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February 20, 2012

Unified Computing Pioneer Transforms Business Model

Tiffany Trader

A pioneer in unified computing, Egenera has been selling its BladeFrame hardware and PAN Manager Software since 2001. The company was founded in May 2000 by a former Goldman Sachs CTO who developed the Processing Area Network (PAN) technology as a way to deal with growing datacenter complexity. The PAN Manager software, based on Processing Area Network (PAN) concept, simplifies datacenter infrastructure and management by pooling compute, I/O, network and storage resources.

Pete Manca, EgeneraA Q&A with Pete Manca, CEO & President of Egenera, in Virtual Strategy Magazine, explores how the company has evolved to stay competitive.

“Egenera was going to take on the Intel/Linux world with its own flare,” Manca states. “We didn’t know what it was called then – Utility Computing, On Demand Computing, etc., but it sure was an interesting concept.”

After just five years in business, they had made over $100 million in sales, but as Manca explains, the year that they achieved their highest revenues was the same year they experienced their biggest net loss. He cites a flawed business model, one that was “heavily dependent on expensive R&D, expensive direct sales, and … required 50+% margin on Intel servers, which was not realistic in the long term.” Despite this, there was a saving grace, which allowed them to maintain a high margin, and that was their software offering, PAN Manager.

The company realized that it needed to do something different. “We had a substantial business but could not stem the losses due to overhead of building and maintaining a hardware business,” Manca explains. In 2006, Egenera announced its intention to create a separate line of business in order to make PAN Manager available under OEM agreement to other server vendors.

“It was clear that the transition was going to be difficult – no other company had successfully made such a transformation before. It was also clear that PAN Manager was the crown jewel,” Manca tells Virtual Strategy Magazine. “It always was the magic that enabled the BladeFrame to be unique in the market.”

egenera logoThe strategy certainly seems to have paid off. In 2011, Egenera had its eighth straight quarter of profitability and more than 400 percent revenue growth for its virtualization management software compared to the previous year. Its software customer base has doubled to over 500.

Egenera PAN Manager Software is currently installed in over 1,600 sites globally, including major enterprise datacenters, service providers and government agencies. Hardware partners include Dell, Fujitsu and HP, and soon NEC. The company’s storage partners include 3Par, Dell, EMC, Fujitsu, HDS, HP, IBM, and NetApp.

When it comes to product differentiation, Manca is emphatic about the importance of quality of service. “With PAN Manager, customers can replicate their primary site quickly, exactly and consistently – right down to the smallest detail,” he says. “This fast, repeatable and verifiable recovery means that organizations can be certain they can reduce the risk and impact of infrastructure failures.”

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