Cloudian makes moves, keeps up with changing object storage market

The flurry of activity surrounding on-premise object storage specialist Cloudian suggests how rapidly the market has been moving during the last year.

Cloudian CEO Michael Tso said 2017 was the startup’s best year, as revenue grew by a factor of 3x and the customer count soared past 200. He said 89% of Cloudian object storage sales came through value-added resellers by the fourth quarter, and the trend continued into 2018 – a significant jump over the 25% in third-party sales in 2015 and 36% in 2016.

“That really is a signal to me that the product is ready for a broader channel,” Tso said.

Cloudian launched in late 2011 with a focus on prominent Japanese telcommunications/service provider customers NTT East, NTT Communications and Nifty that needed multi-tenant, geographically distributed storage after the Fukushima earthquake.

Tso said he expects Cloudian to become profitable over the next few years, with a possible IPO down the road. But he said growth is more important than profitability right now.

“Our board and our investors are telling us to grow just as fast as we can and don’t worry about profitability,” he said. “I think if we stopped growing as aggressively as we are, we either would be able to be profitable this year, or if I look at the numbers carefully, maybe we could have been profitable even earlier. We are looking at a potential IPO probably three to four years down the road. We are not really in a hurry. We expect to be profitable before that.”

Cloudian is concentrating on partnerships with channel and OEM partners to grab a significant share of the storage market. The object vendor followed its 2016 OEM deal with Lenovo with an EMEA-based joint reseller agreement with Hewlett Packard Enterprise in late 2017.  In 2018, Cloudian partnered with Machine Box on a machine-learning option and made available a Cloudian object storage “HyperStore Test Drive” for Google Cloud Platform.

Also, late 2017 conversations with Cisco Systems led to a significant investment earlier this year from Digital Alpha, a private equity firm started by former Cisco executives. Digital Alpha made a $25 million equity commitment to Cloudian and set up a utility financing facility of up to $100 million.

“The goal for the $100 million is to set up a separate company that would purchase appliances and solutions from Cloudian and be able to provide those to the end user through a paper drink consumption model,” Tso said. “They will add more gear when you need it, and they’ll remove gear when you’re trying to take it away. It’s just like the way cloud works except it’s cloud being put into your own data center, because our product is only sold into on-prem environments.”

Cloudian expanded in March with the acquisition of Infinity Storage, an Italian file-based software-defined storage vendor. Cloudian already used Infinity’s technology in its HyperFile appliance that combines file and object storage.

“They make an NFS/CIFS front end that can move data into object storage or into the cloud,” Tso said of Infinity Storage. “We partner with every one of the gateway companies  out there, but we weren’t really happy with any of their solutions. The problem with a lot of products out there is that they’re not in the kernel space. File systems have traditionally always been done inside the kernel. It’s really the only way to do it that’s really robust, but it’s very hard. We spent a year testing pretty much every vendor in the market, and we eventually came on this small company based out of Milan. They’ve been doing it for over 10 years.”