Bob Dutkowsky, CEO, Egenera
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Egenera wouldn't mind being the next VMware, a company that became so popular for its server virtualization software that EMC decided to scoop it up at a premium.
Though considering the ink has recently dried on a $300 million contract with Fujitsu Siemens, Egenera may soon become too big a target for companies looking to improve the way their data-center gear is managed.
And that's just fine with Egenera.
Though the Marlboro, Mass., company is private and doesn't reveal its revenue figures, sources say Egenera is already at over $100 million in revenues and rising. In comparison, VMware just cracked the $100 million mark in the recent quarter.
Egenera makes stateless blade servers. That is to say, they are without disks. So, while traditional blade systems from top-tier vendors take hours to configure, IT administrators can color one of the company's BladeFrame systems as a Linux or Windows system in minutes just by pointing and clicking.
Egenera CEO Bob Dutkowsky explained to internetnews.com how the company's products give it a competitive advantage over systems vendors IBM, HP, Dell and Sun Microsystems.
Q: What is the problem or technical challenge Egenera is trying to address with its BladeFrame systems?
In today's typical data center, large, complex Fortune 1000 businesses have lots and lots of computing power, lots of storage and lots of networking technologies.
The challenge they have is that they are trying to make all of that work together and deliver a competitive advantage in a cost-effective way. Many of those architectures and technologies were designed 40 years ago. They've just been modernized with faster chips and bigger memories. But the basic architecture is the same.
Consequently, companies have to layer lots of tools and software to make the pieces work together. On the server side, the average utilization rate of a server in a data center in corporate America is 20 percent. For every $1 that the business spends for a computer, they only get 20 cents of value back.
Companies that we compete against -- IBM, HP, Sun Microsystems and Dell -- are still using the same basic architecture and trying to get that productivity and usage higher. Egenera said it was time for a new computing architecture -- that's the stateless blade -- and it's time to build an infrastructure from scratch that will solve the complexity problems in the data center. That's what Egenera's product does.
Q: So you see yourself as competing with the blades that market leaders IBM and HP make.
Do we compete against them? Yes, we absolutely do. Do we complement them? Yes we do, because they run different sets of applications in that data center than we do. Our product is targeted at mission-critical, highly available, must-run 24x7 applications. Customers will pay a premium for that.
You mentioned the stateless blade. Let me use your laptop as an example.
Your laptop uses the same 40- or 50-year-old architecture as the mainframe. It has a processor and it has dedicated storage. When you press the "on" button on your laptop, it boots up Windows and that computer is a Windows computer. It's not Linux, it's not Unix, it's Windows, and it's attached to a processor. That processor can do work based on the applications you ask it to do.
That's the same architecture that IBM blades have, Dell blades and Sun Galaxy servers. They all have a "state" because they have a disk in them.
The disk defines what that computer is attached to and what it can do. The Egenera blades have no disk. They have no state. They get their state from the enterprise's SAN -- the big storage infrastructure of a company. It's real easy for us to move workload to our blades because we can point at the blade and say 'turn that one into a Linux blade.'
In the IBM, Dell, HP, Sun world, they have to shut the blade down and reboot it with a different OS. That time is the gap that Egenera's solves with its architecture.
In a data center, it's more complex. When a business wants to run a new application, IT has to build out a server, figure out how to attach it to storage, define the network and then interconnect all those pieces together. It takes one to two months.
Contrast that with an Egenera environment. When an executive says he wants to run an application on Windows, he literally points and clicks, and that server is up and running in two minutes. Two months versus two minutes. That's the differentiation and competitive advantage in the market.
Q: I was talking to a Cisco official recently about the upgrade to its Topspin portfolio. I asked him about Egenera, and he said that Topspin would eat Egenera's lunch. What do you say to that?
Is Topspin a competitor of Egenera? No, it's a completely different class. They don't sell blades or servers.
The reason why Topspin was attracted to Cisco is that it's basically a switch. They have a piece of software called VFrame that adds some value to the switch. That's like comparing an apple and an orange. Call your Topspin marketing guy silver-tongued, ruby-throated savage back and ask him for a reference. And not a high-performance computing reference, but ask him for commercial applications, where people make money. And I think what you're going to hear is that they don't have any.
Our customers are companies like Goldman Sachs, Credit Suisse First Boston, AOL and Sprint and Wells Fargo. I think what you'll get back from Topspin are scientific applications. You don't reboot AOL in the middle of the day and tell all their customers 'I'm sorry, we're down for a few hours.'
Do we compete with VMware? No, we remarket VMware. Our customers use our product plus VMware to get another level of virtualization. VMware splits up the processor to handle multiple workloads and virtualize them. What we do is virtualize the servers. They make the processor more productive; we make the server more productive.
Q: You recently inked a big contract with Fujitsu Siemens. What did that entail and how will that help Egenera compete in Europe. Any plans for a similar contract in the U.S.?
We're about 90 percent U.S. and 10 percent the rest of the world. One of our growth strategies is to accelerate our growth in Europe.
Fujitsu Siemens brings tremendous distribution capability in a strategic growth market for us, which was EMEA [Europe, Middle East and Africa].
To put it in perspective, we had about 15 people on the ground in Europe. Fujitsu Siemens has about 4,000 sales people in EMEA. They could accelerate the deployment of our product in EMEA. We've given sole distribution rights to the Egenera product line to Fujitsu Siemens in EMEA. Now we can put more of our attention in the Americas and in Asia.
Q: You seem to be following a similar growth pattern to VMware, which was acquired by EMC. Would Egenera be amenable to an acquirer, or do you plan to stay independent?
Our desire is to grow this value proposition as aggressively as we possibly can. We believe we have a very unique competitive advantage in the market place.
Our board of directors is aggressively looking at every alternative that gives the company scale and allows us to grow. Therein lies the Fujitsu Siemens deal. That's a quoted $300 million, 30-month deal. If you pretend that we're $100 million in revenue, that's three times more revenue. That makes Egenera a very, very attractive IPO candidate and a very, very attractive acquisition candidate.
We don't have a pre-conceived notion of which direction we want to take the company other than we want to get Egenera as big as we possibly can and get as many customers using the product as we can. We'll figure out what's the best alternative from there.