But Sanrad looks to be driving full speed into a head-on collision with Cisco Systems Inc. (Nasdaq: CSCO - message board), which is about to release its second-generation iSCSI switch. Moreover, Sanrad, which has a minimal U.S. presence, is attempting to sell iSCSI -- SCSI over IP, an immature and unproven technology -- to medium sized businesses that may not be willing to buy into it.

Are these favorable odds for success?

Eyal Felstaine, Sanrad's president and CEO, realizes his firm faces big hurdles, but he thinks he's got both the right technology and the right marketing approach.

"Our major challenge is to be successful at penetration in the U.S. market," Felstaine says. "This is the challenge of many Israeli companies... The U.S. is the major proving ground."

Sanrad has about 50 employees, most of whom are based in Tel Aviv; the company also has a sales and marketing office in Alameda, Calif.

Founded in April 2000, the company has received $7 million in funding from the RAD Group -- an Israel incubator whose companies include RAD Data Communications Ltd. and Radware Ltd. -- and $5 million from the Israeli government. "In Israel, $12 million goes a lot further than it does in the U.S.," says Felstaine.

Sanrad is positioning its switch, which it expects to start shipping at the end of June, as fitting in the gap between high-end storage switches and software-only packages. The company says it will be more powerful than software packages -- such as those from FalconStor Software Inc. (Nasdaq: FALC - message board) and DataCore Software Corp. -- and more affordable than other high-scale, multiprotocol switches from Andiamo Systems Inc., Confluence Networks, Maranti Networks, Rhapsody Networks, and Pirus Networks.

"Unlike Pirus, we're not going to sell the customer a huge box that will cost $200,000," Felstaine says. (Actually, Pirus says its PSX-1000 starts at $85,000 for a configuration that includes four file servers [see Pirus Ships Switch].)

Sanrad's switch will cost $18,000 without virtualization features and $36,000 with virtualization features, which include striping, data mirroring, concatenation, snapshotting, and access control lists. Each switch includes three Gigabit Ethernet ports running iSCSI, and four Fibre Channel ports for connecting storage arrays.

But is Sanrad writing off the big boxes because its own can't scale to high port counts yet? Felstaine says high-scale features are coming. The switch includes a 25-Gbit/s "scaleability port," which will allow customers to connect two boxes together to act as a single system. The firmware to enable the interswitch port will be available in the fourth quarter of 2002, Felstaine says. In 2003, Sanrad expects to introduce a chassis-based switch that allows switch blades to plug in for even greater density.

For now, Cisco has its eye trained on exactly the same space as Sanrad's entry-level iSCSI switch. At N+I this week, Cisco showed its new SN 5428, an eight-port Fibre Channel and two-port Gigabit Ethernet storage router that supports iSCSI and incorporates QLogic Corp. (Nasdaq: QLGC - message board) FC switch technology (see Cisco Turns to QLogic, Cisco and Brocade: This Means War, and Cisco SAN Plans Get Tangled). Cisco hasn't released pricing for the 5428, but the less fully featured 5420 -- which has just one FC port and one Gigabit Ethernet port -- has a list price of $27,000.

Fronting up to Cisco might seem like a daunting task for a small company like Sanrad, but the networking giant has yet to make its mark on the storage market, despite all its talk (see Cisco Stalls on iSCSI).

Sanrad's differentiator, Felstaine says, is that it combines iSCSI-to-Fibre-Channel connectivity with data management features, while being able to maintain throughput of 750 Mbyte/s per switch.

"What disturbs people about iSCSI is the performance, and then with virtualization you add another layer that adds latency," he says. Sanrad's switch combines both network processing and virtualization functions into a single ASIC, the company claims. (Sanrad wouldn't say which company is supplying the chips.)

Sanrad executives says six beta sites are running its switch, with another six coming online next month. Most customers that are interested in Sanrad's switch are planning to implement remote-site backup over IP. "It could be low-hanging fruit," Felstaine says, "but it could be real traction."

Felstaine, an engineer by training, has a master's degree in computer science from the Technion-Israel Institute of Technology. His doctoral thesis, "Scalable Routing in Hierarchical ATM Networks," is pending faculty review. Wait a second -- ATM? "At the time I started writing this, I was convinced that ATM would kill IP," he says.

Now he's got the IP religion. And he draws an analogy between Fibre Channel and ATM: "Fibre Channel does everything better than IP -- just like ATM did everything better than IP," he says. "Except that it's not IP, which is cheap and well understood."

Felstaine also worked for Allot Communications, Intel Corp. (Nasdaq: INTC - message board) in Haifa, Israel, and served in a high-tech military unit in the Israeli Defense Forces.

Zophar Sante, Sanrad's VP of marketing, was previously head of business development and strategic partnerships for Vicom Systems Inc.. Prior to that he was at Tandberg Data Inc., a tape storage company, where he was in charge of market development and product marketing.

Rounding out the management team are two other Technion alumni: Gadi Erlich, VP of research and development, who spent 17 years working for National Semiconductor Corp. (NYSE: NSM - message board) in Israel; and Eyal Mayer, VP of operations, who previously managed operations at WiseBand Communications Ltd., a wireless components developer, and worked at Lannet (now part of Avaya Inc. [NYSE: AV]).

Industry observers familiar with the startup say Sanrad has developed some interesting technology -- but selling it will be a difficult trick.

"In a down economy, their challenge is going to be trying to convince companies they need this," says Balaji Baktha, VP of marketing in Adaptec Inc.'s (Nasdaq: ADPT - message board) storage networking group. "It takes money and marketing savvy to do that."