Despite its 3,000+ customers, Xiotech seems like the oldest startup in the storage business. Several years ago, the company had success selling a product called Magnitude, an easy to use disk array the company sold into small and mid-sized enterprises including city/state/county governments and schools, where IT DNA was relatively limited.
In the early-to-mid 2000’s, Xiotech hit a wall at around $100M in revenue and stopped growing as competition from larger companies and a lack of investment in Magnitude squeezed Xiotech’s growth prospects. So in the mid part of the decade, Xiotech diversified into information management by acquiring a company called Daticon, which provided document management and eDiscovery solutions. Suddenly Xiotech was marketing to legal departments as well as storage admins. For a while, storage took a back seat as Xiotech began investing around software and services for compliance. Long story short, Daticon never took off, de-focused Xiotech’s storage business and the company was sold off.
Xiotech needed to re-load in storage so it re-capitalized the company and acquired certain assets of Seagate’s Advanced Storage Architecture (ASA) group, a secretive skunkworks that made disk drive ‘bricks.’ The technology behind Seagate’s IP allowed Xiotech to introduce Intelligent Storage Element (ISE) which through microcode and other alterations dramatically improves the reliability of Xiotech’s storage systems. As part of the deal, Xiotech picked up some serious brain power including Steve Sicola and Ellen Lary of Digital Storageworks fame.
ISE has been in the field for fifteen months and is demonstrating an order of magnitude better reliability as compared to conventional disk arrays. This is one of the pillars on which Xiotech plans to re-build the company.
New CEO for Xiotech
Last month, Xiotech announced a new CEO, Alan Atkinson. Atkinson came to Xiotech from EMC where he was Vice President of the Storage Software Group. He was formerly head of storage infrastructure for Goldman Sachs and from there went to StorageNetworks, Inc. to work with Peter Bell and company. After SNI, Atkinson founded WysDM, a storage reporting tool vendor that was privately funded and acquired by EMC after Atkinson and his team ran the company up to about $10M in revenue. Estimates from the Wikibon community indicate EMC paid somewhere north of $40M for WysDM.
Wikibon met with Atkinson at the Fall SNW 2009 and had an opportunity to get an early glimpse on how he plans to return Xiotech to growth mode.
Atkinson joined Xiotech from EMC, which is very rare for a storage CEO. EMC has a history of enforcing non-competes as the world saw when Dave Donatelli left EMC to join HP. Turns out Atkinson didn’t have a non-compete with EMC, a condition he imposed as part of the WysDM deal.
Atkinson and Xiotech see storage moving away from refrigerator-sized arrays — “that need a forklift to move them” –toward controller-less storage. Xiotech didn’t provide many details here but with its brick-based IP one can see how Xiotech could emphasize the return to more of a distributed storage model.
The formula we heard from Atkinson was pretty straightforward:
- Keep the existing business growing—i.e. the top line has to grow at 15% per annum.
- Successfully sell to large enterprises.
- Get some OEM business.
- Build credibility by marketing the substantial brainpower inside of Xiotech (e.g. Richie Lary and Steve Sicola).
Atkinison is Xiotech’s third CEO since 2004. He is focused, brings a deep knowledge of storage and is very well connected in the industry. He personally knows several large customers, especially on Wall Street, and has a track record of consistent accomplishment—all positives for Xiotech.
We see five main priorities facing Xiotech, including:
1) Channel. Xiotech has flip-flopped on the channel several times and now that the channel is performing well for the company, Xiotech needs to provide consistent support.
2) Enterprise. Xiotech needs to grow beyond SMB and secure a number of large reference accounts for its products. Atkinson will use his connections in the customer base to open doors but Xiotech needs to demonstrate it can successfully service large enterprises.
3) OEM. Xiotech needs to secure some OEM’s. Its product is well-suited for the OEM market because it’s rock solid and performs well. An OEM strategy will take time to develop but could pay dividends in 2012 and beyond.
4) Focus. Xiotech was one of the first companies to market with virtual disks, virtual ports and virtual controller groups but it never really caught the ‘Tier 1.5’ wave as did players such as Compellent, 3PAR and Lefthand. Xiotech needs to carve out a niche of its own by articulating the value of its controller-less vision and demonstrating superior cost, performance, ease-of-use and reliability to customers.
5) Buzz. Xiotech still needs to do a better job marketing its product and developing a new brand to change its image. Atkinson is capable of doing this because of who he is, who he can attract and the way he’ll market Xiotech’s experts.
On balance Atkinson is a big win for Xiotech. He will mobilize an excellent Xiotech team and bring laser-like focus to the company. As a former practitioner he will bring increased credibility to Xiotech’s sales and marketing motion.
Users should pay attention to Xiotech’s innovations as they may shed light on emerging trends in the storage business. Specifically, Xiotech’s exceedingly high reliability, high performance and thin controller vision may mark a trend toward moving storage functionality away from large controllers and toward both devices and CPU’s.