Ed Note: Phil Soran, Co-Founder, CEO and Chairman of Compellent, one of the hottest young companies in the IT industry, sat down with Storage Analyst and Wikibon.com CEO David Vellante on Siliconangle TV at the recent VMworld 2010. They talked about how Compellent’s vision has become a reality.  Watch it here.

Interview with Compellent CEO Phil Soran, Live from #theCUBE

David Vellante: Phil you have done an amazing job — starting several companies amazingly in the middle of the country. You don’t think of that as a hotbed of IT but there’s a lot of talent out there, isn’t there?

Phil Soran: I actually think it is a competitive advantage. There’s a big competitive advantage to being in Minneapolis. In the old mainframe days you had IBM and the “BUNCH”. One of the BUNCH was headquartered in Minneapolis. There’s a lot of innovation that happened there. One of the big ones was CDC — Control Data Corp. — that would fund entrepreneurial companies inside the company. I’m not sure the venture community got well established in Minneapolis, but the engineering community sure did. We’ve been able to take advantage of that. The quality of talent we have, they’re more loyal, more affordable. All the engineers we started with we still have at Compellent; they don’t pop around they way they might out here in the Valley. And just the quality they come out with, this enterprise-class architecture is a real differentiator for them.

A lot of the storage [vendors] come out there. All of Seagate’s high-end enterprise drive division, all that’s done out there; the old Veritas operations; CNT, the old Channel Network company; Network Systems. There’s a lot of ecosystem for storage talent.

David Vellante: You know I’m from New England and you remember the days of DEC and Wang and Prime and DG, and then we had some tough times back there. But now entrepreneurs like yourself have put together teams of talent, and they’re really sharp people, they’re loyal, and they’ve created a lot of value for customers, for investors. So maybe take us back to the early days of Compellent. I know Larry Aszmann [Compellent co-founder and CTO] a little bit and have great respect for him and his team. Talk about the vision you guys had when you launched the company, because you’ve really seen it through, and I want the viewers to understand where you came from.

Phil Soran: Three of us founded the company: myself, Larry Aszmann as you mentioned and John Guider who’s our COO and also very visionary in the storage space. if you look at our backgrounds there’s a lot of storage DNA there. I go back to IBM and was a storage specialist there. They’ve founded other companies. They’ve done 11 storage subsystems in their careers, and all of them have been successful. They did the first blade servers back in the late ‘80s and early ‘90s. So there has just been a lot of innovation coming out of John and Larry’s brains, and here I get to take the ride with them.

Here’s what we saw: In 2002 a lot of things were happening in the world that influenced us. We had retired for a little bit and started meeting in our basement — in Minneapolis it’s too cold to start a company in the garage, you get frozen to death, so you have to go to the basement. But in 2002 9/11 had happened, I don’t know if you remember the great northeastern power outage, brownouts, for some reason there were a lot of weather events as well. Enron was getting going, and state of retention was getting bigger.

What we saw was an opportunity a lot of high-end functionality was not available to masses of companies. It was too expensive, hard to implement, in some ways maybe unaffordable. So what we said was we want to design a system that has twice the functionality of any system on the market, high end or low end, but do it in a manner that was 10 times easier to use and at a price that is affordable to the first-time centralized storage buyer.

And I think we hit the ball out of the park. Some of the core things we focused on were efficiency — we saw that the way storage was provisioned 70% was wasted. The other thing is that 80%-to-90% of their data was inactive — they don’t look at it for 30 days or more. So you have to take advantage of those phenomena and get the efficiencies down for them. I think we did it.

One other thing we did that was kind of unique that I think stands out: When we started the company we got a lot of press in Minneapolis because there wasn’t much going on the venture community then. We got covers of magazines and the front page of the business section, and we got a lot of interest — people, frankly, calling to ask, “Can we come and see what you’re doing?” A lot of them wanted to be part of it. Our first reaction was to give them what I call the “Heisman Trophy”, sort of stiff-arm them and tell them we are in stealth mode.

Then we realized we will want to talk to them later, so we had better bring them in now. We started the “3C”, the Compellent Customer Council. I thought we would have maybe 10 people on the 3C, we had 35. This was before we had product. We would meet with them every six weeks, tell them what we were doing, get their feedback. They told us where their pain was, where their inefficiencies were, and we came out much more on target because we listened to those customers.

David Vellante: The whole focus on simplicity. I left the storage business for awhile, was doing some software startups, and then came back. You guys were giving me a briefing and talking about tiering, and I was asking questions about your automated tiering, and I couldn’t believe it. I said if you can really do this, it will be a hot company, and sure enough.

Phil Soran: Think about having a volume or file where part of it is RAID 10, part of it is RAID 6 or 5, part of it is on solid state, part of it is on fibre, part of it is data dynamically moving based on performance and usage characteristics.

David Vellante: And the virtualization trend just fits perfectly. We don’t have a ton of time, but I wanted to talk a little about your business. You’re growing very well. Why is it that you are growing substantially faster than the industry, and can it continue?

Phil Soran: Last year we grew 38% year-over-year. I think our segment shrank about 5%. So that was a big market share winner right there.

We’re doing two things. One is our market share revenue growth is coming from two places. One is the growth of new customers we’re adding. Like last quarter for instance we had 182 new customers in one quarter. That’s substantial growth right there. And at the same time, if you look at our product revenue, 50% or so comes from existing customers.

So that says people like Heineken, once they get the product and like it and will migrate more and more of their data onto us because it is so much easier to use and so much more efficient. So our growth comes from if we can keep those existing customers happy and get the word out on out solutions. So we’re real bullish on the future there.

David Vellante: You must have seen a lot of interest with the whole 3PAR/HP/Dell thing. Is Web traffic over the roof? You’re stock has gone through the roof, so thank you 3PAR and Dell.

Phil Soran: It’s fun to watch. You and I go back a long way in storage. I remember when it was “snorage” — it was a disk drive or tape and that was all there was to talk about. It’s finally getting its due, getting some excitement and some interest, and it’s real good. i just look at the show floor and things people are doing with the cloud, storage architecture is real important. It’s not just buy a few disk drives and make it happen. You have to have an architecture that has the flexibility that they will need for this cloud environment.

David Vellante: And making it simple is hard.

Phil Soran: It’s real hard. There is the sophistication of what we do and then 90% of our customers say they spend less that three hours a week managing their SAN, and before that it was three people a week, so you better make it simple but do it they way they want it but in a way that’s very simple and automated.


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