The ugly, dog-eat-dog world of data center startups

The normally staid and somewhat boring world of networking equipment focused startups is become a hotly contested minefield — thanks to the newest kid on the blog, Insiemi, a company started by Cisco (s csco) veterans Mario Mazzola, Prem Jain, and Luca Cafiero. It is spreading money like an old rich uncle and is trying to acquire as much talent it can scoop up from rivals, who no doubt are hopping mad.

The company is building a new very high-speed data center switch along with a software management platform. This is a really hot market — massive data center build outs have already made Arista Networks, a high-speed ethernet switch company co-founded by Andy Bechtolsheim, an IPO candidate for early 2013.  In the early-stage startup scene Nicira, a company building a controller for scaled out programmable networks, has been the victim of corporate espionage and other vendors such as Big Switch are gearing up their marketing efforts to discredit rivals.

Arista’s success (which is spearheaded by former Cisco executive Jayshree Ullal) and the threat that commodity networking gear and programmable networks poses to its business has made Cisco aware that it needs to increase its footprint in the data center business. As a result, it has put three of its senior people — Mazzola, Jain, and Cafiero — on the job. Their mission is clear — get Cisco into this market fast, and then be rewarded with millions.

Cisco has dangled the mega-million dollar carrot before and it has worked. Of course, a more politically correct way of describing the carrot is “spin-in.”  In other words, Insiemi is a company created to build a specific product, which is designed to fill a gaping hole in Cisco’s product line. The payoff for the founder trio is that Cisco will buy their startup and put millions in their pockets. It is not the first time the three musketeers have done a Cisco spin-in and laughed all the way to the bank. Andiamo Systems, a storage networking company was the first such effort. Then came Nuova Systems (which created the Nexus switch technology) which was acquired for $678 million.

Not surprisingly, Cisco is fighting a market that has already attracted many players. Arista Networks, Big Switch Networks and Nicira are some of the more well known participants in the business generically labelled “software defined networking.” There are others such as Vello Systems who are much less known, but are doing brisk business. Of the lot, Arista is the one that seems to have the potential to become the Juniper of data center business.

Understanding that they are playing catch-up, Cisco and by extension Insiemi executives have undertaken some aggressive moves that are ruffling some feathers in the small networking world. For instance, my sources say that the company is promising nearly $2 million (as an eventual pay-off) to engineers and executives who are willing switch loyalties from one of their rivals.

Correction: So far, nine of them have switched. Arista and Nicira have lost four executives each while Big Switch has lost one team member.

An earlier version of the story said that Arista and Nicira had lost four executives each to poaching by Inseimi. In fact, neither company lost any executives as part of that campaign. Inseimi rivals that include Arista, Nicira, Big Switch Networks and Cumulus Systems, have lost of a total of five engineers to the Cisco-backed rival’s poaching efforts. Other engineers at those companies were offered jobs by Inseimi, but ultimately decided not to take them. And my sources tell me that Inseimi isn’t done yet trying to recruit talent away from those companies.

As for the spin-in threesome who have a propensity for naming the “spin-in” with cute Italian names: let’s go (Andiamo), new (Nuova) and collection (insemi): here are two names they might want to consider for their future startups: pagamento (Payment) and/or ricompensa (reward.)

Here is a bit of text  from an email that is being used by a headhunter doing Insiemi’s bidding.

The thing about this new venture (beyond its technical innovation) which makes it particularly unique and rare is that it is a virtual guarantee for high financial payout to those who join especially at this early stage because of the pre-arrangement. Though the company is just a few weeks old, the NY Times is already following it..

I would like to take just a few minutes of your time to discuss the job and provide you enough info to consider it one way or another. We are pulling together a team of great people from Brocade, Google, Juniper, VMware and a host of great start ups too.