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FalconStor CEO Quinn discloses turnaround plan

FalconStor CEO Gary Quinn says the vendor will focus on the enterprise and reunify its data protection products to try and recover from a long slump.

FalconStor CEO Gary Quinn inherited a tough job when he was promoted from COO last July to replace Jim McNiel. FalconStor had lost money every quarter over the past three years and was still reeling from a customer bribery scandal that resulted in the resignation and then suicide of CEO and founder ReiJane Huai. The situation was so bleak that FalconStor tried to sell itself off last year but failed to find a buyer.

Nine months after becoming CEO, Quinn said the company has a clear turnaround plan around its Optimized Backup and Deduplication, Network Storage Server (NSS) and Continuous Data Protector (CDP) products. spoke with Quinn about the technology roadmap, joint development agreement with all-flash array vendor Violin Memory and his strategy to make FalconStor a technology leader.

What is your overall strategy for turning around FalconStor?

Gary Quinn: In July 2013 when I was asked to become the CEO, we did a complete inventory of the company, both on the technology side and on the operational go-to-market side. We decided we should be clearly focused on enterprise customers only. We had been working on developing an SMB recovery appliance but that has been discontinued. So we're 100 percent focused on enterprise customers.

We also think there is an opportunity to basically take the FalconStor technology and embed that into service provider models as well as onto certain manufacturers' arrays. One example is the data protection platform we're working on with Violin Memory.

We basically discarded any technology that wasn't in our core focus and also discarded any roads to market or geographic areas that were not performing.

We also looked at general and administrative expenses -- rebidding contracts, services, etc. We looked at everything that we buy as a company.

So what does your product roadmap look like now?

Quinn: I wanted to get the company reinvigorated in a couple of ways. One of those ways was to get engineering reinvigorated on delivering technology, so we went to a 90-day release cycle. We don't expect customers to upgrade every 90 days, but we wanted them to know that the engineering engine for FalconStor is running again and that they were getting good value for their annual maintenance dollars.

We delivered on NSS and CDP 7.6 in February. We will deliver 7.7 probably around May and version 7.8 90 days from there. The idea was to get a lot of products updated quickly and put features in that customers were looking for to show FalconStor still has the capability to innovate and deliver technology.

We also launched Optimized Backup and Deduplication 8.0 in February, with that we showed a mini-site called What that's all about is we believe the FalconStor portfolio allows customers to free themselves from vendor lock-in, from proprietary solutions, from inflexible models of technology and purchasing technology.

Under your predecessor Jim McNiel there was a lot of talk about a data protection services-oriented platform called Bluestone. Is Bluestone still in the works?

Quinn: I think the way Bluestone was presented to the marketplace was as a product, but it really was an architecture. That architecture is being followed today in what you see being created with this joint development work [with Violin] and later in the year we'll show the reunified platform of the FalconStor technology.

FalconStor technology was built on something called IPStor. That was broken apart over the years to satisfy individual products such as VTL, file deduplication, FDS [File-interface Deduplication System], Network Storage Server -- which does virtualization, replication and snapshotting -- and CDP, which did replication and snapshots in sideband rather than in-band. Each of those code branches was uniquely developed over the years and a lot of common services were also developed by each of the product teams. Now we've brought everything together under a common code platform, took the best common services, put in an API layer, created a unified management GUI and other pieces for reporting and monitoring cataloging.

The API layer and unified GUI were parts of Bluestone. We're still working on those as part of an architecture, but it's not a product. The SMB product was supposed to be one of the first deliverables of Bluestone but we discontinued that after two years of no results.

You recently combined your VTL and FDS products into one. Is that the first step of the reunified platform?

Quinn: Yes, one of the first instances of the reunification is the combination of the VTL product with file dedupe onto a single platform, giving you VTL and NAS capability on a single box. We believe that will give us a competitive edge with NAS customers -- before we had to sell them two products. They looked the same but required separate boxes and separate sets of code. Now they reside on a single box with either interface, a single repository, and we've achieved incredible throughput numbers there. We also combined the consoles of VTL and FDS, so customers can see the entire environment through one interface.

Will that be the console you'll plug other platforms into?

Quinn: That's not the future console. Go to the Violin website and look at the Symphony management product. There's a console there -- eventually our console will look like that console.

Besides the SMB appliance, were there other products that you will get rid of?

Quinn: Nothing else got killed. We got rid of some other technologies that are no longer relevant or marketable -- when you think about things like Lotus Notes or certain operating system platforms or databases. FalconStor was totally open -- people used to call us the Swiss Army Knife. That's nice from a marketing perspective but from a technical support side, nobody's capable of doing that. It's extremely expensive. You have to watch the market and support 80 percent of relevant technologies in the enterprise today versus support all of the technologies that ever existed in the lifetime of the enterprise.

The SMB product never came to market. It was in engineering two years and never came out. It was a simplification of a recovery appliance -- a virtual appliance downloadable off the web. If that kind of simplicity could be brought to the enterprise, it would be amazing. But we were unable to re-use that technology so we are still working on the simplification of FalconStor technology.

What is FalconStor doing with Violin Memory?

Quinn: We're about two-thirds of the way through that joint development project. We're developing an optimized data protection services platform out of our NSS and FDS technology for Violin's appliance or array. That will become the foundation of FalconStor going forward and [will] position us to deliver a unified platform that consists of all data protection services inside of FalconStor's portfolio. Later this year, we'll deliver it for FalconStor itself, and in the first half of 2015 we'll deliver the second half of this platform.

When do you expect Violin to ship software co-developed by FalconStor?

Quinn: The arrangement we have with Violin is that we have to complete the project by the end of this calendar year and that jointly developed technology will be distributed separately by Violin and FalconStor. We both have the rights to distribute the product.

Can you sell that technology in similar deals with other storage vendors?

Quinn: Violin can distribute the joint intellectual property only on its platform and we can distribute that technology on a competitor to Violin or distribute it standalone. It could be embedded into a managed service provider or cloud service provider mode, it could be embedded on another flash SSD array, or it could be sold as a standalone license to customer or partner.

The advantage that came out of it is we are able to modernize the product for the requirements of a flash SSD environment and to provide other capabilities needed there for failover with an always-on environment.

We also layered in a complete API set so you can extract information out of the environment and display that on a console for management and reporting or for applying services to your portfolio.

Violin gets a complete set of data protection services and we get a modernized product set that's been reunified for us to distribute for customers.

What's the status of the partnership announced with IBM last year to sell your dedupe software on IBM hardware?

Quinn: That was part of an IBM OEM program conducted with Avnet. Avnet took IBM hardware and matched it up with ISVs like us. In our case it was the VTL deduplication product. Subsequently, IBM has sold off its server business to Lenovo and the IBM and Avnet arrangement was discontinued in March. What does that mean for FalconStor? It means were aren't getting any marketing dollars or co-branding money from them to drive demand, but our work with IBM business partners addressing customers with 20 TB to 200 TB is continuing. They're able to source IBM equipment and combine it with our software in the field. With the discontinuance of IBM ProtecTier [deduplication] at the high end, we're finding opportunities for VTL deduplication at both large enterprises and midmarket.

Did IBM throw a wrench into it? Yeah, they did cause confusion because they sold off the servers. The question is what's happening with some of that midrange storage? At the moment, it's still happening with the business partners. We haven't closed a huge amount of transactions, but there's a need in the midmarket space to address deduplication and virtual tape.

Who do you see as your main competitors?

Quinn: It depends on the market segment. In the virtualization space, there's IBM SVC, EMC and DataCore. For backup, there are the traditional companies -- EMC, HP and vendors in the VTL space like Sepaton and Quantum. We don't really run into CommVault because we're not really a backup provider, we're a target in the backup space. In the case of recovery or business continuity or always-on, it's a different set of people -- we see Actifio there.

Is VMware virtual SAN [VSAN] a competitor for virtualization?

Quinn: It's competitive in some ways. People have to be aware that VMware and EMC are step-brothers, so you have to be careful. We are not a hardware company, we allow people to pick and choose their hardware. VMware has to reinvent itself and add more functionality to its platform, which it is doing. What does that mean for their partners who have built a tremendous cottage industry around VMware? We're independent and don't have allegiance to any hardware platform. People are looking for alternatives, they don't want to buy everything from one person.

It's no secret that FalconStor had a rough couple of years before you became CEO. Jim McNiel used to say that competitors would often bring up those problems when talking to potential customers. Is that still happening now?

Quinn: We had some unfortunate events that almost took the company down. For the first time in a long time, if you Google FalconStor, you don't see much of that past stuff on the first few pages. That's a good sign. We're being judged on whether we are relevant. Based on the activity we had this quarter, I'd say we are.

Into the third quarter last year which ended in September, myself and the CFO were still doing viability calls, "What are you guys doing, are you going to be around?" In the fourth quarter, we had none of that and a lot of people were happy to see we turned profitable. I think we are getting judged on our technology and our vision and our ability to be competitive on technology and price.

Jim was dealt a difficult hand. It was hard to operate a company under those conditions. When you're a public company, all of your dirty laundry is in the public eye. And when you have a problem, your competitors are wise to use that against you. We don't see that happening now and we're being judged on technology and the value we bring.

You reported a profit for the last quarter of 2013 for the first time since 2009, although revenue fell 35 percent from the previous year. When do you expect revenue to pick up?

Quinn: It's an execution story for FalconStor. The company always had good technology but lost its way on the business side. Now the technology is getting its chance to shine again.

I think we have some nice momentum going. It's a transition year for us. If we can execute on the technology roadmap, execute on the marketing communications plan, deliver numbers and get people talking about us again, I think 2015 becomes the trajectory year for us on the revenue side.

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