NTAP NetApp Inc

By Don Clark 

Employees at private-equity firm Carlyle Group used to wait several minutes to hours for its computer systems to churn out some financial reports. Now such tasks are often completed in seconds, thanks to new-wave data-storage hardware from a startup called Tintri Inc. it began installing a year and a half ago.

"I could not believe the difference," said Alan Thompson, Carlyle's vice president of global information-technology services.

Such testimonials are becoming commonplace as one of Silicon Valley's least-sexy sectors turns into one of its hottest. Technology for helping companies store data--the high-tech equivalent of filing cabinets--has become crucial to speeding operations to make companies nimbler. The change is giving storage gear a bigger claim on corporate information-technology dollars.

Well-funded storage startups are pressuring technology giants like International Business Machines Corp., Hewlett-Packard Co., Dell Inc., EMC Corp. and NetApp Inc. Some newcomers are targeting specific incumbents, which have responded by buying or building new kinds of storage hardware.

"It's a knife fight," said Jeremy Burton, EMC's president of products and marketing, referring to the competitive environment.

Venture capitalists pumped more than $6 billion into 96 startups selling storage-related hardware, software and services between 2010 and the first half of 2015, according to CB Insights.

Some, like Pure Storage Inc., are exploiting a shift from disk drives to faster flash memory chips. The Silicon Valley startup recently filed to go public after reaching a $3 billion private valuation last year.

Others are combining computing and storage in multipurpose boxes for other speed and cost advantages. Two such companies, Nutanix Inc. and SimpliVity Corp., have also topped billion-dollar valuations.

One reason: Companies will spend more than $40 billion in 2015 on storage hardware alone, research firm International Data Corp. estimates. Many of the vendors--whose systems typically cost from tens of thousands of dollars to hundreds of thousands--had exhibits at VMware Inc.'s annual conference in San Francisco over the past week.

At the same time, computers, mobile devices and other gadgets are generating a rising flood of data that must be stored on company premises or on cloud services. An IDC study, sponsored by EMC, last year estimated that the volume of digital bits from all sources will grow 40% a year into the next decade.

Companies like Pure, Kaminario, Violin Memory Inc. and SolidFire Inc. have responded with systems that store data on flash memory rather than hard drives, which have spinning disks and electrical motors that are prone to mechanical failures and consume more energy than semiconductors. Data stored on such chips can be retrieved about 20 times faster than from drives, estimates Andy Walls, a 34-year veteran of IBM who is chief technology officer and chief architect of its flash-based systems business. Flash "is changing the landscape and changing it dramatically," he said.

Blackline Inc. is a believer. The accounting-software company began installing flash-based storage equipment from the Boston-area startup Kaminario in November. Alain Avakian, Blackline's chief technology officer, said the technology sped up its website operations by 30% to 40%; data starts transferring in less than a thousandth of a second--more than 60 times faster than the company's prior storage hardware. "The speed was incredible," he said.

Makers of disk drives--a technology that emerged in the late 1950s--have had decades longer to drive down costs compared to flash memory, which began reaching huge commercial volumes in the past decade after it became a mainstay of smartphones. Though it has steadily fallen in price, flash technology remains more expensive per byte of data stored. A 1 terabyte drive based on the newer technology, for example, retails for about $500, compared with $50 for a comparable hard drive.

So some storage startups, including Tegile Inc., Reduxio Systems Ltd., and Nimble Storage Inc., offer a mix of flash and disk drives to provide both increased speed with large storage capacities.

Other startups, such as Nutanix and SimpliVity, are borrowing techniques from large cloud services to combine servers and storage in "hyperconverged" hardware that can be simpler to use and faster than using separate boxes.

Many companies say their technical advantages have less to do with the hardware they sell than the software that comes with it, which handles chores like optimizing performance and backing up data. Some new vendors, in fact, only sell software, betting on the appeal of low-cost commodity servers packed with flash chips or disk drives. Software-only startups include Scality Inc., PernixData Inc. and Formation Data Systems.

Vendors also point to a more subtle issue: labor. Many companies with traditional storage systems employ staffers to manage backups and maximize performance by distributing data to various devices. Newer devices are designed to eliminate or automate many such tasks.

"You don't need to do that anymore," said Joris Vuffray, head of networking and systems management at the Switzerland-based lottery operator Swisslos, describing his experience with Nutanix gear.

The startups are pushing ahead despite a move by many companies to rent computing services from the likes of IBM, Google and Amazon.com Inc., reducing their need to buy and own their own storage hardware.

Pure, which has raised $470 million in funding, has hired away dozens of EMC sales people to aid its effort to target the storage giant's customers.

EMC has lodged lawsuits alleging theft of trade secrets and patent infringement against Pure, which denies the claims and accuses EMC of violating its own intellectual property. Litigation is still pending. EMC also bought two flash-based startups.

Revenue from EMC's mature disk-based hardware has been declining lately. But Mr. Burton predicted sales of flash-based hardware will reach $1 billion this year, outselling the top three or four rival vendors combined.

Write to Don Clark at don.clark@wsj.com

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(END) Dow Jones Newswires

September 04, 2015 19:43 ET (23:43 GMT)

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