Storage-as-a-Service Specialist Zadara Acquires Compute Developer NeoKarm

‘Most of our customers are MSPs who use our storage internally to offer to clients who pay for usage. It’s software-defined storage. No Capex. They like not needing Capex and like our flexibility. And they ask us why we don’t also provide Compute as a Service,” says Zadara CEO Nelson Nahum.

Zadara Storage, a developer of software-defined storage technology used to provide Storage as a Service, has added a compute element with the acquisition this week of NeoKarm.

NeoKarm’s technology, which was acquired from Stratoscale after that company closed its doors in late 2019, provides an Amazon Web Services-compatible cloud system that, when combined with Zadara’s hardware and software, gives MSPs an on-demand private cloud fully managed by Zadara, said Nelson Nahum, co-founder and CEO of Irvine, Calif.-based Zadara.

“Most of our customers are MSPs who use our storage internally to offer to clients who pay for usage,” Nahum told CRN. “It’s software-defined storage. No Capex. They like not needing Capex and like our flexibility. And they ask us why we don’t also provide Compute as a Service.”

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Zadara, which already provides file, block and object storage along with flash-optimized block storage, considered that question for four years but did not have the bandwidth to invest in the necessary development, Nahum said.

However, he said, NeoKarm last year purchased the intellectual property of Stratoscale and relaunched the technology, and late last year Zadara saw the opportunity to partner with NeoKarm to offer a complete Cloud-as-a-Service stack.

“NeoKarm offers a 100 percent software product based on the Stratoscale technology,” he said. “We have been deploying it the same way with our storage. We sell everything as a service. We provide the software, the hardware from Supermicro, and managed services as a package.”

Working together, Zadara and NeoKarm already have done over 20 deployments and have done very well, Nahum said. However, he said, Zadara felt it was important to acquire NeoKarm rather than continuing to partner with the company.

“The IP NeoKarm has is very important,” he said. “We want to have this IP as part of Zadara’s IP. And NeoKarm has some very good people. [NeoKarm CEO] Simon Grinberg is a brilliant guy. He was vice president of products at Stratoscale and is now the vice president of products at Zadara. We’re OK with partnering with Supermicro for the hardware. But we want NeoKarm to be part of Zadara.”

Nahum declined to speculate why Stratoscale went out of business. However, according to the Israel-based online news site Calcalist, Stratoscale stopped development of its AWS-compatible cloud system because sales were not growing at the pace needed to match the investment the company needed to make. Stratoscale had raised about $70 million from a couple of venture capital funds as well as from IT giants Cisco Systems, Intel, Qualcomm and SanDisk.

Zadara itself has raised a total of about $60 million in funding, including its last round of $25 million about two and a half years ago, Nahum said.

Nahum declined to discuss the acquisition price for NeoKarm. He did say that Zadara is not yet profitable because it has been focused on growing its business, including increasing its staff to about 150 people including those who came with NeoKarm. He said the acquisition was funded with the company’s existing cash.

While Zadara develops software-defined storage, it does not sell that technology as a stand-alone offering, Nahum said.

“We sell the full cloud,” he said. “Our software-defined storage technology is used to make Storage as a Service. With NeoKarm, we now provide the entire stack. I don’t think many companies have the full stack we offer.”

Zadara’s technology is an edge cloud service to provide a full cloud at the customer’s location, Nahum said.

“We position the cloud in general as better to run at the edge,” he said. “For example, we partner with companies like Veeam for Backup as a Service. It’s easier to do backups where you are than do them across the country in a public cloud.”