Features - Enterprise Data Insights:

INKRA SCORES WITH IBM
By Eugenie Larson

Inkra Networks looks as if it's ready to play with the big guys: the data-center switchmaker announced recently that it has signed a multimillion-dollar contract with IBM Global Services.

IBM will deploy the Inkra 4000 Virtual Service Switches in data centers that offer its brand-new -- and highly touted -- e-business On Demand initiative. The computing giant, which has been talking to Inkra for the past year and vigorously testing the switches since August 2002, says it plans to use them to help offer customers a long line of security and performance services that have been customized for each customer's needs.

This is a huge step up for Inkra, which only three months ago announced its first customer, small service provider Savvis Communications Corp.

There's definitely nothing small about IBM or its e-business program. When Big Blue launched the initiative late last month, CEO Sam Palmisano called it the most important initiative IBM had undertaken since the advent of the Internet. The company has said that it will spend $800 million to market the services over the next year. Last week, IBM appointed Linda Sanford, previously general manager of its storage group, to head up the On Demand initiative.

Inkra aims to virtualize, and therefore simplify, the complexity of the data center. Instead of each customer in a data center maintaining its own dedicated equipment, Inkra's switches allow customers to turn on IP services through software commands. Using ASIC (application-specific integrated circuit) processors and software, the switch can create "virtual racks" for data-center customers. By using a feature Inkra calls HardWall, the switch ensures that each customer's virtual rack is inaccessible from other virtual racks.

While Inkra won't say how much it stands to make off the deal, executives admit that they're counting on millions. "This is huge," says Dave Roberts, Inkra's vice president of strategy. "This is the single largest contract that we could have hoped for at this stage. From our perspective, it's an absolute homerun. This is a huge legitimacy event for Inkra."

Industry analysts agree that the startup has scored a big win. "Inkra's landing some pretty impressive customers in a market that is difficult," says HTRC Group LLC analyst Greg Howard. "IBM Global Services doesn't do anything lightly. It's a marquee customer."

IBM already offers virtualization at the computing level, but says that for some time it has been evaluating what product and vendor to go with for virtualizing the network.

"We looked at some of our existing vendors today, but their products were more designed for individual customer use," says Michael Tilder, global operating executive in IBM's hosting services group. "Inkra's switch provides us with the ability to support multiple customers in a cost-effective manner and provide the security and performance [they need]... Nobody had the same expansive set of services that Inkra has."

HTRC's Howard isn't surprised that IBM settled on Inkra, pointing out that the company still isn't facing much competition. Nexsi, the only other startup with a product in this space, filed for Chapter 7 bankruptcy protection in April. And while big players like Cisco Systems Inc may have started embedding services onto high-end network interfaces, Howard says they still have a way to go before they reach Inkra's level of virtualization. "Virtualization is, in fact, a trend, and Inkra is the trend-setter," he says.

"This is a huge proof point," adds Howard. "I think it will raise some eyebrows and that [large networking vendors] will start looking at them as an acquisition."

Tilder says that Inkra's HardWall feature made its switches especially attractive. "Each customer is kept separate," he says. "They're not affected by problems on other customers' racks." IBM will use Inkra's Center Point management suite to track and manage the services it deploys to enterprise customers.