Q&A with Pete Manca of Egenera

By Pete Manca (Profile)
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Wednesday, February 15th 2012
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VSM: What is Egenera’s history?

PM: Egenera was founded in 2000 with a combination hardware and software vision. Egenera was going to take on the Intel/Linux world with its own flare. We didn’t know what it was called then – Utility Computing, On Demand Computing, etc., but it sure was an interesting concept.

The idea for Egenera was born from Vern Brownwell, the former CTO of Goldman Sachs, who was frustrated at how long it took to deploy an application. Vern thought of the concept of having all of these provisioning tasks pre-wired, and deploying an application became as simple as sliding a server to a rack and presto, you’re up and running in a matter of minutes.

Within the first five years of selling the product, we attracted world-class talent and reached $100 million in sales. However, a funny thing happened along the path to greatness. The year we had our highest revenue, we also had our biggest net loss. The business model was flawed. It was heavily dependent on expensive R&D, expensive direct sales, and a business model that required 50+% margin on Intel servers, which was not realistic in the long term. Amazingly, we were able to keep our margins high because of one thing – our software called PAN Manager.

VSM: When did you realize you had to make the transition from hardware to software company?

PM: It was clear that our software was really what made the hardware tick. The hardware itself, while innovative and fast, was basically a well-put together blade server leveraging x86 processors. It had some unique differentiators but not enough to separate it from the large vendors as they entered the blade market in the mid-2000’s. As our hardware differentiation eroded and the price required to build the next generation BladeFrame hardware platform escalated, Egenera was at a crossroads. We had a substantial business but could not stem the losses due to overhead of building and maintaining a hardware business.

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. It always was the magic that enabled the BladeFrame to be unique in the market. Today, PAN Manager is our flagship converged infrastructure management product and is built on Egenera’s breakthrough approach to computing fabrics. The product itself is available on multiple hardware platforms, and is compatible with all leading SAN vendors. The software combines the simplification benefits of unified computing with integrated high availability and disaster recovery services for physical and virtual servers.

VSM: How long did the transformation take and would you consider it successful?

PM: The transition lasted about two years and Egenera exited 2011 with its eighth straight quarter of profitability and more than 400 percent revenue growth for its PAN Manager software compared to the previous year. Since the transition, Egenera also doubled the software customer base and now counts over 500 customers and thousands of implementations worldwide. PAN Manager currently supports hardware from Dell, Fujitsu and HP; with NEC coming soon. From a storage perspective we are certified with 3Par, Dell, EMC, Fujitsu, HDS, HP, IBM, NetApp and others.