Xiotech resurfaces with data compliance focus

Xiotech has been busy acquiring a legal discovery software vendor and building a data compliance practice, but what about storage?

Xiotech Corp. has been quietly retooling to survive in the storage marketplace and has resurfaced this week with an acquisition under its belt and a new consulting practice solely focused on data compliance.

"They dropped off the radar for about nine months," said Dianne McAdam, senior analyst at The Clipper Group. "The storage market is really tough and with HP [Hewlett-Packard Co.], EMC [Corp.] and Dell [Inc.] going after their market [namely small and midsized businesses] with bigger channels and deeper pockets, they had to do something."

Diversifying, Xiotech acquired document management company Daticon Inc. for $30 million in January. Daticon specializes in converting paper documents into digital content that it merges with electronic documents to form a single database for legal discovery. Its software enables IT managers to retrieve important information more easily.

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"Adding this functionality gets us out of day-to-day combat with EMC and IBM," said Mike Stolz, vice president of corporate marketing at Xiotech. He stresses that the company is not getting out of storage, but developing products that it hopes will differentiate Xiotech more easily. "Evidence management and data discovery evolve around the storage system but at a higher level."

John Webster, founder and analyst with the Data Mobility Group, said he applauds the company's strategy. "Anything you can do to stay off the radar screens of the EMCs of the world, the better."

Alongside the Daticon products, Xiotech is developing an appliance strategy that will focus on vertical markets. The first product in this family will be available early 2007 and is loosely referred to as an evidence management appliance that will let users search data around legal issues. It goes into beta in the next few months. Xiotech is keeping the details of this product under wraps until the launch.

On a related note, the company announced a consulting practice this week around information management, electronic data discovery and incident management. To head up the new team, Xiotech has hired Dean Gonsowski, Esq., formerly corporate counsel at Fios Inc., an electronic discovery services company, and most recently director of discovery practices at Navigant Consulting Inc. Gonsowski specializes in assisting businesses with computer forensic investigations, electronic data discovery and records management issues.

"We're providing the glue that holds all the different parts of Xiotech together," Gonsowski said. Compliance is managed through point products department by department today, but companies need to develop procedures from a holistic perspective, bringing compliance, IT, legal and risk management together, he said. "Any bit of data has storage concerns, ILM [information lifecycle management], records management, risk management and legal concerns; there are overlapping needs on any given piece of data, and all those groups need to weigh in on it," he said.

He added that midmarket companies -- Xiotech's bread and butter -- want to turn compliance projects around in months not years. "They can't afford monstrous, ongoing engagements." Xiotech's plan is to sell them a quicker and easier way to become compliant that will no doubt include the company's storage products along the way.

"This is a new approach for [Xiotech] that is somewhat different from selling storage," notes Tony Asaro, senior analyst with the Enterprise Strategy Group. "They know how to sell storage and certainly there is a team of Daticon guys that know how to sell its services." He added, "Being great at both is always a balancing act that sometimes leads to a lot of stumbles and falls … That is the biggest challenge they have."

What about the storage?

Despite its new focus on compliance, Xiotech appears to be continuing to innovate where its core business is concerned, much to the relief of its customers. Heritage Auction Galleries, an online auctioneer, purchased Xiotech's Magnitude 3D 3000 array in early 2006 after struggling for years with EMC's Clariion replication software, MirrorView.

Heritage required immediate failover and synchronization capabilities to keep its auctions online 24 hours a day. "An auction can't go down 10 minutes before the close of bidding, there are a lot of auction sites out there, people would never come back," said Brian Carpenter, senior network and systems administrator at Heritage. EMC offered to write them a script that would enable failover in 20 minutes, but this wasn't satisfactory.

Xiotech's replication software, launched in April, called GeoRAID, was just what Heritage needed. It can write a storage volume across two physical locations within the same storage cluster. It's limited to locations that are 10 kilometers apart, as the software only supports Fibre Channel, but if one location fails, server access to data is automatically routed to another location without interruption. Heritage got to test it out recently when a power supply failed and knocked out a production server. GeoRAID failed over the request, there were no outages, and the Web site was unaffected, according to Carpenter. He said EMC might be the "market leader," but "its technology is far from the best."

Last month Xiotech surprised the industry with news that its storage array will soon support solid state disk (SSD) technology. Famously expensive at approximately $20 a gigabyte, but extremely high performing, Xiotech nevertheless sees a future for this storage, for guess what? -- compliance purposes. It could also be a tier of storage within an ILM model, albeit an expensive tier, the company admits.

"Think about it," Webster said, "You could put an index in solid state and make it go really fast -- it would be very effective for searching in legal discovery."

Xiotech has an interesting juggling act ahead of it balancing its traditional storage business with its new compliance practice, but according to Stolz, the company's been profitable for the past five quarters, so it appears to be getting something right.

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