ASTI Sees Promise in Plasmon’s UDO Technology
August 18, 2009 Alex Woodie
When Alliance Storage Technologies Inc. (ASTI) purchased the remainder of Plasmon’s assets in a fire sale early this year, the company knew it faced a tough challenge. After all, Plasmon had the exclusive rights to the technology underlying the Ultra Density Optical (UDO) storage format, but it couldn’t make any money. Today, nearly nine months into the recovery, ASTI executives are confident they can continue to design, manufacture, distribute, and service Plasmon’s UDO technology, and not go broke along the way.
Plasmon’s financial troubles started long before the company was placed into receivership by the British government earlier this year. Costs had been outpacing revenue for years before the company’s board ousted CEO Nigel Street in 2007. Street, by all rights, deserved a lot of credit for spearheading the UDO format, which has been adopted by a good number of IBM iSeries and System i shops since its debut in 2004.
But when the expected revenue didn’t materialized and debt started to rise, the board brought in CEO Steve Murphy to turn the ship around. Unfortunately for Murphy, the ship was already doomed. A last minute financial deal arranged by Murphy to get enough working capital to fund the turn-around last fall ran head-long into the global financial meltdown. After declaring the U.K.’s version of bankruptcy, Plasmon’s biggest debt holder, Silicon Valley Bank, decided to chop Plasmon into bits and sell them to the highest bidder.
As it turns out, ASTI was the only bidder in an auction for the whole company, and Silicon Valley Bank decided to take that approach instead of selling individual pieces. The auction netted ASTI everything of value that Plasmon had–its patents, copyrights, and associated intellectual capital; its facilities and manufacturing equipment; and its inventory.
The haul allowed ASTI to ramp up production at Plasmon’s old manufacturing plant, which is actually a fairly new building in Colorado Springs, Colorado, with a view of Pike’s Peak. “We’re the exclusive manufacturer and distributor of all Plasmon optical libraries, including drives, library, media, and parts, and right now we’re manufacturing and shipping all of the products worldwide,” says Chris Carr, CEO and president of ASTI, a partner of Plasmon’s that is also based in the Colorado Springs area.
The less tangible assets of Plasmon’s business model, namely the relationships with employees, customers, distributors, suppliers, and other business partners, including IBM, required careful handling. Carr and his executive team have made headway on most fronts, including re-hiring key individuals at Plasmon and re-establishing relationships with suppliers.
“We have retained some of the key people [and] we’re still actively pursuing some of the other key individuals,” Carr says. The company is also close to announcing a new re-seller and support program that allows business partners to get access to parts and software to support UDO customers.
The company has also introduced a maintenance program to help the thousands of Plasmon customers who got the proverbial shaft when the company went south, leaving them without coverage after paying thousands in annual fees. That will not endear some customers to ASTI, which carries on the Plasmon brand and operates the www.plasmon.com Web site. But it’s important to note that ASTI is under no obligation to honor those old contracts, which were liabilities, and not assets, and therefore not part of the sale.
Carr understands there may be some hard feelings. “There’s a program we have in place to award some sympathy for these customers that got stuck with service contracts that were not fulfilled,” Carr says. “Based on the amount of time that they were under contract, that they had paid for, we have different levels of discounting in our plans, to help offset the additional maintenance fees they would have to pay.”
More work is required to rekindle the relationship with IBM, which was OEMing a version of Plasmon’s G-Series optical library and reselling it to the iSeries and System i installed base as the Model 3996 before IBM ended sales in late 2008. There is not much hope of re-establishing the OEM relationship, as both IBM and Plasmon realized the sales volume of the 3,996 was not high enough to warrant the OEM agreement.
But both companies realize the importance the UDO technology has to System i and Power Systems customers, particularly in heavily regulated industries like healthcare and banking. In those sectors, demand for UDO products is high, ASTI officials say, because no other storage technology guarantees the 50-year lifetime of its media, or can deliver “true” write once, read many (WORM).
Before Plasmon imploded, the company was in talks with two IBM groups, including the storage team and the Rochester System i division, says Tim Summers, who was Plasmon’s chief technology officer and is currently vice president of product development at ASTI.
“The iSeries group was much more interested in that relationship than the back-up group,” Summers says. “In fact, at the time, we were doing development work on the libraries to add Fibre Channel support, to support the newer iSeries boxes that were going to be coming out.”
IBM was also interested in working with Plasmon to develop a new storage architecture for using UDO the System i. The system would utilize a central UDO appliance that could communicate with many attached processors, similar to what IBM’s mainframe group does with the Systems Complex, or Sysplex.
None of the development work was finished, leaving SCSI–which is not supported on current System i iron–as the only way to connect a System i server to ASTI’s optical libraries. However, ASTI does have an agreement with IBM to support existing G-Series and 3996 customers. “We’re actually working with IBM very closely to fulfill all their needs for the next five years for every part, including engineering and firmware,” says Bryan Engstrom, ASTI’s director of worldwide sales.
If there’s one thing that’s clear at ASTI, it’s that the company believes the UDO platform is very much alive and kicking.
“Frankly the characteristics of the media–true WORM, the reliability and track record of the product itself–drives customers back to us,” says Bill Gallagher, director of strategic accounts and regional sales. “I don’t know what their feeling is on tape. But ultimately I do believe our clients feel secure knowing their information–those things that are really relevant for an archive, whether its statuary requirements, regulatory compliance, corporate governance, or litigation–is stored on a true WORM device such as UDO.”
What happened at the Veteran’s Administration during Hurricane Katrina was truly a disaster, as Plasmon case study (now an ASTI case study) shows. The fact that UDO cartridges were recoverable attests to the media’s durability. “They said we’re the one true bucket-tested media, because we’re the only thing that really recovered from that disaster,” Gallagher says.
The UDO roadmap is also alive and kicking. Summers and his group have developed a prototype of a third generation of UDO technology that will double the storage capacity of UDO2, taking it to 120 GB per cartridge. “Most likely it’s about two years away,” Summers says. “Most likely in the 2012 timeframe.”
Had Plasmon not devolved into a “lifestyle” company, as Carr calls it, and maintained a focus on developing the products and serving customers, the company could have thrived. UDO sales were actually going up at this time last year, and for the year, Plasmon recorded $60 million in revenue. (The problem, of course, was the $80 million in costs).
“Plasmon got themselves in a little bit of a downward spiral, with very high cost structures and issues,” Carr says. “Today Alliance Storage Technologies is building a foundation block that lowers cost structure, to be able to take this proven technology forward. Since January, we’ve been looking at what Plasmon did, the processes they had in place, and analyzing them, step by step, to make sure we have a structural foundation as we rebuild what’s left of the Plasmon assets.”