The rumors of the demise of COPAN were rampant in late 2009. There was broad speculation that general operations had wound down and that the company was maintaining a skeletal staff. It was clear that COPAN’s end was near and the management team was scrambling for an exit strategy. Most people assumed that the recent silence from COPAN suggested that the company had not survived.
It was in the context of this situation that I saw a tweet last night about COPAN being acquired. The first questions were who and for how much and the tweet suggested that the answers were SGI and $2 million dollars respectively. Wow, what an amazing decline. COPAN raised $124 million dollars in multiple financing rounds and they exit the market at a $2 million valuation.
COPAN focused on MAID (massive array of idle disks). The technology allowed them to spin down unused disks to reduce the power and cooling requirements. The design included proprietary highly dense disk packaging that provided the densest storage in the industry, and actually required some datacenters to specially reinforce their flooring. They focused on $/GB and said that they offered the lowest in the industry both from an acquisition and operational cost standpoint. All of this sounded compelling from a marketing perspective, but the reality was different.
COPAN’s technology was optimized for storage density and green-ness, and not for performance. Their initial route to market was to sell a VTL appliance through an OEM agreement with FalconStor. The difficulty is that the limiting factor for many backup environments is speed. Companies must ensure that they are meeting their backup and recovery requirements and performance is typically the key element. COPAN’s positioning of “very green, but not very fast,” did not resonate. Of course, customers with specific power and cooling limitations were interested, but this represented a fraction of the market. In my opinion, this positioning error and architecture limitation limited initial adoption.
The advent of deduplication became another huge problem for COPAN. Deduplication can be highly I/O intensive and often requires high performance disk systems. In fact, some vendors even require Fibre Channel disk drives for performance. COPAN’s architecture did not align with this technology trend. They did not have the I/O performance for deduplication and their message of space, power and cooling savings was being echoed by deduplication vendors. They tried to remedy the situation by including non-COPAN disk as storage for the FalconStor deduplication landing zone, but that clearly was not a winning solution.
The other area COPAN tried to address was the archival space. They partnered with Quantum on the StorNext file system and positioned their platform as an archival target. Unfortunately they were unsuccessful in this endeavor as well.
The core problem with COPAN is that they made a bet on a technology that did not address a primary customer market pain. End users appreciated the power and cooling benefits of the solution, but that need was secondary to the real requirement of backup and recovery performance. Deduplication technology further eroded their position by bringing substantial power and cooling benefits to traditional disk platforms. COPAN was stuck with a proprietary MAID technology with a limited market opportunity. The result is that COPAN’s technology became irrelevant due to deduplication and more recently disk spin-down technologies, and this was reflected in the company’s dwindling financial performance. SGI is now the owner of COPAN’s technology and it will be interesting to see how they bring it to market.
The key lesson is that success depends on addressing real customer pains. COPAN tried to build a business on a feature, power and cooling efficiency, while customers wanted a solution to their real backup and recovery pains. This disconnect resulted in a solution that was not well aligned with the market and hindered COPAN’s success. If you are an emerging vendor, you must thoroughly understand the markets that you address and focus your product on solving customer pains. Anything less will inevitably lead to failure.