25 New IT Companies to Watch

Today's Best Tech Deals

Picked by PCWorld's Editors

Top Deals On Great Products

Picked by Techconnect's Editors

The next generation of IT vendors has arrived on the scene. Driven by a tentative economic recovery that is seeing venture capitalists release a few more dollars to tech startups, and a need to create tools for the world of cloud computing and virtualization, a flood of young technology companies is hitting the market.

One startup you've never heard of might end up being the next Intel or Microsoft. Others may force changes upon established vendors that have gone stale, which will have to innovate themselves or purchase startups that have a brilliant idea the big guys haven't thought of. Still others may simply fade into the tech industry graveyard, never to be seen or heard from again

25 hot products from new IT companies|15 cloud companies to watch

At Network World, we've identified 25 IT startups that we think are worth watching. These startups have recently released their first products or remain in stealth mode, and typically have financial backing from venture capitalists.

Most of these startups, in one form or another, are attempting to fuel the shift from static IT infrastructures to virtualized data centers and cloud networks. Analysts say the biggest opportunities may be in software that can manage, secure and accelerate cloud-based and virtualized systems. However, a few brave companies are building new hardware products that compete against the Intel/AMD monopoly in the chip market.

The shift to cloud computing and virtualization is not unlike the shift from mainframes to PCs several decades ago, an era that saw the rise of giants like Intel and Microsoft but also the demise of several mainframe vendors not named IBM, says Zeus Kerravala, an analyst with the Yankee Group.

But predicting which new company will distinguish itself and join the class of IT giants, like VMware did a decade ago with innovations in virtualization, is nearly impossible. The window of opportunity will be short -- particularly in the hardware market -- because billion-dollar vendors such as Oracle, IBM, HP and Microsoft will jealously guard profit margins, and try to push out new competitors by swallowing them up or replicating what startups have created.

It's often easier for small companies to innovate, says Robert Armstrong, a financial analyst and senior columnist at Dow Jones Investment Banker. But established vendors are so good at marketing and sales, and IT customers are so conservative that "just having a better product" isn't enough "to break the iron grip of the incumbent," Armstrong says.

Network World's 25 New IT Company to Watch include companies that improve the performance of cloud-based applications and storage, add extra layers of security to e-mail and Web sites, accelerate network traffic, relieve the data access logjams that mar virtualization and other IT projects, create Amazon-like private clouds behind the firewall, and provide disaster recovery optimized for virtualized data centers. Others tackle the data center energy problem with software tools that monitor energy use, and new server chips based on low-power architectures.

One startup is even building its own LTE-based 4G wireless broadband network to fuel the next generation of smartphones for consumers and enterprise customers. That would be LightSquared, which has more than $3.5 billion in debt, equity financing and assets contributed by Harbinger Capital Partners, as well as deals with Nokia Siemens Networks and Nokia itself to build the network and devices for it. LightSquared services will debut next year in Denver, Baltimore, Phoenix and Las Vegas. Satellite coverage will extend nationwide, and the wireless broadband network is expected to cover at least 92% of U.S. consumers by 2015.

The data center energy crisis

Let's take a look at the rest of the 25 startups in more detail, starting with two vendors building server chips with the aim of solving the data center energy crisis: Smooth-Stone and SeaMicro.

Backed by plenty of venture capital and a $9.3 million grant from the U.S. Department of Energy, SeaMicro says its servers consume 75% less power and space than traditional machines. The SeaMicro SM10000, which goes for $139,000 and up, uses 512 low-power Intel Atom processors connected by a fabric that provides throughput of 1.28 terabits per second, along with a design that decreases the number of motherboard components by 90%. The servers are "specifically optimized for the workloads and traffic patterns of the Internet," the vendor says.

The stealth mode Smooth-Stone, meanwhile, has $48 million in venture funding and is building low-power alternatives to Intel and AMD chips that use smartphone microprocessors. Low-power chip development is frequently targeted at the mobile phone market, since the devices rely on short-lived batteries.

"It's not a proven concept yet," Armstrong says of using smartphone chips in servers. But there is a huge unmet need in the area of low-power servers, and while Intel and AMD are jumping on the bandwagon, the power problem has increased faster than expected, he says.

"The incumbent vendors have been less fast than you would expect in providing provide people with a solution to this problem," Armstrong says. "The limitation in many data centers at this point, in terms of ability to process information quickly, is not the computers -- it's literally the power cord going out to the grid. It's literally 'we can't get enough electrons into this room.'"

The data center energy problem is also being tackled by the likes of JouleX. With ISS co-founder Tom Noonan as its CEO, JouleX launched out of stealth mode at this year's Interop Las Vegas conference, with software that simplifies IT energy management by automatically discovering all network-connected devices -- from servers to HVAC and lighting systems -- and identifying opportunities for power savings.

JouleX makes it easier to monitor energy use because it doesn't require agents to be installed on every monitored device.

"There's not a business we're familiar with that is asking 'can we have another agent to install on our PCs and servers,'" says JouleX vice president of sales and marketing Tim McCormick.

Customers such as Siemens, Equifax and BMW have hopped on board the JouleX bandwagon, and why not? Noonan and partners sold ISS to IBM for $1.3 billion in 2006, and Noonan believes energy is one of the few IT issues that can rival security in its importance and scope.

Cloud security

But controlling energy use is far from the only major problem facing IT as it moves toward networks that are heavily virtualized and reliant on cloud-based services. Security -- no surprise -- is still top of mind, with IT pros surveyed by Forrester calling it the biggest concern preventing them from adopting software-as-a-service (SaaS).

Most startups will tell you security is baked into their product, no matter what part of the tech industry they're in, but a few of Network World's New IT Company to Watch are tackling cloud security more directly.

CloudFlare has built a content delivery network that acts as a cloud-based firewall, as well as a network traffic accelerator, blocking threats and limiting bots and crawlers to improve security and decrease stress on bandwidth and server resources.

CloudFlare wants to expand the market for CDN services by "bringing the performance and security tools previously available only to the Internet giants to anyone with a Web site," and has gained great interest since the launch of its public beta a month ago.

The CloudFlare network was on pace to serve 350 million page views and 25 million unique visitors in October, CEO Matthew Prince says. Despite its current focus on small Web site operators, CloudFlare is in discussions with enterprise users and plans to launch an enterprise-focused service in Q4 2011.

Another security-minded startup is Truedomain, whose cloud-based e-mail authentication service is designed to block phishing e-mails, protecting legitimate domain names from being used for fraud. Truedomain relies on industry standards like DKIM (Domain Keys Identified Mail), and SPF (Sender Policy Framework), and provides reporting and analytics tools "to give e-mail senders direct insight into e-mail authentication results, phishing and spoofing activity and delivery performance."

We've all dealt with spam, even if we haven't been taken in by a phishing attack or identity theft, so anything that cuts down on junk messages is a good thing. From a business perspective, a service like TrueDomain's could help large e-mail senders restore the trust consumers once had in them. We'll still be suspicious of poorly written e-mails from "eBay" and our bank, however.

One big area of concern regarding cloud security is storage, of course. For now, cloud storage may remain off-limits for the most sensitive data, but a startup called Oxygen Cloud -- a subsidiary of LeapFILE, a provider of secure file transfer technology -- is helping businesses use cloud services to securely share and collaborate on files. The Oxygen Cloud service, now in beta, lets enterprises build a "hybrid storage solution" combining different public and private clouds, while applying AES 256-bit encryption to data in transit both in the cloud and on local devices.

While Oxygen Cloud's standard service combines a Web-based platform with a desktop client, the company will also deliver its technology on local hardware through a partnership with Data Robotics. Oxygen Cloud is so named because the service supposedly "breathes life" into files.

Building the private cloud

Businesses that worry about the security or performance and availability of public cloud services are in some cases opting to build private clouds, which are generally defined as highly virtualized networks that allow the delivery of IT as a service, potentially with developers and end users provisioning their own resources through self-service portals.

Vendors tend to slap the private cloud label on any old IT product, but a couple of newcomers among our New IT Company to Watch have built private cloud software that may be worthy of the name.

Chris Pinkham, who led development of Amazon's Elastic Compute Cloud, is the founder of Nimbula, whose software automatically organizes virtual servers into an Amazon-like private cloud that operates behind the enterprise firewall. Nimbula Director, available in beta and slated to be generally available later in 2010, lets customers offer virtual machine instances in any flavor they like, from Linux to Windows, while setting policies that determine how much compute and storage capacity VMs can consume.

One of Nimbula's early customers, CIO Joubert Steyn of the Metropolitan Health Group, a health insurance company in South Africa, says he opted to build a private cloud because "South Africa is still quite bandwidth-constrained." Even for customers with enough bandwidth to use public cloud services, software products such as Nimbula Director can drive up utilization rates of existing in-house resources and improve services for developers.

Our second private cloud startup is the aptly named Cloud.com, which secured the highly coveted domain name for its launch in May of this year.

Available now, Cloud.com offers open source infrastructure-as-a-service software that helps service providers and enterprises turn physical and virtual resources into cloud computing services. The software, CloudStack, runs on top of the VMware, Citrix XenServer and KVM hypervisors, creating computing pools consisting of VMs, storage and networking capabilities, accessed through self-service interfaces for both administrators and users.

CloudStack is compatible with common cloud frameworks like Amazon's API, Citrix Cloud Center and VMware vCloud, potentially allowing portability of applications between private data centers and cloud. While the open source version is free to use, Cloud.com offers additional features and commercial support to paying customers, starting at $10,000 per year for five nodes. Cloud.com has some early support from Microsoft, as the two companies are collaborating on making Hyper-V compatible with open source cloud software.

Next page: Databases, storage, and virtualization

1 2 Page 1
Page 1 of 2
Shop Tech Products at Amazon