After five years running one of the Web’s first social media sites, I decided to jump to an enterprise startup focusing on data storage, a decision that shocked many of my friends in the consumer Web sector. In a world where sexy companies like Facebook and Twitter become overnight successes, why go to something as boring as enterprise storage? Building and selling to the enterprise–the thinking goes–involves long, painful development and sales cycles, not to mention interminable trips to customers who inconveniently chose to locate far from Silicon Valley in places like Mankato or Bentonville. There are some rational reasons. Enterprises spend over $300 billion a year on IT, vs. the roughly $25 billion spent for all of Internet advertising. And those pesky customers tend to have real problems–that they are willing to pay real money to solve.
I must confess, however. The real reason I moved is that the enterprise is looking very attractive to me again. And storage? It’s now downright sexy. What makes a startup sexy? (Hint: it’s not the developers who have been coding for months, subsisting on ramen and Diet Coke, and basking in the warm glow of their monitors.) First, the startup should be attacking a big problem in a large and growing market. The amount of digital data created is growing 60% per year. In 2010, we’ll create enough data to fill a stack of DVDs that stretches to the moon. All that data needs to be stored somewhere, which feels like a bigger problem to me than designing a slightly better way to tell people about my favorite sushi spot.Market size isn’t the sole factor. The market also needs to be poised for a period of creative destruction–where established players, economics and technologies undergo cataclysmic change, making it possible for smaller and nimbler startups to compete. It is much easier for tiny, egg-eating mammals to prosper when the dinosaurs are getting knocked off their feet by asteroids. Similarly, it is only possible for a company like Google ( GOOG – news – people ) to upend the advertising industry when everyone is networked and the cost of publishing has dropped to near zero.
The consumer Web appears to be in a constant state of creative destruction. In the perception of the venture capitalists on Sand Hill Road, Microsoft ( MSFT – news – people ) was beaten long ago by Google, which is itself losing to Facebook, which in turn will be crushed by Twitter, shortly before Twitter is annihilated by FourSquare. At its logical extreme, this inverted food chain has an organization with $18 billion in annual profits ending up in the belly of a company with an unproven revenue model and less than 50 employees.
Such periods of creative destruction are less common in enterprise markets, but are stunning when they occur. We’re in such a period now. Beyond contributing to massive data growth themselves through things like YouTube videos and Facebook photos, those cool consumer companies have shown that is possible to run on a massive scale by virtualizing all of your applications and running them on open-source software (e.g. MySQL and Linux) deployed on inexpensive, commodity hardware. The rest of the world is now following Google’s lead in the design of data centers. Next generations companies like Salesforce.com ( CRM – news – people ) and Red Hat ( RHT – news – people ) have built multi-billion dollar business by serving that need. They’ve largely done this by sidestepping the traditional enterprise model–with its long sales model, difficult licensing schemes and painful deployment processes.
This revolution in computing has created the conditions for a similar revolution in storage. I think it is inevitable that the storage world will not only have to adapt to support the new computing environment, but also will inevitably end up looking like it. In other words, storage is about to become open source, virtualized and standardized. That’s bad news for incumbents who make billions on proprietary storage hardware, but great news for an open-source, software-only storage company.
Furthermore, it’s now possible to build an enterprise company that runs like a consumer startup. Just as Facebook’s success is driven by its 500 million users, open-source companies are driven by their community of users and developers. By being willing to cede a little control and give value back, a tiny company like ours can effectively acquire a global staff of thousands of developers, testers, marketers and salespeople. This radically shortens both development and sales cycles. Over 95% of Gluster’s sales now happen over the phone, from prospects who heard about us from other passionate users, who successfully piloted the product for free in their labs and who have come to us ready-to- buy as they go into production.
This model is very capital efficient. And, it involves a lot fewer trips to Mankato. Which is great, because no matter how sexy the startup, it is very hard to look that way after an eight-hour red-eye.
Ben Golub is the chief executive of Gluster, an open source clustered storage company. He was formerly CEO of Plaxo.