Nexenta passes 4,000-customer plateau, sharpens VDI and cloud focus
15 May 2012 Source: 451 Research
Storage software specialist Nexenta Systems has gone against the grain by refusing to create its own line of integrated storage hardware appliances, but has still managed to post impressive growth numbers. Although Nexenta's core NexentaStor software is based on ZFS, the vendor continues to provide differentiation through the addition of proprietary add-on packages, such as its new cloud archive module and the NexentaVSA for View product for VDI environments.
The 451 Take
Nexenta has rapidly grown its base of customers in the last few years, and its newest product developments should extend its reach into new markets such as VDI and cloud storage. While Nexenta's customer count is still quite small compared with established storage players, the vendor has a head start over the growing number of cloud storage software vendors now entering the market, including Scality, DreamHost (Ceph) and Basho Technologies. In the VDI space, the NexentaVSA for VMware View has interesting capabilities for storage provisioning, as well as performance management and testing, which could attract VDI reseller partners to Nexenta, especially with vendors such as EMC (VSPEX), NetApp, IBM and Dell (with Desktop Virtualization Solutions) bringing VDI bundled offerings into the market.
Context
Nexenta added $21m in series C funding in January, boosting its total to the $30m range. The latest round saw it add new investor Menlo Ventures (which led the round), in addition to contributions from existing investors Sierra Ventures, Razor's Edge Ventures, Javelin Venture Partners and Translink Capital. The company recently moved to a larger facility in Sunnyvale, California, relatively close to its former headquarters in Mountain View. It had approximately 170 employees in June 2011 (40 at the start of the year), and has 210 today with plans to grow to 300 by the end of the year. Nexenta is looking to add product- and support-level engineering, and will continue to invest in sales and marketing headcount, which has already tripled in the last year.
Nexenta currently has 4,000 paying customers, and claims that its revenue has grown 400% year over year in the last three years. Its average deal size has grown from $10,000 to $15,000 recently, driven by the sales of its support and through the sales of add-on licenses for products such as its High Availability (HA) Cluster module. Nexenta claims NexentaStor helped its partners generate $300m in hardware sales in 2011, up from $70m of hardware sales in 2010. Including nonpaying community users, Nexenta claims it currently has more than 10,000 companies using its software, which totals more than 400PB of storage capacity.
Strategy
Nexenta fulfills 85% of its deals through its network of 250 resellers, and claims to be growing its business through OEM partners such as SGI, which is selling a Nexenta-based NAS head for its modular InfiniteStorage product line. The company generates 60% of its revenue in North America, and has had strong sales success in Korea (Korea Telecom is major customer and investor), Germany, Netherlands and the UK market it is preparing to launch localized versions of its software in Korean, Spanish and Italian. The vendor's primary markets are higher education (Stanford), service providers (Integral Networks) and financial services; it claims that NexentaStor deployments have expanded beyond the backup storage and research markets, and into server and desktop virtualization. It is these areas where it is now focusing its future development efforts.
Products
Nexenta's business continues to be centered on sales of support for its open source, ZFS-based NexentaStor storage software. To create differentiation and increase margins, over the last few years Nexenta has added closed source modules, such as its HA Cluster Module (priced at $4,900) and Clustered Namespace ($4,999).
To push deeper into the VDI space, the vendor recently announced the beta software availability of its NexentaVSA (Virtual Storage Appliance) for VMware View software virtual appliance, which will allow SME customers to create virtual SANs using their server's hard drives. The Nexenta allows customers to create storage profiles to match the needs of the virtual desktop created, and the software package includes benchmark software to help customers size IOPS requirements for virtual desktops against their hardware configurations. Beyond the core storage capability of the Nexenta, the company claims tight integration with VMware vSphere and View is a key asset, allowing the platform to quickly provision and rebalance storage resources on demand. NexentaVSA has a wizard-driven interface to create virtual desktop pools, and claims it can allow customers to set up VMware View VDI environments in a matter of hours.
Nexenta is also an active contributor to OpenStack, and recently announced that it has released a technology preview software release that allows customers to run OpenStack's Swift storage layer on top of its NexentaStor software, which adds object-based storage to NexentaStor's file and block storage capabilities. Nexenta has also provided a volume driver for OpenStack Compute (also known as Project Nova), to allow Compute VMs to utilize block-level storage on NexentaStor systems.
Nexenta's new cloud archive plug-in supports Amazon S3, Google Storage and OpenStack Swift; it can be used to back up NexentaStor systems to a cloud or to back up cloud storage data to an on-premises NexentaStor system. The Cloud Archive plug-in is priced at $899, and has a backup scheduler for backing up snapshots from a NexentaStor system. Given the plug-in's ability to back up data from public clouds, the vendor believes service-provider and enterprise customers could use this capability to help drag data back into on-premises storage resources. At this point, the Cloud Archive plug-in does not have WAN optimization or de-duplication capabilities to minimize bandwidth consumption, although Nexenta plans on adding these features in the future.
Technology
With the release of NexentaStor 4.0 later this year, Nexenta will be moving off of OpenSolaris to run on the Illumos Kernel. It is an active contributor to the project, along with partner companies such as Joyent and managed hoster Every City.
The acquisition of Sun by Oracle flipped around technology release cycles for OpenSolaris and ZFS, with new innovations going into Oracle's commercial software and later trickling back into the OpenSolaris community. With many of the key developers leaving Oracle over the last two years (including ZFS author Jeff Bonwick and DTrace developers Adam Leventhal and Bryan Cantrill), the Illumos open source project was launched in 2010 to create a fork of the OpenSolaris operating systems, which would create open source replacements for the closed source components within OpenSolaris (drivers and libraries). With the move to Illumos, Nexenta believes it has solidified its core software and eliminated the use of proprietary Oracle-owned code in its stack.
Competition
Nexenta claims it primarily competes with major storage vendors, such as EMC and NetApp, and positions its combination of software and third-party commodity hardware as an inexpensive alternative to proprietary arrays. In the midrange storage space, there are a number of strong rivals, including Dell (Compellent and EqualLogic), IBM, Hitachi Data Systems, and Hewlett-Packard (which also has a VSA storage offering). A number of storage startups have also brought products to market based on ZFS, including Tegile Systems and GreenBytes. Nexenta believes its closed source software efforts including its NexentaStor VSA for VMware View, Clustered Namespace and HA features provide differentiation over other ZFS-based players. Nexenta also points out that its larger customer base and developer resources help keep its products ahead of the curve. In the VSA space, besides HP's LeftHand VSA, VMware launched its own VSA in 2011. Against these two rivals, Nexenta claims its provisioning and performance management tools in NexentaVSA will provide differentiation once the software becomes generally available later this year. From a cost-savings perspective, Nexenta claims its NexentaVSA running on commodity hardware with VMware View can deliver VDI at a cost of approximately $385 per desktop, compared with other rivals that charge approximately $800-1,000 per seat for their bundled offerings (with software and dedicated server and storage hardware). Other startups selling integrated offerings (servers/storage) for VDI include Pivot3 and Nutanix.
Although Nexenta's integration with OpenStack's Swrift is still in the early stages, the vendor believes it is in a good position to become a player in the cloud storage market. Nexenta's investor and customer Korea Telecom is an early adopter of Swift, and should help the vendor to properly integrate NexentaStor with Swift. The vendor believes the flexibility of its software licensing to scale licenses up and down based on utilization is an important aspect for service providers that do not want to pay upfront for a large pool of idle resources.
As it extends into the object-based cloud storage market, Nexenta will need to fight off a number of rivals, including EMC Atmos, NetApp (StorageGrid) and Nirvanix. It will also have to contend with a number of storage software startups, such as Scality, Cleversafe, Basho (Riak CS) and DreamHost (Ceph), which also run on commodity hardware.
SWOT Analysis
Strengths - Nexenta's sales have grown at a rapid rate over the last few years, and the vendor has had success in a number of markets, including the service-provider space and higher education. The new VSA and cloud archive products should help Nexenta push deeper into the emerging VDI and cloud storage markets.
Weaknesses - The vendor is still quite small compared with other storage specialists, and still does not sell integrated hardware/software storage systems,
which are the norm in the enterprise and midrange markets.
Opportunities - VDI and Cloud Storage are developing markets, and some customers have shown a willingness to go against the grain to reduce costs.
Threats - There is no shortage of competition in the markets Nexenta is addressing, and this includes a number of startups that are also using ZFS storage software.
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