History 2001: FalconStor new Cheyenne?

Will the founders of FalconStor have as much success as they did with their previous start-up, Cheyenne Software?

Their philosophy: don’t change a team or strategy with winning software that works. Both Cheyenne and FalconStor share their names with airplanes … for the same take-off?

FalconStor Software was founded in February 2000.

“We are 50 people in New York [Melville, NY, to be more precise], 25 in Taiwan and 7 in Europe. 90% of them come from Cheyenne Software,” explained European manager Gerry Briggs, himself, of course, a Cheyenne veteran, in European HQs at the same address once occupied by Cheyenne, and like the new company’s chairman Barry Rubenstein, who was a founder of Cheyenne, as was president, CEO and technological guru ReiJane Huai, who was the chief architect for ARCServe, and just like the company’s CFO, its VP engineering, its VP marketing, its VP sales, etc., etc.

All followed blindly, given how successful their first venture had been. In 1996, Computer Associates acquired Cheyenne Software, a company that generated a mere $174 million in revenues, for the insane sum of $1.2 billion. Ironically enough, CA has done very little with the backup software company, which at one time accounted for 80% of the NT market and 90% of the Novell market.

No money woes
After such a financial exploit, it’s easy to understand how Rubinstein and Huai had only to round up a few buddies in order to obtain some $33 million during the start-up’s first financial rounds.

During its first year, FalconStor worked quietly from the sidelines, or with its partners under NDA, only launching its Web site in February of this year.

However, since then, it has more than made up for that early silence, with no less than 26 press releases, for an average of more than one every 3 days!

Its first product, IPStor, had only just been released when a publicly-held company listed with Nasdaq, Network Peripherals Inc., involved in Ethernet switches, decided for all intents and purposes to sacrifice itself in order to marry its fortunes blindly with FalconStor.

NPI has been stagnating: its sales have fallen from $10.2 to $7.5 million from 1999 to 2000, but it has cash reserves of nearly $100 million.

It has decided to commit $25 million for about a one-third participation in FalconStor, and is now looking to sell off all of its current business.

“It’s more of a reverse merger,” explained Briggs. “NPI will become FalconStor.”

In other words, it’s a clever and unorthodox way for FalconStor to go public without submitting to an IPO, which in the current climate has become a tricky operation –

Roxio, another storage software company, not to mention a subsidiary of Adaptec, recently tried and failed with its own IPO.

The merger was finalized, of course, as if any other outcome was imaginable, given that NPI had promised to pay FalconStor $3 million if the transaction was not completed.

IP and virtualization
So what is this famous IPStor, which even before its final release, slated for April 30, had succeeded in finding some fifty supporters, including such choice partners as Adie, Bell Microproducts, Cisco, Crossroads, Dot Hill, Emulex, IBM, NEC, QLogic and Vixel?

“We have some thirty additional agreements underway,” added Briggs.

Even the well-known Enterprise Storage Group analyst Steve Duplessie is giving raves: “One of the most complete products on the market [storage over IP] that comprises not only IP-based storage networking, but also a full virtualization engine.”

It is true that at this time, the words “virtualization” and “storage over IP,” are generating as much buzz as they are bucks.

And what about those products offering both … So what is all the fuss about? IPStor is a Linux software suite installed on an Intel box under Linux, with a driver on each client server. The IPStor server connects via Ethernet back to the enterprise servers, and to any eventual NAS. In the other direction, it is connected to the storage, via SCSI, FC, SSA and soon iSCSI and IB interfaces, to one or more local or remote SANs. IPStor manages the entire storage pool of client servers through logical volume that’s the virtualization part – with the latter perceiving all that storage as a single storage peripheral, by means of the transformation of the IP protocol into a SCSI signal, and vice-versa, for the transfer of block data back to the Ethernet.

The NAS are also taken into account, since FalconStor’s product is equally comfortable with block-level and file-level storage traffic. The most demanding storage users, already equipped with a SAN, can even have their EMC and/or Compaq box managed by IPStor. Those that have yet to take the FC plunge are also served … The originality of this product, compared to the current players in virtualization, such as DataCore, Veritas and others, resides in the fact that the whole system is achieved with application servers linked together with IP. IPStor also allows for functions such as mirroring, replication, zeroimpact backup, snapshot and recovery.

Software-only solution
You might hesitate over the transfer speed for SCSI/IP via (proprietary) software alone, which seems to be a light version of TCP/IP.

According to Extremelabs, a benchmark company, “the difference in performance between server I/O using a local disk subsystem and the IPStor SAN ranged from a rare 0.6% latency to a 7.2% gain in performance over local disk I/O.”

Otherwise, the only apparent risk is in getting involved in the iSCSI standard, which has yet to be set. End user base price for the new FalconStor product: $10,000 per IPStor server plus $1,000 per client. Add another 20% in annual maintenance.

As for the marketing of the product, FalconStor intends to do exactly as … Cheyenne: first take on OEMs company with a dedicated version of IPStor, then, once the product has gained some recognition, move on to a standard and generic version for the end user, usually targeted by the distribution channel.

“We have some 50 beta sites for our software throughout the world, including a dozen in Europe,” said Briggs, naming Argus and Tim in Germany, A2P in France, and Sagitta and Source Consulting in UK.

This article is an abstract of news published on issue 161 on June 2001 from the former paper version of Computer Data Storage Newsletter.