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Panzura CEO discusses fading cloud storage gateway market

CEO Randy Chou discusses why he thinks the cloud gateway market will be absorbed by cloud providers or legacy storage vendors, and why EMC isn't a competitor.

EMC's recent purchase of TwinStrata fell in line with industry analyst predictions that the cloud storage gateway market will consolidate and fade away as a discrete product category. But the market dissolution is of little bother to Panzura, according to CEO and founder Randy Chou.

Chou said he has been against the cloud gateway label since the Campbell, Calif.-based startup received its Series A funding in late 2008. He said he never viewed the company's product in the way that analysts defined cloud gateways to him, as a "seamless way for an enterprise to move data in and out of the cloud" using familiar protocols such as NFS and CIFS.

To underscore the point, Panzura offered up a free cloud gateway virtual appliance, essentially its protocol converter, in July and partnered with Google to provide 2 TB of free cloud storage for a year to users of its gateway.

Panzura's main focus is cross-office collaboration through a global file-locking system that connects different locations using on-premises controllers and cloud storage. The company ships an appliance that integrates its controller, software and global file system. Case studies posted on Panzura's website include the U.S. Department of Justice; the Miami Marlins baseball team; and architectural, engineering and construction firms such as Bolton & Menk and C&S Companies.

During an interview with SearchCloudStorage, Chou offered his take on the shifting cloud storage gateway market, discussed his vision for cloud storage and talked about the gateway landscape that includes Microsoft and EMC.

Industry analysts have historically classified Panzura as a cloud gateway, and many of them now predict cloud gateways will fade away. Some say the functionality will shift to major storage vendors. Do you agree with their assessment?

Randy Chou: I not only agree, I would add to that. The features that typically are in a cloud gateway, I don't know if they would go to incumbents as much as they would go to the cloud providers, but that's beside the point. The main point is we never believed cloud gateway was a standalone market. From a Panzura standpoint, we don't believe we ever were just a cloud gateway.

How do you classify your products these days?

Chou: The market we've always felt we were defining is the cloud controller market -- in other words, the ability to provide NAS functionality across sites at a high performance with the authoritative copy of the data sitting in the cloud itself. It was never about one-site access from one location. It was always about feeling like people are accessing the same data across multiple sites and knowing the data is always next to them. We rarely have a customer who purchases us with fewer than three sites.

Who do you view as your chief competitors today?

Chou: It's legacy folks like NetApp. Anybody who sells storage across distributed sites. We really do not have competition in the cloud side of things -- in other words, certainly not the cloud gateway. We never bake-off against any cloud gateways. And there is nobody that is on the horizon coming out stating they are a competitor from a multisite standpoint.

What did you think of EMC's acquisition of TwinStrata? Do you consider EMC to be a competitor now?

Chou: Not at all, and this is why we've always had clarity from a cloud gateway standpoint. EMC still resells our product. In fact, we closed a seven-figure deal with EMC about two weeks ago. [EMC] purchased TwinStrata because they wanted to add cloud gateway functionality for their VMAX, which is the most expensive system they sell. Most people who buy a VMAX put it in one site, in their core data center. That's never been our competition. We've never actually tried to sell into an enterprise that's just had one data center.

What did you think of Microsoft's acquisition of StorSimple and the tightening of the integration with Azure?

Chou: The only thing that did was make it easier [for us] to fundraise. The two companies that you've mentioned -- TwinStrata and StorSimple -- we have never been in any bake-off with them since the beginning of the company. We have never been in an account where they put up a StorSimple and a Panzura and compare the two. Not once.

What's your prediction for the remaining vendors in the cloud gateway market?

Chou: Let me just comment on the market. I never like to underestimate a vendor. They may, in the back of their mind, have some other strategy. The cloud gateway market, I think that's going to get absorbed, as you're [now] seeing. I think each one of them will be consumed by either a cloud provider or a legacy storage provider. The value they provide to one of these two categories is far higher than the revenue they can bring in today by themselves.

Why did you decide to give away your gateway software for free?

Chou: We knew that the largest cloud vendors like Microsoft, Amazon and Google were going to be dropping their pricing tremendously. We knew that sooner or later some of the vendors inside the cloud storage gateway market would get absorbed.

Knowing that was coming anyway, we wanted to make it very clear we were not a cloud gateway company. We kept getting confused from a marketing standpoint with cloud gateways. And so what easier way to say, 'We are not a cloud gateway' [than] by giving it away? And that was a tremendous win. From a marketing standpoint, we got more press across not only online coverage but even printed paper coverage than any other news we ever did.

Was there any financial impact to the company in giving that gateway software away?

Chou: Absolutely not at all. Our revenue has more than doubled this year versus last year. And last year versus the year before, we more than tripled.

What was the impetus for your partnership with Google, where an enterprise can get 2 TB of storage on Google Cloud Storage free for 12 months with your gateway?

Chou: One of them was because we were giving the cloud gateway out for free. [Secondly] because Google had dropped its pricing and was heavily investing. They were investing probably at least two times more than they were before, starting in March, and maybe even more than that. There's been a complete turnover of headcount and leadership on the cloud infrastructure side. We wanted to be going out with Google -- one of the top three hyperscale vendors -- reach the market together and allow them to do something they've always wanted to do, which is enable people to use clouds in a more seamless manner.

Do you see yourselves as an acquisition target? Or do you foresee storage vendors such as NetApp or cloud providers providing the functionality that you do?

Chou: If this company doesn't do [an initial public offering] IPO, it would be very difficult to explain to our wives. We fully expect this to be a standalone company and an IPO company. I think [storage vendors] all want to offer what we offer. Whether they have the technical ability is beside the point.

Do you foresee public cloud storage being able to handle all enterprise storage?

Chou: Absolutely. That's already happening, and that's not sold just simply as storage today. If you look at people running Oracle on Amazon Relational Database Service, that's already a line item for both Amazon and Oracle from a financial standpoint. You simply don't go to Amazon and say, 'I want to buy this storage with this brand, with this model, with this revision number, with this software to run this.' You just say, 'I want to run Oracle.'

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Do you see a clear difference between cloud storage gateways and controllers?
i think it is clear to understand the difference in theory but in the real world the difference is less clear so as i see a gateway is to translate protocols to the cloud in the other hand controllers are to connect storage from several offices between then and to the cloud. I think a gateway can be part of a controller but just a little part because the controllers has another options
They might be better off at least considering the acquisition exit strategy. Depending on an IPO is risky and I'm sorry, they're not Box.