LSI buys OnStor, VCs take Bath

In a continuation of the busy storage industry M&A
season LSI has snapped up midmarket NAS vendor ONStor for $25 million in cash. While
I'd consider selling DeepStorage Labs for $25 million a success; the venture capitalists
that put over $130 million into OnStor over its 9 year life it was just a way
to get away with something.

To me this is just another indication of how hard it is to
make money in the midmarket NAS business. 
On the one hand midmarket NAS vendors have to convince SMB customers
that their products are worth the extra cost over prosumer NAS boxes from Buffalo,
drive vendors Seagate and Western Digital, along with network vendors dLink and
Netgear not to mention EMC subsidiary Iomega.

Once they've cleared that hurdle, and entered the midmarket,
they have to convince the guy running 10-100 Windows and/or Linux servers that
he needs a dedicated NAS to replace the general purpose server he's been using
as a file server and that he shouldn't buy the Celerra or NetApp filer all the
enterprise folks are buying or a Windows Storage Server box from Dell or HP.

OnStor also tried for years to sell NAS gateways, which
makes sense to engineering types after all you're going to need block storage
so why not use a gateway in front of it and have a single pool of storage. Of
course the people that think that way are the same ones that will slap a server
running OpenNAS or NexentaStor in front of their Clariion rather than buy a
gateway.  Most NAS customers want their
appliances to come with storage so they have one throat to choke when it doesn't
work.