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A contrary success: Panasas grows as demand for network storage space soars
Thursday, June 21, 2001 By Eve Modzelewski, Post-Gazette Staff Writer
While other technology companies have been cutting back and laying off, Oakland start-up Panasas has been going in the other direction.
Not that anyone noticed much until last fall, when the computer network storage technology concern landed a $10 million investment. Just in time.
Since then, it's moved into posh new space on the North Side, upgraded its California headquarters and opened a new office in Houston. And dot.com-inspired perks that have been eliminated at other firms -- such as free soft drinks in the office and access to a private gym -- remain standard issue for Panasas employees.
The company was founded in Pittsburgh in April 1999 by Garth Gibson and Bill Courtright, but is headquartered in Fremont, Calif., on the fringe of Silicon Valley. In the last six months, it has increased employment from 15 to more than 70, including about 30 locally, and is continuing to hire engineers. In February, Panasas also lured Rod Schrock, the former chief executive officer of AltaVista and a 12-year veteran at Compaq Computer Corp., as CEO.
"You build a more efficient organization when you build in a downturn," said Gibson, who is also chief technology offer at Panasas. "There's never been a better time to recruit extremely talented people."
Part of the secret to Panasas' prosperity is its chosen industry -- computer network storage.
As orders for other Internet-related equipment have slowed considerably the past few years, computer network storage is experiencing rapid growth. That's because the need for computer storage capacity continues to soar as people and their computers keep creating more information.
The total factory revenue for disk storage hardware is expected to increase from $29.9 billion in 2000 to nearly $70 billion in 2005, said Roger Cox, chief analyst for research firm Gartner Dataquest.
"The fact that information is increasing each year and that there are new [business-to-business] applications on the Internet are what's driving the storage market," he said. Plus, as technology has advanced, storage devices such as disk drives are now cheaper to manufacture.
To keep up with the growth of information, companies have switched from what is known as direct-attached storage to network-attached storage, which is easier to expand and more efficient. As a result, the storage industry has become more dynamic and more complex. It's no longer just about idle disk drives enslaved by a computer.
Data storage companies EMC and Network Appliance have been the benchmarks for the data storage industry, but Panasas is approaching the market with a different type of network-attached storage product.
The company is focused on developing a better way for organizations to arrange storage in a network by creating "smart drives" that work with distributed software. With this system, networked data can be directly stored and retrieved by client PCs instead of going through a bottlenecked server that's being forced to handle too much data from a variety of sources.
Because computer intelligence is distributed throughout the Panasas system -- between Panasas Smart Drives, Panasas Storage Managers and customers' servers -- the company claims fewer human managers will be needed to manually move data within a system.
Also, Gibson said, the technology is compatible with existing systems and can grow infinitely since storage space is expanded when another smart drive is added. The result, he contends, is a reduction in overall costs for data storage.
The company's potential customers are organizations with large technical departments requiring huge amounts of data storage, such as banks, retailers and health-care providers.
Panasas has not yet had a product offering, but it expects one by mid-2002. In the meantime, the company is employing its engineers -- who in Pittsburgh have spacious river-view offices -- to continue developing the more than 2 million lines of software code needed to operate Panasas' storage system.
"Engineers are our primary assets," Gibson said. "We want them to have good space."
Gibson has been researching computer storage networks since 1986, when he was a graduate student at the University of California at Berkeley. His research on RAID -- redundant arrays of inexpensive disks -- has sparked derivative research and developments in industry.
He also created the Parallel Data Laboratory at Carnegie Mellon University, a storage systems research center of faculty, staff and students that receives guidance from an industrial consortium that includes EMC, Network Appliance, IBM, Hitachi and Seagate Technology and several other big-name firms.
As organizations are shifting their information technology budgets from servers to storage space, Panasas has found itself in a potentially lucrative niche.
Because Panasas is a start-up, it's been able to adjust its strategy in order to meet the needs of the growing data storage industry, which its founders view as an advantage.
"Start-ups can embrace and set the standards for new technology more easily than a large corporation," Gibson said. "It's about agility."
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