueArc.)

Another reason for BlueArc's promotion is its second-generation product family, due out this fall. By the end of the year it will no longer be a one-trick pony, which was cause for concern in such a tight market. BlueArc plans to scale its product up and down market to attract a broader range of customers.

Recent management changes, including the appointment of Jeff Allen as executive VP of business and strategy, all bode well for this company (see BlueArc CEO Steps Down and our interview with Jeff Allen, Senior VP, Strategy & Development, BlueArc).All in all, we sense the ducks on the Arc are in a row.

Hanging on to its position at No. 3 is storage management and virtualization software startup DataCore Software Corp.

At last DataCore's strongest ally in the incumbent storage market, Hitachi Ltd. (NYSE: HIT; Paris: PHA) -- an orginal investor in the startup -- has agreed to OEM the product (see DataCore Scores Hitachi, at Last).

Again, customers win the day, and DataCore has an army of them, including hospitals, insurance and financial firms, publishing houses, retailers, and telecommunications companies. Not testing it out. They are paying for the product.

Nishan Systems Inc. slides down a couple of places to No. 4, partly because the company doesn't call us anymore, and we hate that.But when we got in touch to let them know we were updating this list, Nishan told us "an army of people were at the end of the phone to provide us with whatever we needed."

So here's what we need:

Until then, a list of paying customers will be fine.

Can't argue with this one: Carlson Companies, a privately held hotel, restaurant, travel, and marketing services company, has deployed an IP-based SAN that uses TWELVE of Nishan's IP-to-Fibre Channel switches -- one of the largest storage networks to date that uses IP as its core fabric (see Nishan Bites Into the Core).

Mesaba Airlines Inc., a regional carrier based in Minneapolis affiliated with Northwest Airlines Inc., is using two Nishan storage-over-IP switches, along with other storage equipment in its network, for disaster recovery and business continuity. Apparently it's a $250,000 buildout, instead of the contract worth millions of dollars this was supposed to be a few years ago.TRW, a massive conglomerate that is so huge we can't tell what it does, is also a recent customer win for Nishan.

'Nuff said. Nishan stays in the Top Five, for now.

The news gods have finally beaten us down on NuView Inc., which swoops in and takes out Acirro Inc. in the No. 5 spot.

First, to Acirro, which was a new entry on the Top 10 in May. What happened? [Ed. note: The rate of change is fast in this business, eh?]

Acirro emerged from stealth mode in April full of the joys of spring and bursting with confidence. Then, less than three months later, the company has laid off almost half its workforce in order to close a second round of funding (see Acirro Sheds Staff).Eeeeew! That sucks. It seems the management team at Acirro was up in the clouds during stealth mode, and once out in the real world, market conditions turned out to be a little tougher than it expected – like a-spade-over-the-head tough! Wakey wakey, Acirro! Try the Bit Bucket for a while. It's quieter down there.

In contrast, Houston-based NuView, also in the file virtualization space, is not beholden to venture capitalists and has been quietly stacking up customers and partnerships right in front of us (see A NuView for NetApp and EMC?).

NuView's recent deal with Network Appliance Inc. (Nasdaq: NTAP) has more meat to it than initially meets the eye, and CEO Rahul Mehta's presentation to Microsoft Corp.'s (Nasdaq: MSFT) sales force at its Global Summit in New Orleans this week could be the first step towards a much bigger deal with the software giant (see NuView Backs Up NetApp).

The company also meets the two new criteria we recently introduced for inclusion on this list: It is shipping its product and has revenue-generating customers. Among other Wall Street accounts, T. Rowe Price Associates Inc, one of the largest mutual funds in the U.S., is a NuView customer.

For now, NuView is holding steady in the toughest of market conditions, while others are beginning to crack at the seams. Let's see how long it lasts.Poor old Pirus Networks. Once the darling of the storage networking startup world, it's now hunkered down so far it can barely be seeing daylight.

Pirus did get in touch with us, eventually, to say it isn't able to announce those customers it promised. "You should get nasty!" a company spokeswoman admits.

"Buying cycles are still slow," she explains. "Companies are not issuing purchase orders. It's all tries and buys." Yadda, yadda, yadda. [Ed. note: Er... not Yotta Yotta Inc.]

We have dropped Pirus down five places to No. 6, a steep and not altogether unexpected fall.

However, the vision of intelligent storage driven from the network was largely pioneered by this company, and that means Pirus remains, at least in spirit, in the upper right quadrant of our heart. [Ed note: Always preferable to the cold, stiff Gartner alternative.]Its growing reseller channel also gives it a clear edge over all the other next-generation switch startups, none of which are shipping. For this reason, Pirus remains a contender and a key player on this Top Ten.

Hanging on at No. 7 is Alacritech Inc., now shipping its iSCSI and TCP/IP offload cards (see Alacritech Releases GigE Accelerator and Alacritech Ships NIC).

It has announced some flashy benchmark results, but, sadly, these count for diddly when it comes to paying employees at the end of the month (see Alacritech Touts NAS Testing).

To stay on this list much longer Alacritech needs to announce some major OEM deals or significant customer wins – fast.

Someone over there better get out the chickens and start doing an iSCSI rain dance, or something, as this market isn't happening any time soon.The second new company on this list, PolyServe Inc., joins at No. 8

despite its name, which sounds like something you use to mix cement.

It actually sells host-based file clustering software that enables "dozens" of servers to have concurrent read-and-write access to shared data on a SAN. Apparently, this is really hard to do, according some people at PolyServe who told us it's really hard to do (see PolyServe Hits the Comeback Trail).

Not just any old people, though: Most of PolyServe's engineering team came from Sequent, creators of NUMA, the first clustering technology that IBM Corp. (NYSE: IBM) acquired, for $810 million in 1999. [Ed. note: Bodes well, no?]

PolyServe is shipping and has several customers, including the Burlington Coat Factory, which is impressive for a company that only recently launched.

Watch this space – this company could be on its way up.New at No. 9 is GlassHouse Technologies Inc., filling a hole in the storage market for professional services companies that offer consulting, strategic planning, and implementation of storage networks.

Companies have overpaid for storage that's underused and poorly managed. Add to this the daunting number of technology options available to fix the problem, and you have an IT administrator's nightmare. Step in, independent consulting firm, to advise and help sort it all out.

EDS, Accenture, Cap Gemini Ernst & Young, IBM Global Services, and the other major IT consulting firms have yet to really exploit this opportunity. More likely, they don't have the hands-on experience to design, deploy, and support sophisticated storage networks.

Meanwhile, Boston-based startup GlassHouse does and is so excited about this opportunity it's steaming up its own windows. With only 20 people on board, GlassHouse is promising to help customers figure out how much they're paying for storage, how to bring down costs, and how to increase the efficiency of a SAN (see GlassHouse Makes Things Clear).

It's a tiny outfit, but GlassHouse already has 22 paying customers. The ones we can mention include Air Products and Chemical, GiantLoop Network Inc.,

Network Plus, RISO Inc., Brockway Smith, Charles River Labs, Hewlett-Packard Co. (NYSE: HPQ), ISO New England, Shipley (a Rohm and Haas Company), and State Street Global Advisors.Its competitors include Imation Corp., Storability Inc., and Calisma Inc. But for now, we think GlassHouse cuts the mustard.

Startups acquiring startups. We love this. Why? Because it demonstrates two important traits in a young company: One, that it has enough cash; and two, that it can spot market trends and isn't afraid to buy expertise rather than taking years to grow it in-house.

And why is all this relevant to our new No. 10 entrant, you ask? Well, LeftHand Networks recently snapped up North Fork Networks (see LeftHand Grabs North Fork) to move into a new area.

LeftHand was first to market a year ago with a NAS box that operates over standard Ethernet networks and supports both block and file transfers. But the capacity of its so-called Network Storage Module (NSM) was a little on the small side. Prices for a 160-Gbyte NSM system, including hardware, software, and a three-year service and remote support warranty, begin at $15,000, which is pretty low for this kind of gear. Compare it with offerings from BlueArc Corp., Network Appliance Inc. (Nasdaq: NTAP), and EMC Corp. (NYSE: EMC), which start at around $50,000.

To move upmarket and improve its appeal to larger enterprises, LeftHand acquired North Fork, which provides it with clustering software that enables it to pool its boxes so they appear as one giant, mainframe-like system. Is that cool, or what? This means companies that wish to start small can do so, but with the assurance that they can augment the system as needed.The one reservation we have about LeftHand, which is why it didn't make it onto the list sooner, is that its technology is proprietary. That is to say, you can only pool LeftHand boxes into this cluster, which must be managed separately from the rest of your storage. However, this does not appear to be deterring LeftHand's customers, of which there are about a dozen, including MetaSolv Software Inc. (Nasdaq: MSLV), Leopard, and Denver Health.

To move them up the list, though, we will need to see evidence of LeftHand working with partners and interoperating more with other storage technology.

Our latest Bit Bucket casualty is distributed file systems company Acirro Inc., which only launched a few months ago and then promptly laid off half its staff. Never a good sign!

Next up is SANcastle Technologies Inc., makers of a Fibre Channel and Gigabit Ethernet combo switch.

We thought integration of Fibre Channel and Gigabit Ethernet networks over long distances without disruption or technology changes was a rocket of an idea, but it's turned out to more of a small pocket flashlight. Compaq Computer Corp. seems to like the idea, but it hasn't actually committed to an OEM agreement. And who knows what will happen to that, now that it's being folded into Hewlett-Packard Co. (NYSE: HPQ)? (See Compaq OKs SANcastle.)Other than that, SANcastle hasn't really seen much action; hence, it drops off the list.

Next to drop: Scale Eight Inc. Back when we first compiled this list, we picked Scale Eight because it looked like the only storage service provider (SSP) with a hope of making it (see SSPs: RIP).

But eventually, after all the other SSPs had already figured out that the business model sucked and morphed into software companies, Scale Eight followed suit (see Scale Eight Smells the Software).

It has also been through a tumultuous year on the management side and still does not have a CEO, from what we can tell (see Scale Eight Shapes Up).

Rules are rules, and Scale Eight has broken too many of them. Later!3PARdata Inc. wasn't a difficult one to strike off. It still isn't shipping its so-called utility storage system and clearly doesn't have any paying customers yet, either.

Its goal, like Cereva Networks Inc. and Yotta Yotta Inc. before it, is to come up with the EMC-killer box – and maybe it will. But it has an incredible task ahead to convince today's market to actually buy it. Not many people are even buying EMC Corp. (NYSE: EMC) hardware right now, never mind next-gen equipment from an unknown startup. They're looking to manage and get better use out of what they already have.

Eventually, enterprises will need to buy more capacity again. But the question is: When? No one, not even EMC, has an answer to that right now.

Finally, there's Storigen Systems Inc. This startup is shipping its multiprotocol caching appliance, but its two "customers" are still only evaluating the product (see Storigen Systems