STARTUP TO WATCH
Exponential Storage: Security Through Openness

Exponential Storage hopes to one day persuade the National Security Agency and other government bureaus to hire the company for its data storage network . Its focus on NSA seems to have potential: The agency already established that open source software can be made secure and uses it for some computer functions.

Three-year-old Exponential has yet to land a customer but executives said they expect to secure their first round of investor financing soon. The company's five founders developed a network using open source software that they believe would make storing large amounts of data -- from satellite images to patient X-rays -- easier and cheaper, Chief Executive Officer Wick Keating said.

Glut of Data

The data storage business is booming as more people use computers to collect documents, photographs and streaming video. What makes Exponential unique is that it combines open source software with a cluster architecture that uses a network of servers on the Internet to build pockets of data storage space.

The process is "leading edge," said analyst Benjamin Woo, vice president of enterprise storage systems at IDC, an information technology consulting firm in Framingham, Mass. Woo said Exponential's methods make data storage more flexible, and allows the customer to more easily expand its space when needed.

"The government is requiring that we store more and more data," Woo said.

A Mere 60 TB, for Starters

It took two years for Exponential to develop what it calls the right combination of open source software that makes its network capable of storing enough data securely. A patent is pending on the combination.

The company is aiming its product at three types of customers: health care, media and defense.

The product that Exponential hopes to persuade customers to support is a cluster of five servers that can each store 12 terabytes' worth of data. A terabyte is the equivalent of 1,000 gigabytes. An iPod with 160 gigabytes of storage, for example, can hold up to 40,000 songs or 200 hours of video.

With five servers, the product demo offers 60 terabytes' worth of storage, which is the equivalent of about 80 percent of NetFlix's inventory of 50,000 movies, Keating said. The network can distribute a multigigabyte video file simultaneously to thousands of users. Customers can order as many servers as they want depending on how much data they need to store. The data are stored on the servers' disk drives.

Both Open and Secure

Open source means the software's programming code is free and available for anyone to use and modify, and often can be downloaded from the Internet. Users customize and encrypt the programs to make them secure.

The NSA and Defense Department have embraced open source security software to guard their networks. Columbia, Md.-based Sourcefire, which developed network security software from the open source community, has a number of government contracts to protect sensitive data.

The NSA declined to comment on whether it would use a product such as Exponential's, saying it doesn't discuss how its operating system works.

Plenty of Business

Big players such as Sun Microsystems (Nasdaq: JAVA) and up-and-comers such as Isilon Systems are already in the cluster architecture storage space, Woo said, but there should be enough business to go around.

Isilon spokesperson Jay Wampold said the government is an ideal customer for clustered architecture because customers can expand capacity when needed by adding more storage servers to the system. He said his company has a number of government clients but declined to disclose them.

Wampold said his Seattle-based company has avoided operating with open source software, saying it is difficult to manage. He hadn't heard of Exponential Storage but said there will be enough business to go around given the expanding need for storing more data.

Industry experts say the use of open source software among computer storage companies is growing. The Storage Networking Industry Association, which represents about 400 storage companies, is developing standards for open source storage software as a platform that everyone would be able to use.

'More Than a Trend'

Sun Microsystems, IBM (NYSE: IBM) and Cisco Systems (Nasdaq: CSCO) have formed a group called "Aperi" to develop open source storage management software. "The use of open source software is more than a trend," said Vincent Franceschini, chairman of the industry group. "It could become a strategic approach going forward."

With the proliferation of data-heavy Web sites such as YouTube , MySpace and Facebook , the computer storage industry's capacity needs will grow at a rate of 57.4 percent per year over the next five years, Woo said. At the same time, the cost for storage is coming down, at a rate of 33.7 percent each year. In 2006, the cost of storing a gigabyte of data was US$8, while in 2011, the price-per gigabyte will be less than $1, according to IDC's forecast.

Exponential's founders pooled their savings to start the storage company in 2005, a year after AMS, an IT consulting and integration company based in Fairfax, Va., where three of them worked, was sold. Keating had been AMS' chief technology officer. Exponential's only employees are the five founders.

Out of Stealth Mode

They said they are close to securing their first round of private investment, about $750,000. They also are searching for their first customer.

Last month, Exponential's founders threw a housewarming party at the Chesapeake Innovation Center, the state's homeland security incubator in Annapolis, more than a year after they moved in. Keating said the company wanted to stay "stealth" until its technology was far enough along that it would be tough for a competitor to copy it.

For Keating, it was not only important to establish the company's headquarters in Maryland to be near NSA and other federal government agencies. His ties to the state date back to the 1600s, when his ancestors settled on the Eastern Shore; and to the War of 1812, when his great-great-great-grandfather, Levin Winder, was governor.

He said Exponential will stay small, and rely on subcontractors to build servers and market them, and provide customer support. "We've projected healthy growth," Keating said. "But when you start at zero, it takes a while to be come a Sun" Microsystems.