Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Storage Start-Up Egnyte Lands $10 Million, Launches Hybrid Cloud for iPad

You can’t help but admire Vineet Jain’s guts. A few months ago he was an iPad skeptic, convinced that Apple’s wonder device seemed a bit of a fad and that at most it would turn out to be a device largely devoted to media consumption. Now he’s got such a heart full of iPad religion — in part because his customers love it so much — that his company, Egnyte, went so far as to announce an app for the iPad 2 a full day before Apple itself was expected to announce the device’s existence.

You can probably forgive his enthusiasm. You see on the same day Egnyte, which sells what it describes as a hybrid cloud storage service for enterprises (more on that in a moment) landed a $10 million B-series funding round from Kleiner Perkins Caulfield and Byers, joining prior investors Floodgate and Polaris Venture Partners. The investment is coming from Kleiner and from its iFund, the $200 million fund set up in partnership with Apple to encourage development of software and other things around the iPhone and iPad. That fund is managed by Matt Murphy. All this amounts to something of a conversion for Jain. We talked yesterday about Egnyte and its mission, and why he loves the iPad now.

NewEnterprise: So what is Egnyte?

Vineet Jain: When I started Egnyte, we launched our first product in March of 2008. We were looking to build a product for the small-medium business space. The problem we were trying to solve was to replace that physical file server, with all its associated overhead and other things that you need, like VPN for remote access, and external FTP for sharing large files. We combined all that that into an integrated platform. And quiet frankly when we first launched it, the word “cloud” wasn’t so hot. We called it an on demand file server. We didn’t even know we were building a cloud product.

But it’s not all cloud-based right? You call it “hybrid cloud storage.”

Correct. We realized early on that the cloud-based system can only go so far for something as data intensive as your entire file system, with huge amounts of data and lots of employees accessing it and probably from multiple locations. There’s three fundamental problems with that. One is latency. We were trying to replace something that has traditionally run on the local area network with something that’s in the public cloud. The other problem is offline access. What happens if for a few minutes my office loses connectivity, or the provider can go down? The third problem, which is more psychological, is the fear of going totally in the cloud, which is paramount for larger companies. There’s a sense of losing control of the data. So as a combination of these problems, after 14 months we introduced a product we called the local cloud.

I’ve heard of private clouds, but what’s a local cloud?

It sounds a little like an oxymoron. When you use cloud file storage solutions like Drop Box or Sugarsync, they don’t really scale beyond more than five employees because you can’t be replicating the same file 20 different times, and clogging up the networks and eating into hard drives. So we built this product for off-the-shelf network attached storage devices from Netgear and others like it that converted them into a group solution. We called it the office local cloud. Then last year, we built a generic engine, where a company would cloud-enable hardware from Dell and Hewlett-Packard or NetApp by deploying a virtual cloud appliance using VMWare. We called that the enterprise local cloud. But all in all, our view of the world is that for large enterprises, the hybrid cloud is the way to go because of the way the Internet is today.

So I see that your vision is working with a lot of large customers. Your Web site names customers like Intel, Cisco Systems, Ikea, Sears, Lexmark.

What’s interesting is that we don’t sell to the CIO or the IT heads of these organizations. They’ve actually come to us over the Web. The point is that we’ve managed to attract customers a much larger class of customer who wouldn’t normally sign up with a pure cloud-based solution. I’ll give you an example. We’re working with a company called Sugar. They’re growing like crazy. They came to us saying their servers were running out of steam. They started with 200 seats, but plus one local cloud appliance in their San Francisco office, and within a few months they added another in New York. If we didn’t have a hybrid approach we wouldn’t be attracting these customers. Our average revenue per user has gone up from $35 and now its closer to $57.

So it’s basically a combination of storage in the cloud and storage that’s on premise?

Correct. Here’s another example. We’re working with an investment company in the UK. They use about 140 people using it. But there were 30 people who worked in the finance department who were dealing with extremely large Excel files. They couldn’t edit these files live over the cloud because of the latency problems. Once they deployed a local cloud instance in each of their offices, they had an interesting dynamic where these 30 people are working with the locally stored versions of those large files. They get synced up into the cloud, and it’s a bi-directional sync, and the rest of the company is happily working off the files they need that are stored in the cloud.

So basically the ones who need the local storage get it and the ones who can work well enough with the cloud without experiencing latency can do that? And its all transparent however you use. The experience is the same?

Right. Both instances are synced up real-time. Not just the data but also folder access permissions. So if you have read-only access for some folder, you get the same level access whether its local or in the cloud. We replicate that without the user being aware of it.

So you’ve just announced an application for iPad 2?

I have to admit, I didn’t anticipate how popular the iPad would become in the enterprise. It’s been a real surprise. We’ve had a basic iPad app for awhile. In the last six months our customers have demanded the same level of access on the iPad that they get on the desktop. They want the whole thing. I was shocked. But I realized I’m an outlier. We had a client, an advertising firm, that wanted to do a 2,500-seat deployment with us. But they wanted a large part of their employees to be able to use mobile devices including the iPad. And they demanded that it had to work with all types of users including regular employees to administrators and business partners.

So is it safe to say you’re an iPad convert?

Absolutely. I was totally wrong about it.