Startups Ready Big SAN Switches

Storage area networks (SANs) have become crucial to service providers who are seeking to manage huge amounts of content and hosted applications. But two startups say today's SAN products lack the capacity and performance carriers need. And they mean to make a killing delivering alternatives.

"This is a huge opportunity," says Thomas Z. Isakovich, founder and CEO of TrueSAN Networks Inc., one of these startups. The overall SAN market is forecast to reach $4.5 billion by 2003, he says, and "at least half" of that will go to carriers and other service providers buying SAN gear.

TrueSAN, which announced its first products in October, plans to finalize its second round of funding early in December. The round will add up to $25 million, Isakovich says, on top of an undisclosed amount already received. The company hopes for an IPO in 2001, he says. Backing is coming in equal portions from VCs, investment bankers, and unspecified "strategic partners."

Isakovich, a recent Stanford graduate, says TrueSAN's product, Paladin, is based on a SAN switch fabric built right into a server that supports distributed parallel processing. This approach, he claims, delivers an order of magnitude better capacity and performance than competing solutions from EMC Corp. (NYSE: EMC) and Network Appliance Inc. (Nasdaq: NTAP). It also allows TrueSAN to support network-attached storage as well as SANs. And it's scaleable: Customers pay for processors in add-on increments -- up to 128 can be supported in one platform.

TrueSAN's product features ATM (asynchronous transfer mode), gigabit Ethernet, Fibre Channel, and 16-channel WDM (wavelength-division multiplexing) connectivity -- the last via a module from Finisar Corp. (Nasdaq: FNSR). Optical connectivity is a must for the carrier market, Isakovich contends. And while EMC has optical connectivity too, it can't claim to have combined it with distributed parallel processing, he says.Isn't TrueSAN, which has just 35 employees, afraid to challenge vendors like EMC, which has thousands? No, says Isakovich. "There's room for everyone. Look at how Alteon and Juniper went up against Cisco, Nortel, and Lucent. They succeeded by leveraging technology, early advantage, and engineering talent. And certainly Cisco didn't go out of business."

TrueSAN has another ace in the hole: It's cut an unusual support deal with IBM Corp. (NYSE: IBM), by which that vendor's Global Services arm will service TrueSAN accounts. "It was time-consuming to put this agreement in place, but it's going to be worth it," Isakovich says. "It means that if someone wants a SAN anywhere in the world, we can help deliver it." Also, he says, the deal with IBM gives TrueSAN the means to live up to a higher level of support than it otherwise could.

Whether TrueSAN succeeds in its mission remains to be seen. But at least one other startup has similar plans, confirming the attractiveness of the proposition. Cereva Networks Inc. is still in stealth mode and unwilling to talk much about its doings, although it acknowledges that it's on the verge of releasing its first product. Analysts and VCs confirm that this is a switch/server similar to the one TrueSAN has launched. (Jeff McCarthy, general partner at North Bridge, spilled some of the beans to Light Reading back in July: see Cereva ).

Cereva's got other things in common with TrueSAN. It's rumored to be going for more funding, after having gotten $66.5 million in funding from a slew of leading VCs, including Goldman Sachs & Co. (NYSE: GS), North Bridge Venture Partners, and Worldview Technology Partners. And the vendor acknowledges it will probably try to go public sometime next year.

Unlike TrueSAN, however, Cereva seems chary about competitors, citing them as a reason for its cagey approach to everything from press announcements to its Website, which was only recently revised from an extremely minimalist state that one company spokesperson said "helped make sure our competitors didn't take us too seriously."But Cereva's having only mixed success keeping its secrets. "They're very quiet, but I'm told they've built an expensive, powerful storage system with very high-end technology, all of which they've created themselves," Isakovich says.

And "expensive" is the keyword for him. "Our business model is different from theirs in that we OEM our ASICs," he says. (Translation: TrueSAN's application-specific integrated circuits are custom-made by outside contractors.) That will enable him, he thinks, to charge significantly less for his product than Cereva.

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com