5 Questions With FalconStor CEO James McNiel - EnterpriseStorageForum.com

5 Questions With FalconStor CEO James McNiel

ReiJane Huai’s abrupt departure from FalconStor Software left the storage industry wondering what was next for the data protection software vendor. We now have some answers to that question. The interim CEO, James McNiel, has big plans for the company, including a major strategy shift and a new product that he believes will put FalconStor on the right track in the data protection market.

FalconStor (NASDAQ: FALC) took a public relations hit last September when Huai, the company’s president, CEO and chairman of the board, resigned from all of his positions with the company after it was discovered that “improper payments” had allegedly made in connection with one of the company’s customers.

In the aftermath, FalconStor named James McNiel, chief strategy officer, as interim CEO. In this interview with Enterprise Storage Forum, McNeil outlines how he plans to change the company’s strategy by engaging directly with corporate IT executives, his new tack towards OEM partners, and hints at the imminent release of a new data protection platform for the cloud.

Enterprise Storage Forum: What impact has ReiJane Huai’s resignation had on FalconStor?

McNiel: I was brought to FalconStor in December [of 2009] by the Board to help bring a little bit more of a customer focus to the company. The recent event, with ReiJane Huai stepping down, was obviously a sad thing. He is a huge contributor to the storage industry and certainly to this company, but it also creates a clean break and an opportunity.

Enterprise Storage Forum: What is your strategy for building FalconStor’s business going forward?

McNiel: Since the beginning, FalconStor’s customers have always been the OEMs – the EMCs and Suns of the world – and not the corporate IT executive. The company didn’t move rapidly into distribution, work to create a brand name or name recognition, or a branded channel. Most of the OEMs have come to the conclusion that they need to own their own technology, whether it be virtualization, deduplication, virtual tape, replication, etc., which puts FalconStor in a difficult position.

We will continue to have strong OEM partnerships, but, at the same time, we have an opportunity to build a loyal reseller channel. We have to change our customer focus and start speaking a different language.

Enterprise Storage Forum: How are your partners reacting to the internal changes and the shift in strategy?

McNiel: The discussions we’ve had with our OEM partners have been really positive. The most important thing to them is an assurance that the products they buy from us and resell are of the highest quality. We are in the process of going through a fairly significant audit process to make sure of that. Is that to say that we didn’t make sure of that in the past? Yes, that’s what I’m saying.

In the past, we may have let some [technologies] get out before they were fully vetted. That might be too harsh, but the reality is that we are a heterogeneous company and we have not done as good a job as we could have. Our number one priority today is to deliver the highest quality products in the industry.

Enterprise Storage Forum: Will FalconStor’s product/technology roadmap change?

McNiel: Some of the best products are very simple. The [conversation] has moved beyond files and blocks and it’s now about the service. The industry is shifting gears and moving towards the concept of service-oriented data protection. To achieve that, the next generation of data protection solutions need to understand the relationships between various components that collectively comprise those services.

Eighty percent of what we are talking about our resellers and customers are doing today, but they are doing it without the benefit of a management layer. The other 20 percent that is missing is what is really required to make this type of product easy to deploy and sell into the channel. Apply that same challenge to the cloud. If I’m going to provide disaster recovery and business continuity services on a cloud basis, I’m going to have to manage hundreds of independent enterprises from a single pane of glass. Meaning we have to have a multi-tenancy approach.

Our goal is to let the customer define the service and the functions they want to apply to that service and give them the ability to do it themselves. We will be announcing a new product, code named Bluestone, in the first half of 2011.

Enterprise Storage Forum: How do you view the competitive landscape ahead of you as you shift towards a more customer-oriented approach to selling your products?

McNiel: We see a blue water opportunity to completely change the way data protection is being done in the enterprise. I don’t have any interest in competing with the rest of the market in a level playing field. Backup is broken. Virtual machines break backups. The entire approach is flawed. The goal for us is to deliver next generation, services-oriented data protection. The wood behind that arrow is in the transport – the ability to move the bits. There is nobody in the industry that can move data more efficiently or faster than we can.

It’s not rocket science. Why do people buy Macs? It’s because they are easy to use, they work, and they don’t go blue screen on you every two days. We’re going to get there by listening to customers. They’re very smart and are the only ones who have taken the time to understand the capabilities they need [in a data protection solution]. I’m getting good advice.

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