Azaleos: Simplifying Exchange
Azaleos aims to capitalize on the complexity of Exchange by offering an e-mail appliance and monitoring service that eases customer headaches.
- By Paul Desmond
- December 01, 2006
In late 2002, Lee Hudson, technology director at the action sports-focused
retailer Zumiez Inc., began an upgrade from Exchange Server 5.5 to Exchange
2000 Server. Although he completed the job with the help of his small
IT staff and a couple of local trusted advisors, he was never really satisfied
with the results.
"The performance wasn't where we wanted it to be," he says.
"And we had reliability issues with the server." Disaster recovery
was another issue; if the Exchange Server went down during the night,
Hudson's group wouldn't know it until the next morning. And all storage
was direct-attached, not on the corporate storage-area network-another
So it wasn't long before the Everett, Wash.-based company started planning
another upgrade, to Exchange Server 2003. In late 2004, Hudson and his
team sat down with a local VAR and walked through the Exchange and Windows
Server environments at Zumiez, talking about configurations for various
servers and how to integrate the Cisco Unity Unified Messaging infrastructure
that the company would soon install. "It was a little daunting,"
Just as he was starting down that path, a mutual contact in the Seattle
area introduced him to Azaleos, a Redmond, Wash., startup that was just
launching an Exchange appliance and accompanying monitoring service. "We
envisioned a lot of our headaches going away, which ended up being the
case," Hudson says.
Once the planning was complete, Azaleos installed its OneServer appliance
in "a couple of weeks, at most-it was one of the smoothest installs
we've done," he says. The install went vastly better than the upgrade
to Exchange 2000. "The end users didn't even know it was going on."
Now OneServer supports mailboxes for about 300 Zumiez employees, who
collectively receive more than 10,000 e-mails per day and send about 4,500.
Many of them are in the corporate office, but as the company grows nationally-it
now has more than 225 stores and some 2,500 employees-a number of corporate-level
employees work from home or on the road. That means they need to use Outlook
Web Access (OWA). Traditionally, OWA was a problem area for Zumiez in
terms of reliability and performance. "We just haven't had those
issues with Azaleos," Hudson says.
Similarly, Exchange users in the corporate location now rarely complain
of e-mail problems. "Exchange was one of the systems we visited the
most before we went to Azaleos," Hudson says.
Born over Burgers
Azaleos was the brainchild of Keith McCall, the company's CTO,
and Roger Gerdes, who served as CEO for two-and-a-half years until he
left the company in October to spend time with his family before starting
a new venture. McCall worked at Microsoft for six years, the last few
on the Exchange team, working with ISVs, systems integrators and corporate
developers. "Talking to customers and partners, it was increasingly
evident that there was a huge cost and complexity in running an Exchange
organization effectively," McCall says.
In February 2004, Gerdes had just finished up a consulting gig with Network
Appliance Inc., helping the storage appliance vendor establish a tighter
relationship with Microsoft. The two met on a trip to the Whistler Blackcomb
Ski Resort in British Columbia, Canada, through Gerdes' wife, Sarah, a
consultant focused on partner development who worked with McCall at Microsoft.
"Over a burger on the ski slopes at Whistler, he talked about his
experiences with Network Appliance as a storage appliance. I talked about
the cost and complexity of running Exchange," McCall says. "And
we said, 'Why couldn't we put Exchange in a box and support it with a
set of managed services to potentially allow people to set and forget
their e-mail environment?'"
It took just a few months to flesh out a business plan, and McCall left
Microsoft that June to start "the adventure." They started building
the product in July and had a beta version installed at their first customer,
Compass Health of Everett, Wash., in December-less than a year after the
idea was conceived. The second and third customers were K2 Sports and
Zumiez, respectively. Azaleos officially launched as a company on March
21, 2005-the first day of spring.
Exchange in a Box
The OneServer appliance houses a complete Microsoft Windows and
Exchange Server clustered environment, along with third-party anti-virus
and anti-spam, archiving and other services. "If an IT professional
wanted to get it up and running himself, he'd have about 6,000 pages of
documentation to read through," McCall says.
The appliance is built to be managed by the Azaleos OneStop monitoring
service, which continually sends data to the Azaleos network operations
center on the health of the system. Azaleos alerts the customer's IT department
to any problems it detects, along with suggested corrective actions.
Headquarters: Redmond, Wash.
CEO: Phil Van Etten; leadership also includes
Keith McCall, CTO and co-founder
Founded: 2004; emerged from stealth mode March
Line of Business: Microsoft Exchange Server appliance
and monitoring service
Microsoft Partner Program Level: Gold Certified
Microsoft Competencies: ISV/Software Solutions,
Advanced Infrastructure Solutions
Annual Revenue: Undisclosed
Growth Rate: 100% quarter to quarter for last
Customer Base: All industries; various-size companies;
sweet spot is 250 seats and up
Clients: Allegheny Technologies, Inc., Coinstar
Inc., K2 Sports, Zumiez, Inc.
Through its Azaleos Certified Experts program, the company trains its
partners on how to appropriately configure the customer environment, including
the Active Directory infrastructure, and install the appliance. Prospective
partners go through a small amount of on-the-job training with an Azaleos
engineer before becoming certified.
Azaleos also has an automated provisioning system that enables its partners
to fill out a simple Web form with IP addresses, domain names and other
configuration information. The form generates an XML file that can be
put on a USB key and used from a laptop to completely deploy an Exchange
server on the appliance. "We can bring a complete clustered solution
up in under an hour," McCall says.
After that, the value proposition Azaleos brings to its partners lies
largely in the OneStop monitoring service. "Before, if [the service
provider] wanted to roll their own Exchange solution, they'd get the black
eye of being woken up at 2 a.m. when Exchange inevitably failed. And they'd
have to reallocate resources from another project to fix Exchange,"
McCall says. With Azaleos, once the installation is complete, the partner's
work is done: Any trouble calls come in to the Azaleos network-operating
Additionally, partners can sell value-added products and services on
top of Exchange, such as customer relationship management, unified messaging,
collaboration and line-of-business applications.
OneStop also provides a recurring revenue stream that Azaleos shares
with its partners, who typically get about 5 percent of the service subscription
price, plus 20 percent to 30 percent of the appliance price, depending
The recurring revenue stream was a factor in Azaleos' ability to secure
$640,000 in seed funding in August 2004 from the Seattle boutique investment
firm Second Avenue Partners, whose founding partners include two ex-Microsoft
executives, Mike Slade and Pete Higgins. In June 2005, the company secured
an additional $6 million in funding from Ignition Partners of Bellevue,
Wash. That round, plus a $1.5 million bridge loan, should be enough to
fuel rapid growth into 2008 before the company has to look at another
round of financing, McCall says.
A Bullish Outlook
Microsoft's Exchange roadmap is also fueling growth at Azaleos.
Each new version of Exchange, along with the end of support for earlier
versions, creates what McCall calls a "discontinuity." Customers
must decide whether to continue investing in the current version or to
upgrade. Part of the upgrade decision involves considering an outsourced
or managed-services model.
Azaleos offers customers a seamless migration from one Exchange version
to another. Customers must buy licenses for the new version, but it can
run on the same Azaleos appliance. "We think we offer an excellent
way of placing the Exchange 2003 product and future-proofing them from
2007 or any other release," McCall says, noting that the appliance
will support the 64-bit version of Exchange Server 2007.
And he is most definitely looking forward to that next release. "The
discontinuities introduced by Exchange 2007 actually give us an enormous
opportunity to capitalize on the 140 million Exchange seats that are currently
out there," McCall says. "So I am very bullish on the prospects
for the company. If we could get 10 percent of those 140 million seats,
I'd be extraordinarily happy."