Optionetics, September 2001 | Written by Shelley Souza

Diamond Lauffin is a dangerous man to talk to if you don’t want to know about network storage. Before he’s finished, you’re likely to believe that you need NexSAN Technologies’ networked storage solutions, even if you’re not on a network. That is not to say you don’t need NexSAN’s solutions, but rather that you will find that it is possible for you to store your data much more cost-effectively than you might have imagined this type of technology would cost. You’ll find yourself wondering, as I did: is there a way for me to get NexSAN’s services to work for me? Who, after all, has not gone through the frustrating experience of lost data because of crashed systems—for whatever reason?

Lauffin is the kind of man who could sell coal to miners and ice cream to Eskimos. And if you speak to him for more than ten minutes, you find you are talking not only to an evangelist—a man with a mission—but to an evangelist who knows his industry inside out. As a 30-year veteran of manufacturing and of the industry of tape and network storage, Lauffin makes it simple for even the most uninformed listener to understand what network storage is all about and why it’s necessary. And he makes it easy to grasp what the different levels of enterprise (and home user) storage capacities and performances are, and how to determine which level suits your personal or business needs. Most of all, from an investment perspective, he demonstrates why NexSAN Technologies is likely to succeed in an industry that clearly has strong leaders like IBM (IBM), Compaq (CPQ) and EMC (EMC).

Lauffin’s mission is to make NexSAN Technologies, a closely held three-year old storage-centric company, a global leader in what he calls the second class (second level) enterprise storage niche—where data storage doesn’t need 100% real-time access and performance but still offers more than 90% of real-time benefits for less than one third of the cost. Storage Area Networking and Network Attached Storage are part of the fastest growing industry in technology and NexSAN hopes to leverage its lead in the previously overlooked niche of second-class enterprise storage.

He told me that while other companies in the storage business talk about “interoperability,” for NexSAN the issue doesn’t exist. NexSAN has created a suite of appliances that are operating system independent. “NexSAN’s technology allows us to come to the appliance market using a common sense approach to an industry people keep making more complex,” he said. “Storage technology grew fat in an age when storage was still black magic.” He explained that as more professionals understand technology, the mystique of black box storage technology no longer holds water. Nowadays, customers don’t want huge costs for storage if they realize that optimal performance for their needs can be supplied for much less.

Lauffin made it clear that industry leaders cannot afford to compete with NexSAN right now because current overhead would be too expensive. He said any of the industry’s leaders could reverse engineer NexSAN’s technology and figure it out. But at a certain point, growth (size) of a company outweighs return of cost. As the company grows, product price has to increase in order to sustain the costs of running the company and maintaining gross margins. Offering services at prices at which NexSAN can afford to deliver them would be prohibitive to leading competitors.

NexSAN is still small enough to be able to undercut virtually every one of their competitors and still bring home a healthy profit for their investors. As Lauffin said, he’s not running a dot-com based economic model at NexSAN; his investors expect to see real profits coming from the company through earnings. How the company and its products have been structured, together with their philosophy of “correct cost model for the product line,” allows Lauffin, who is NexSAN’s Executive Vice President, to reduce the average cost of storage per megabyte from the current cost of 19 cents to 1.7 cents and still make a profit that satisfies his shareholders.

Lauffin is passionate about bringing affordable storage to every IT manager who doesn’t require primary class enterprise storage technology 24/7. And in addition he told me that NexSAN is able to offer 24-hour-accessible virtual storage online to home users who want to ensure they have an external backup of their data outside their home for as little as $500.

NexSAN Technologies was scheduled to go public earlier this year but with the uncertainty in the market, they postponed their IPO to sometime next year. Their philosophy is to always work in line with the correct model for the product line. When industries are growing fast this is not an issue. But when a product grows beyond cost-effectiveness so that price exceeds value, it becomes impossible to move quickly into new and more profitable markets that emerge as a result of new ideas and technology. Lauffin expects NexSAN to have strong growth over the next ten years and to be a leader in its niche. He also anticipates that there will be a point in time when NexSAN looks for other ways to bring value to shareholders beyond their current products by immersing themselves in a new opportunity.

Enterprise Storage Group, an independent research firm, said that the space NexSAN occupies is extremely viable. As more companies look to recover critical information quickly, not only back up data inexpensively, they expect to see multiple players in this space providing disk-to-disk [D2D] recovery products creating a strong market place for NexSAN to offer its solutions.

Shelley Souza
Contributing Writer & Co-founder Tugboat Technologies

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