SAN Valley Does the Cisco Two-Step
lightreading.com
LAS VEGAS -- Networld+Interop -- SAN Valley Systems Inc., one of a slew of startups now entering the IP storage networking market, is walking a fine line between working with Cisco Systems Inc. (Nasdaq: CSCO - message board) and competing against it.
Cisco has invested in SAN Valley, while, at the same time, launching its own IP-based SAN products, and SAN Valley is working with companies that compete with Cisco in other markets.
At the Networld+Interop trade show held here this week, SAN Valley demonstrated its storage product working with a Compaq Computer Corp. (NYSE: CPQ - message board) DRM (disaster recovery management) package -- which, in turn, included Brocade Communications Systems Inc.'s (Nasdaq: BRCD - message board) Fibre channel switch, ADIC Storage Solutions' tape libraries, and LuxN Inc.'s DWDM transport technology.
SAN Valley is in talks with Compaq about a possible licensing agreement. "It's all about execution for us now," says Rick Walsworth, vice president of marketing. He was unable to comment further on the possible deal.
On the other hand, with Cisco eager to become a major force in the storage market, SAN Valley could easily become a potential acquisition for Cisco. Walsworth admits there is "no telling what's around the corner." He points out that Cisco lacks a service provider offering, "a significant hole in its storage strategy." Coincidentally, that's where SAN Valley's technology fits.
The company's 8-port SL1000 device, which connects Fibre Channel using Internet Protocol (FCIP) encapsulation, helps tie together remote storage networks over an IP backbone. Service providers, including Enron Corp. (NYSE: ENE - message board), are trialing the device, with a mind to offering storage as a high-bandwidth service. "Enron has roughly 80 percent of its fiber unused, and our product helps fill its pipes," says Walsworth. SAN Valley is expecting Enron to sign purchase orders in July, when the SL1000 is commercially released, he says.
SAN Valley's close ties with Cisco began when Andreas Bechtolsheim, one of the founders of Sun Microsystems Inc. (Nasdaq: SUNW - message board) and now VP of engineering for Cisco's enterprise group, rescued the company, then called G2 Networks, from a failed acquisition.
Transoft, a provider of software tools for integrating e-business applications and legacy systems, had stepped in to buy G2 in early 1999. Transoft planned to embed its software into G2's ASICs, but at the 11th hour the deal fell through when the two companies could not agree on the financial terms. At that point, G2 was under-funded and not focused enough, according to Walsworth: "But they had some great ASIC technology."
Relaunching themselves as SAN Valley, G2's founders Sandy Helton and George Harris presented their new business plan to Bechtolsheim, who convinced Cisco to invest. The G2 ASIC found its home in SAN Valley's SL1000 with traffic shaping, flow control, and QOS capabilities wrapped around it, while Helton and Harris got new jobs as CEO/president and VP of engineering, respectively, of the newly constituted company.
After two rounds of funding the company has a total of $31 million from Moore Capital, Upstart Capital, Vertex Management, Innovacom Venture Capital, Cisco, and Agilent Technologies Inc. (NYSE: A - message board). It is in the process of looking for a third round but is "in no rush," according to Walsworth.
In getting its technology accepted in the market, SAN Valley has plenty of competition to battle: SANcastle Technologies, Lucent Technologies Inc. (NYSE: LU - message board), CNT Networks, Entrada Networks (Nasdaq: ESAN - message board), Crossroads Systems Inc. (Nasdaq: CRDS - message board), and Cisco (through its NuSpeed acquisition) are all competing in the IP storage connectivity market.
William Hurley, storage analyst with The Yankee Group is bullish on SAN Valley's chances, although he says demand is not yet there for IP-based devices. "These products will increase the adoption of SANs, but the robustness must be proven," he says. "Point-to-point wavelength services are still the most reliable way to connect remote storage networks together today. SAN Valley has its work cut out."
As for SAN Valley's relationship with Cisco, in the past such type of "co-opetition" arrangements have generated mixed results -- sometimes favoring Cisco, but often resulting in a big win for the startup.
ONI Systems Inc. (Nasdaq: ONIS - message board), for example, took Cisco's money and leveraged its reputation to the full while it was getting started -- but then reportedly gave its patron the bum's rush when Cisco tried to acquire it. ONI has since gone on to considerable success as a public company.
Then there's Procket Networks Inc.. Cisco was a lead investor in this startup, which started life as a developer of OC192 (10 Gbit/s) and OC768 (40 Gbit/s) components. Procket subsequently switched direction and is now working on a routing system that will go head to head with Cisco's core routers. In effect, Cisco ended up funding a potentially powerful new competitor (see New Kid on the Cisco/Juniper Block ).
Brocade is another storage networking company that's partnered with Cisco. However, this relationship now looks as if it may be heading into stormy waters after Cisco set up a stealth-mode spin-in called Andiamo Systems Inc. that will compete with Brocade in the SAN market (see Cisco’s Secret SAN Strategies Revealed ). Brocade has had to change its product strategy to react to the threat from Andiamo/Cisco and others (see Brocade Unveils Big SAN Switch ).
— Jo Maitland, Senior Editor, Byte and Switch lightreading.com
Watch for Light Reading's new SAN-oriented site, Byte and Switch, scheduled to launch on June 15, 2001.
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