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Hitachi, BlueArc announce OEM partnership

What had been rumored to be an acquisition has turned out to be an OEM deal, but HDS has also made an investment in BlueArc, indicating an acquisition could be the next step.

BlueArc Corp.'s Titan network attached storage (NAS) head will function as a gateway in front of Hitachi Data Systems Inc.'s (HDS) storage, and BlueArc will resell HDS storage products under the terms of a new OEM deal, the companies announced this morning.

The combined product, dubbed the Hitachi High-Performance NAS Platform, is being aggressively positioned by HDS as its entry into the high-performance computing (HPC) market. The Titan NAS heads are high performing, with up to 10 gigabytes per second (GBps) throughput, which matches the maximum performance claims from clustered storage competitor Isilon Systems Inc. Titan heads can also be clustered. Currently, the two companies will be offering a maximum cluster of two Titan NAS heads, a configuration that scales up to 1 petabyte (PB).

"We support scaling up and clustering -- it just takes a lot fewer BlueArc devices to get to the level of other HPC clusters," said John Affeld, director of product marketing for BlueArc. "It'll eventually go beyond two [nodes]," he added, "but the market will have to drive that demand."

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"We consider high-performance computing to be any environment which has high levels of content and a need to access that content very quickly," said Brenda Peffer, vice president of global marketing for HDS. "We believe that market space will become mainstream in the next few years, and we have a chance to dominate that market."

Meanwhile, analysts said they're not sure about the HPC spin. HDS has also had some success with NAS blades, announced in April 2005, which are designed to be attached to its TagmaStore arrays. The blades won the Storage magazine and Diogenes Labs Quality Awards for enterprise NAS in May (see sidebar), but they can't achieve the scale of the BlueArc system and lack important features like file-level replication and global namespace.

"The real news here is that BlueArc's file access is being integrated with Hitachi's replication product, and file and block systems can both be managed under [HDS's HiCommand] management console," said Dianne McAdam, director of enterprise information assurance with the Clipper Group.

According to Arun Taneja, founder and analyst with the Taneja Group, clustered NAS is "in its infancy in the grand scheme of things," and the deal was probably inked in order to address a market beyond HPC. "This fits into the high end where HDS storage customers are," Taneja said.

Despite the success of the HDS NAS blades, Taneja said there was still a gap in the NAS portfolio that has nothing to do with HPC. "As a predominantly block-storage supplier, HDS has always been at a disadvantage against other big companies when it comes to NAS," Taneja said, and the other big players also have clustered NAS partners already. IBM has Network Appliance (NetApp), Hewlett-Packard Co. (HP) has PolyServe Inc. and EMC Corp. has its own Celerra NAS products. "There aren't that many options left."

This would be HDS's second attempt at partnering on NAS, something analysts picked up on in a conference call with HDS president and CEO Dave Roberson and BlueArc's president and CEO Mike Gustafson Monday morning.

"You've had NAS partnerships previously and haven't attained market leadership," said Tony Asaro, analyst with the Enterprise Strategy Group, in response to Roberson's declaration that this partnership would rocket both companies to the top of the high-end NAS market. "What's different this time?"

Roberson replied that in addition to being a higher end product than HDS's previous OEM products from NetApp and its own internally developed NAS blades, the new product has already garnered major interest from the HDS customer base.

"We sold our first solution before we even made the announcement," Roberson said. "We've already done a substantial number of [sales] quotes [for the new product]. There's a healthy demand."

"We're happy with [NetApp], but we'd definitely be interested in buying NAS from Hitachi -- it always makes it easier to buy from one vendor," John Parish, associate vice president in charge of terminal technology, Dallas-Fort Worth International Airport Board, told when rumors of an HDS-BlueArc deal first broke.

Could an acquisition still be in the works?

HDS is traditionally not an acquisitive company, but analysts said the announcement of an OEM deal doesn't necessarily close the door on the possibility of an acquisition in the near future, especially since HDS also made an investment in BlueArc for an undisclosed amount as part of the OEM deal.

BlueArc has received more than $200 million in venture capital funding, something that would make them incredibly pricey to acquire, according to Taneja. "For the VCs to get any kind of return on their investment would require $500 million," either in sales or in an acquisition bid, and "Hitachi could definitely sell that amount of NAS with its access to the channel."

According to another analyst who asked not to be named, the investment "either means BlueArc badly needed an influx of cash, or it could be a test before [Hitachi] buys them later -- this may be a trial."

"I wouldn't be surprised if this was step one of two or three steps, the final step being an acquisition," Taneja said.

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