iTera Says Business is Brisk

by Timothy Prickett Morgan

As I have said many times in the past, it would be tough to find a more aggressive and competitive market than that created by the makers of high availability and clustering software for the iSeries. It was a tough market in the 1990s, when there were three dominant players, and in the 2000s, with a half dozen players, it is even tougher. But the increasing competitive pressures are expanding the use of HA software among iSeries shops, and this is good news for all HA players.

iTera was one of the upstarts that took on DataMirror, Lakeview Technology, and Vision Solutions several years ago in the iSeries HA software market with its Echo2 software. iTera has been pricing its HA software very aggressively, and has attained significant traction in a market where only 4,000 or so customers are doing full-blown high availability (not just data replication to a remote system, but real rollovers to hot spare servers from production machines). The aggressive pricing of Echo2 and its product feature set has forced the more established HA players to get more aggressive with product pricing and deliver more granular products that address different HA needs at different price points. And while each of the HA players will grouse at being compared to the others in this story, the fact remains that they are now all able to chase a bigger potential iSeries market, not just the crème de la crème of sites. This is good for the iSeries, it is good for all the HA players, and it is--most importantly--good for iSeries shops.

iTera, which is based in Salt Lake City, is a privately held company (as is Lakeview and as was Vision Solutions before it was acquired by Idion Technology Holdings, a company based in South Africa). As such, iTera does not have to talk about its financial results. But because it is an upstart iSeries HA vendor, it most certainly wants to say something about its progress from a completely unknown company a few years ago to one of the established players. iTera is not, however, showing us its books, but rather some metrics that show its growth in the market.

"The days of iTera being seen in the market as a second-tier high availability vendor are over," said Dan NeVille, iTera's president in a statement outlining the company's progress in 2004. NeVille was unable to attend COMMON a few weeks ago, but I talked with Rick Ayres, vice president of business development at the company, about how business was going.

Ayres said iTera's revenues were up 200 percent in 2004, and for those of you who get confused about percent change, that is a tripling in sales from 2003's levels. Ayres was not at liberty to say how much software and services iTera booked in 2004, but he did say that according to the company's calculations, sales of the Echo2 HA software pushed nearly $20 million in iSeries hardware sales last year. Because iTera is a very competitive player in a very competitive market, the company was quite proud of the fact that it started 2004 with 250 customers and added another 500 customers in 2004. Ayres said about one-third of the customers signed in 2004 were competitive replacements--specifically mentioning a competitive win against Lakeview at retailer Target and one against Vision Solutions at building products manufacturer Georgia Pacific. Competitive replacements are always the big talk in any market, but the fact remains that two-thirds of iTera's sales were to sites that had never installed HA software before. Personally, I think this is much more interesting, and I would bet that this is why IBM is giving iTera fair treatment compared to the other HA players after being hesitant to do so at first. (For instance, iTera's resellers now get many of the same value-added discounts that the other HA players get.) IBM wants new HA customers more than it wants the HA installed base to churn.

"The only thing we have ever asked for is for a level playing field," said Ayres. "We want to let customers bring in all of the other players into the circle, because we will then be in the game and we will win those deals," he boasts. Even if iTera has been able to win a lot of competitive replacements, only a small portion of any installed base is ever in play, and the more established HA players in the iSeries markets are not taking iTera's competitive threats sitting down. They have broadened their product portfolios and reduced their pricing to meet that threat.

Part of the reason iTera has been able to boost sales in 2004 is that it has more feet on the street in addition to a well-regarded HA product. Last year, iTera increased the size of its channel by 20, boosting it to a total of 85 resellers. Ayres said about half of iTera's sales (meaning revenue) go through these resellers, which is consistent with IBM's own share of iSeries sales. (Even though partners are involved with 85 percent of the deals, IBM controls about 50 percent of the revenue.) iTera's biggest reseller, according to Ayres, is MSI Systems Integrators, which is based in Omaha, Nebraska.

Now, of course, is the time for IBM and its iSeries HA partners to take it up to a new level--or, to speak more precisely, to take HA down to a new level. While iTera's Echo2 and Maximum Availability's NoMAX have spawned a new wave of innovation and aggressive pricing among the HA software vendors, as I have said in past discussions with the HA vendors, with IBM, and with the readers of this newsletter, what the iSeries base needs is for HA to become part of the system. Do not misunderstand me: I do not mean that IBM should buy one HA player and integrate its software into i5/OS. That would stifle the competition in the HA market that is driving innovation.

But IBM could, as I have suggested in the past, make HA software a pre-installed option as each i5 is manufactured. For big machines supporting large OS/400 workloads, IBM and its HA partners could sell pre-configured clusters after customers choose which HA solution they want--and do so before the machines leave Rochester. Also, because IBM puts governors on the i5 520 Express machines, and therefore leaves either three-quarters or half of the CPW processing capacity in the machine idle, there is an opportunity to make very inexpensive HA on these entry iSeries servers a marketing edge against Wintel, Lintel, and Unix platforms that do not offer transparent HA capabilities. To do this, IBM could activate a shadow partition on the i5 520 that worked behind the primary partition where they run their applications. Only the HA software could see and replicate data to that shadow partition and do failovers to it in the event of a software or human error on the primary partition. And, for those cautious entry iSeries customers who want true high availability, IBM could package up twin i5 520s in a cluster as well.

I mentioned these possibilities to John Reed, IBM's new director of client availability solutions for the iSeries line, while I was talking to him at COMMON. He said these were ideas worth considering. We'll see if the ideas bear any fruit.

iTera's NeVille has expressed enthusiasm for the idea of transparent and integrated HA, pre-configured on the iSeries, during past conversations with me. But he also said iTera expects its license sales of Echo2 to double by the end of 2005--so clearly he is not counting on integrated HA to drive iTera's business. What iTera seems to be counting on is expansion into Europe, where there are more iSeries servers than in the United States and fewer installations of HA software among iSeries shops. iTera will be focusing on the United Kingdom, France, Germany, and the Nordic region to boost its presence in Europe. In September, iTera hired Phil Davis, a former Lakeview executive in Europe, to be its own vice president of sales for the EMEA region.