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How Fusion-io Improves Companies' Memory

Rick White was having a hot dog with his kids in Salt Lake City when his cell phone rang. "Hi Rick. It's Michael," the caller said. It was fall 2007, and White's company, Fusion-io, had just come out of stealth mode. In the weeks since his startup's debutante moment at the DEMO conference in San Diego, White had been getting calls from venture capitalists and potential customers wanting to know more about his innovative approach to data storage. But he didn't recognize this voice.

"He said he was impressed with what we were doing and he wanted to fund us," White recalls. "I was still really confused, so I finally asked him: 'Michael, you're with…?'" The response? Dell (DELL). The caller was, in fact, Chairman and Chief Executive Michael Dell, and he was dead serious about plunking some of the computer-maker's cash in Fusion-io. "I thought it was a joke at first, and I tried to think of a smart-aleck response, but I couldn't," White says. "I'm glad I didn't."

Since then, Fusion-io has become only hotter. Hewlett-Packard (HPQ) and IBM (IBM) both offer Fusion-io components in build-to-order servers. Steve Wozniak, who co-founded Apple (AAPL), joined as an adviser and now is chief scientist. And BusinessWeek readers, in an online poll, just voted Fusion-io the No. 1 innovation up-and-comer in the world.

Cheap, Transferable Data

Fusion-io's plan is nothing less than to overturn the way data are stored at large corporations. Its tool is the same technology you carry in your pocket or bag every day—flash memory chips, the tiny circuits inside MP3 music players, smart phones, and USB flash drives. Fusion-io crams a lot of these chips onto a card. Insert the ioDrive card into a garden-variety Web server that costs tens of thousands of dollars, and you end up with a server that performs much like a high-end storage area network (SAN) that costs tens of millions.

While SANs are commonplace today—used for large-scale databases of constantly updating information—they have one fundamental flaw: In order to make them fast enough, you have to buy 10 times more storage capacity than you have data. The reason: Only a small section of the drive's platter is used to store data; the rest is needed to speed along storage and retrieval. It's as if only a short song were recorded on a single LP record, while the remainder of the side and the entire flip side were empty.

"You spend all that money for all this storage infrastructure, and in the end you use maybe a 10th of its capacity," says David Flynn, Fusion-io co-founder and chief technology officer. "If you need to hold a terabyte worth of data, you have to buy 10 terabytes worth of disks in order to get the performance you'll need. If it's 10 terabytes you need to store, then you have to buy 100 terabytes. It's crazy."

Nonetheless, SAN sales came to $12.4 billion last year, estimates tech-market researchers IDC in Framingham, Mass. Among the biggest suppliers are IBM, EMC (EMC), and NetApp (NTAP).

White and Flynn got their idea for Fusion-io from Sony's (SNE) Playstation 3. The 2005 gaming console came with a revolutionary chip called a cell processor, which had been built by IBM, Sony, and Toshiba (TOSBF). Had PS3 come out a decade earlier, the two men reckoned, it would have been considered one of the world's top supercomputers. This led to talk about the processing power inside wireless phones. What would happen, they wondered, if you took the chips from 100 to 200 phones and put them in a single computer? Not much, it turns out—these microchips aren't very good at the kind of math that supercomputers do.

Early Brainstorm

Supercomputing is a subject both men know well. White, 39, had founded Phobos, which built computer network systems, and sold it for $318 million to SonicWall (SNWL) in 2002. That followed the 1992 sale of his first company, a memory-module maker called Omni Systems, which he started fresh out of high school. Flynn, 40, had worked at Linux Networx, which built a supercomputer for the Los Alamos National Laboratory that in 2003 was named one of the 10 fastest in the world. A graduate of Brigham Young University, Flynn was building 3D flight simulation and image-processing software for the U.S. Defense Dept. at the age of 16.

Days after their first brainstorm, Flynn called White. Instead of the processing chips inside cell phones, he asked, why not aggregate their data-storing flash memory chips? It was the central point of Clayton Christensen's 1997 book The Innovator's Dilemma, which argued that flash memory would one day invade the core of the hard-drive industry.

And so it has, as the chips have become faster and cheaper. Laptop computers are now offered with solid-state drives that use flash vs. conventional hard drives. Apple's iPod family, which first used hard drives to store music and media, now employs flash memory in all its products with only one exception, the iPod Classic. Apple, in fact, is now the world's largest purchaser of flash chips.

Flash chips have other advantages over hard drives beside speed. Since flash chips don't spin, they don't require as much power as hard drives. They also don't generate as much heat, and so there's less need to spend money air-conditioning a data center of computers.

Quick Converts

White and Flynn opened for business in 2006. They financed Fusion-io from their own savings and operated out of office space borrowed from a friendly computer-science professor at the University of Utah. Early on, several employees worked for little or no pay. Today, its 150-person staff includes former employees of Micron Technology (MU), which operates a chip factory in nearby Lehi, Utah, and StorageTek, a Louisville (Colo.) storage firm now owned by Sun Microsystems (JAVA).

Investors were initially hard to find. "No one got it at first, White says. "No one except potential customers who tried early versions of the product." Potential customers were often easy sells. "We demonstrated it to the CTO of a major financial firm, and he saw the benefit after about 30 minutes," White says. It took longer to win over financial backers. In addition to the undisclosed investment from Dell, venture capitalists New Enterprise Associates invested $19 million in early 2008, adding Fusion-io to a portfolio that includes TiVo (TIVO) and WebEx (CSCO). was one of Fusion-io's early buyers. The online retailer used Fusion-io's ioDrive to fix an order-fulfillment system that was getting clogged every holiday season. CTO Geoffrey Smalling says its old system, based on hardware from NetApp, was able to process 700 simultaneous inputs and outputs per second (IOPS), a key metric for SAN hardware. An upgrade, he was told, would have cost $100,000 to boost performance to 1,800 IOPS. For the same price, he purchased six ioDrives and saw performance soar to 86,000 IOPS.

Flynn says Fusion-io can promise everyone else similar gains. "Our stuff is displacing about 10 times the cost of your typical disk array gear," he says. "When we sell $1 million of our stuff, we're displacing $10 million of someone else's stuff." No wonder orders are doubling and tripling every quarter, and SAN vendors like EMC and NetApp are turning to flash-memory products, too. "It can be stressful for a company our size, but it's good situation to be in," Flynn says. Finally, everyone gets it.

Hesseldahl is a writer with BusinessWeek Online in New York .

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