A new IBM supercomputer opened at Brown University’s Center for Computation and Visualization in Providence, RI, today is 50 times faster than Brown’s next best machine and is the most powerful computer in Rhode Island, according to an announcement from IBM (NYSE: IBM). Researchers at Brown and other institutions intend to use the 1,440-processor machine to model subjects such as the genomes of ocean-going microbes, the mechanics of human and animal movement, and the topography of other planets. Brown ordered the multimillion-dollar supercomputer in June; its exact cost hasn’t been disclosed, but IBM and Brown are calling it “a shared investment.”

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There’s lots of buzz in the startup community about agile software development; there are software programs, books, and seminars on the topic, and even huge firms like IBM are now touting their “agile development solutions”. The general idea is to create a team and a software process that is flexible, quick, and adaptive to feedback from the market. Put stuff out there, collect feedback on what works, kill what doesn’t, improve what does, rinse and repeat.

But there’s a parallel trend occurring in the early stage technology market that hasn’t been talked about much. Programs like TechStars, Y Combinator, and Founder’s Co-op have been pioneering what I like to call agile organizational development. These “initiator” organizations provide founding entrepreneurs with an incredibly compressed calendar of iterative feedback on all aspects of their company. The feedback comes from a broad network experienced entrepreneurs who serve as mentors in these programs, and it comes often, regularly, and relentlessly.

Mentors in these programs provide feedback on the startup’s team, 30 second pitch, fund raising pitch, positioning, product, pricing—on just about every aspect of the organization. Some of the feedback is contradictory—just like market feedback can be. The TechStars program even has a name for the confusion that results from conflicting advice: “mentor whiplash”.

The net effect of all this mentor input is a set of organizations that adapt to market feedback much more nimbly than startup organizations of the past. This feedback cycle and the entrepreneurs’ response is what I’m calling agile organizational development, and my bet is that the companies that embrace it are much more likely to succeed than those that don’t.

These programs are all relatively new, and there aren’t any books or seminars on the topic yet—but I’m betting there will be.

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For Mik Kersten, it all started when he saw Maria Klawe speak at the University of British Columbia. It was the mid-1990s, and Klawe, a distinguished mathematician and computer scientist—now the president of Harvey Mudd College and recently appointed to Microsoft’s board of directors—was giving a lecture to students and faculty. “She talked about her hippie days traveling in India, and it convinced me to switch to computer science,” Kersten says.

Kersten was an undergrad at UBC studying anthropology. Today, he is the co-founder and CEO of Tasktop Technologies, a Vancouver, BC-based startup that is working to reinvent user interfaces for software developers and other knowledge workers so they can be much more productive. It is one of those quiet Northwest success stories you probably haven’t heard much about yet, but you will—Tasktop is profitable, and has recently signed a number of important deals with the likes of IBM and Microsoft.

The company’s basic idea is to organize work around tasks, instead of files, folders, or Web pages. Kersten’s “task-focused interface” builds tools and information around the specific task you are trying to accomplish—writing code to import digital media into a library, say, or analyzing trends in a database. Tasktop’s software automatically gathers screenshots, notes, e-mails, and other information related to the task at hand and puts it on your desktop in a single handy spot for reference. If you come back to the task an hour later, or a week later, your desktop is returned to where you left off.

It’s a far cry from the way most people work on tasks today, using tools that are glorified Windows Explorer or Mac Finder applications, or Outlook or Google search tools that make you scroll through tons of results, Kersten says. As a software engineer himself, he had felt quite a bit of personal pain. “I was getting bad RSI [repetitive strain injury] in my forearms,” he says. “I was spending more time looking for the information I needed to write code than actual coding.”

Kersten’s early career path took him to Palo Alto Research Center (formerly Xerox PARC) in Silicon Valley, where he worked on user interfaces until 2003. There, he was exposed to a technology called “degree of interest trees.” This is a type of interface that lets you navigate large, branching structures of information. The amount of detail displayed is based on your level of interest in each item, so you don’t get swamped with lots of information about low-priority matters. As Kersten explains, this “makes it easier for programmers to work with very complex systems”—like having to refer to millions of lines of code, or search through 100,000 files. “Programmers get completely overloaded with information,” he says. “It’s extremely difficult to find what they’re looking for.”

After a six-month stint at Bellevue, WA-based Intentional Software (billionaire Charles Simonyi’s company), Kersten decided to quit industry to do fundamental research on how to improve …Next Page »

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[Updated 12:25pm, 10/20/09. See correction below] Seattle-based Azaleos is announcing today it is releasing new software and services to help companies manage Microsoft Office Communications Server, which is a software platform for instant messaging, Internet telephony, and video conferencing over the Web. It’s a strong move for Azaleos that expands its product line beyond management services for e-mail and collaborative software, and into managing “unified communications”—all forms of company communication run by a single system.

Azaleos is best known for the services it provides to help companies manage their Microsoft Exchange e-mail servers and Microsoft SharePoint collaborative networks.

Last spring, Azaleos established itself in the realm of SharePoint server management. The company also merged with North Carolina-based M3 Technology Group, doubling its size and solidifying its position in e-mail and other communications management. Azaleos now has about 125 employees, and is backed by Ignition Partners, Frontier Capital, and Second Avenue Partners.

“Anybody who follows the IT industry sees the promise of the concept of unified communications, integrating real-time and non real-time,” says Scott Gode, vice president of product management and marketing for Azaleos. “It’s important for Azaleos to get in early.”

These days, companies typically implement instant messaging first, Gode says, and then follow up with conferencing and Internet telephony for their employees. [An earlier version of this article mixed up the order of these services. We regret the error---Eds.] Azaleos provides extensive consulting to help companies deal with the complexities of running and monitoring these features using Microsoft’s Office Communications Server. (Microsoft is a leader in the space, though it competes with Cisco and others.) Azaleos breaks even on its consulting service and looks to make its profits on the management service, Gode says. This is different from big companies like Accenture or IBM, which tend to make more on consulting fees.

So who’s the target customer for Azaleos? “The sweet spot in general for our business is a 500 to 5,000-seat company,” Gode says. “They’ll assume a little more risk [in moving from telephony to IP telephony].” He adds that companies typically can save 30 to 50 percent of the cost of running communication systems by using Azaleos.

Gode says the company has also been “pushing aggressively into Europe.” In late August, Azaleos opened a new office in London that employs five people. He says the company is now selling to more companies based in Europe, such as Mediq, a Dutch pharmaceutical firm.

Lastly, I asked Gode where Azaleos is in terms of its cash flow. From his response, it sounds like the company is still in a growth and expansion mode, rather than hunkering down and getting profitable. “We’re flirting with profitability, and I mean that in a good way,” he says. “Business is good.”

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I can’t do justice to a comprehensive review of yesterday’s FiReGlobal (West Coast) conference at the Four Seasons Hotel in Seattle. Instead, I’ll just give a few of my key takeaways. The all-day event, organized by Strategic News Service, focused on how to solve some of the most pressing problems in technology, business, and society—in areas as diverse as broadband access, entrepreneurship, education, sustainability and the environment, political discourse, human health, and mobile devices.

The sweeping conference had the tagline, “Global technology driving local solutions.” Interesting, as that’s sort of the reverse of Xconomy’s mantra, which is reporting about local stories with global impact. But I think they’re two sides of the same innovation coin.

So, in “ESPN plays of the day” style, here’s my top 10 list from the conference (if only I had the video to go with it):

10. Setting up entrepreneurial zones. A panel led by Ty Carlson of Microsoft proposed denoting special “R&D zones” from Oregon to British Columbia geared toward supporting startups in fields like renewable energy, sustainable farming, and biotech. The idea would be to offer tax credits and other incentives to create a more entrepreneurial culture in the Northwest, especially in rural areas.

9. What government should and shouldn’t do. Investor and entrepreneur Martin Tobias of Seattle-based Kashless said, “Startups and investors can’t make a 10-year bet when you have a two-year tax credit.” Those conditions freeze out small companies, especially in costly ventures like energy. So government should create open markets and set minimum market sizes for new technologies, Tobias said. But it shouldn’t pick the technology winners themselves.

8. Northwest tech startups do the Olympics. Tom Guthrie, CEO of Seattle-based Twisted Pair Solutions, said his company has helped numerous agencies on the Olympic Peninsula inter-operate their radios—a key problem in disaster response and other scenarios. Twisted Pair, which is backed by Ignition Partners and other investors, is also working on a laser system to deliver broadband signals. Meanwhile, Paul Manson, CEO of Vancouver, BC-based Sea Breeze, talked about his company’s project to build a high-voltage, direct-current undersea cable between Victoria, BC, and Port Angeles, WA. This would be a fast, controllable power transmission component of a smart grid; it should be under construction by mid-2010, he said.

7. The world according to Dell. In a chat with Mark Anderson of Strategic News Service, Michael Dell said he is excited about China and the rest of Asia as fast-growing economies. He anticipates a U.S. recovery from the recession, but says, “I don’t think you’ll see an immediate snap-back.” And he likes South America as an emerging market (Dell does sales of more than $1 billion in Brazil alone). But Europe, not so much—he sees a lot of uncertainty in the workforce there.

6. Get ready for Dell smartphones. “Mobility is absolutely the theme,” Dell said. He was talking about the relative importance of desktop computers, laptops, netbooks, and mobile devices to …Next Page »

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San Diego Gas & Electric has formed a coalition with the non-profit group Cleantech San Diego, UC San Diego, and major companies like Qualcomm, IBM, and Intel to integrate emerging “smart grid” technologies in the public utility’s regional power grid.

The coalition’s goal is to develop and deploy a host of innovations, including renewable energy generation, new types of energy storage systems, advanced electric transmission and distribution technologies, advanced sensors, and wireless “smart meters.” It also plans to seek $100 million in federal economic stimulus funding, part of more than $4.5 billion in smart grid funding designated by the Obama Administration as part of its new national energy policy.

Smart grid technology also is intended to enable residential utility customers to use the Internet to monitor their home energy consumption. SDG&E, the public utility operated by San Diego’s Sempra Energy (NYSE: SRE), began installing digital smart meters in suburban San Diego last year. The meters monitor each customer’s electricity and gas usage and use Zigbee wireless networking technology to regularly transmit data to the utility’s computerized information center.

The coalition SDG&E put together includes state agencies, a labor union, academic researchers, and companies developing such technologies, such as GE, Cisco, Itron, BAE Systems, SAIC, BMC Software, and On-Ramp Wireless. Altogether, 28 organizations are participating in the effort.

“The stimulus dollars are matching funds, so SDG&E and the coalition are matching the amount they are requesting,” says April Bolduc, a utility spokeswoman. “SDG&E has been working with many of these companies for years on individual projects and this is the first time they’ll all be brought together to work together on interconnecting all of the projects to create a smart grid.”

SDG&E, which is leading the coalition, will pass any federal smart grid funding through to the participating tech companies to complete their work, Bolduc says. “SDG&E will be prioritizing and making decisions along with the partners.”

UC San Diego, which has invested heavily in its own energy initiatives, will provide research and development resources—along with UCLA and the Energy Policy Initiatives Center at the University of San Diego School of Law. Lisa Bicker, president of Cleantech San Diego, says their role is to explain the benefits of smart grid technologies to diverse segments of the community.

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Vlingo, the Cambridge, MA-based startup that makes a suite of speech-to-text applications used by millions of iPhone, BlackBerry, and Nokia mobile device owners, is about to get a brain transplant of sorts. It said today that it will largely abandon a core speech-recognition engine developed by IBM and maintained by Nuance Communications in favor of a system from AT&T Labs in New Jersey.

As part of the shift, says Vlingo CEO Dave Grannan, Vlingo and AT&T have agreed to a long-term strategic alliance. Vlingo’s speech scientists will be able to modify and improve the source code for the AT&T technology, called Watson, while AT&T will take a minority ownership stake in Vlingo. All of Vlingo’s applications will be running on top of the AT&T speech-recognition system by the first quarter of 2010, Grannan says.

Vlingo’s own speech scientists have developed software that exploits information collected from users—the way a Bostonian’s pronunciation of a dictated phrase like “I parked my car” might differ from a New Yorker’s, for example—to build statistical models that help improve speech-recogition accuracy over time. These models provide supplemental input that helps to guide a core speech-recognition engine as it transforms speech sounds into text. Vlingo didn’t build its own core engine—it has long licensed that part of its system from IBM.

The switch from IBM’s engine to AT&T’s is a “best of all worlds” situation for Vlingo, in Grannan’s words. For one thing, he says, the Watson technology simply works better than the IBM recognizer. “Watson is superior on speed and base-level accuracy,” he says. Once the transition is complete, users of Vlingo’s iPhone, BlackBerry, and Nokia apps should notice fewer wrong guesses in the transcriptions of their utterances. Grannan says they’ll also see a few new features, such as automatic punctuation, that Vlingo can now add because it will be able to tinker with Watson’s innards.

But just as important, the switch will help Vlingo disentangle itself from its strained relationship with Nuance.

Burlington, MA-based Nuance (NASDAQ: NUAN) is one of the Boston area’s biggest high-tech firms, and it is the world’s largest specialized provider of speech-related technologies. It offers software for mobile speech recognition that competes directly with Vlingo’s. In June 2008, after losing out to Vlingo on a contract to supply Yahoo with speech-recognition technology for its oneSearch service, Nuance hit Vlingo with a lawsuit alleging that …Next Page »

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In 2004, Marathon Technologies abandoned its old hardware business to focus on “fault tolerance” software for Windows servers—programs that switch computing work from one server to another almost instaneously in the case of a hardware failure. Last year, in a move to adapt to the virtualization movement sweeping through the corporate IT world, Marathon brought out software that does the same thing for virtualized servers. Last month, the company raised $7 million in a Series B financing round led by Atlas Venture, Longworth Venture Partners, and Sierra Ventures. And today, the Littleton, MA-based startup is making one more big change: the company has announced that former IBM executive Jim Welch has joined as president and CEO, replacing former CEO Gary Phillips.

Welch tells Xconomy that Marathon has “a terrific technology foundation” that should appeal to more businesses as they stack more and more applications onto virtualized servers—meaning that these systems need to be just as reliable as traditional stand-alone servers. But Marathon hasn’t done a good job of explaining why its products are valuable, according to Welch; he says it’s been more focused on building great technologies than on figuring out what the market wants.

“I think you will see Marathon, under my leadership, very much transformed into a market-led company,” says Welch. “Under Gary’s guidance, the company grew phenomenally, but now it’s time to take that to a whole new level.”

At IBM, Welch was vice president and general manager of the InfoSphere data warehousing business. He’d been at Big Blue since its 2005 acquisition of Ascential Software, where, as vice president of product operations, he’d helped make the company into the leader in the $2 billion electronic data interchange (EDI) market.

Welch says that Marathon, which has 70 employees, will also build on its existing partnerships with Microsoft and Citrix to make its fault-tolerance and disaster recovery software work in more kinds of computing environments. “Today our tech is very much sold and used as a point solution,” protecting Windows servers, Welch says. “But the opportunity in the enterprise is obviously much more broad. I want to see us protecting Exchange servers or fetal heart monitors or whatever it may be. We need to continue to expand our capabilities for a heterogeneous world.”

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The Boston Globe is reporting today that IBM has picked Alistair Rennie, currently a vice president of development and technical support for the company’s collaboration software division, to replace Mohamad Ali as IBM’s senior executive in Massachusetts. Ali left IBM in July for a position as senior vice president of corporate development at Avaya. Rennie told the Globe he will work to enhance innovation at the so-called Mass Lab in Littleton and Westford, MA, where IBM plans to consolidate up to 3,400 software employees.

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[Updated 9/3/09, 3:00 pm. See below.] Bellevue, WA-based VoiceBox Technologies, a developer of speech recognition systems for use in cars and mobile applications, has raised about $13 million from corporate investors in Asia over the past year. The investors include AutoNavi, Inventec, MiTAC, and the Morningside investment fund.

[An earlier version of this story cited a regulatory filing stating that VoiceBox had raised $7.4 million in equity and options out of an $18.6 million offering, and said the investors were not disclosed---Eds.]

Chief strategy officer Victor Melfi of VoiceBox says the company has raised a total of about $21 million to date, including investments from friends and family, and InfoSpace. He adds that VoiceBox is now looking to raise an additional $15 million from institutional investors, for which it has signed on Seattle investment bank Cascadia Capital. Melfi says VoiceBox is sensitive to customers in Europe and Asia—particularly China—and that it is developing technology for nine different languages. [This paragraph was added at 3:00 pm after speaking with Melfi---Eds.]

VoiceBox is developing what it calls “conversational voice search” software that lets you search, navigate, and discover content and services using natural spoken language. An example would be telling your car to give you directions to a particular location, pick a song to play, and adjust the temperature—all while you’re driving. Or telling your smartphone to search for a stock quote or other information online while you’re on the go.

Technologically, it’s a very hard problem. That’s because of ambient noise, differences between people’s accents and the way they make requests, and, fundamentally, the challenge of correctly understanding the meaning of what they’re asking for. Voicebox has partnerships with a number of companies including IBM, Toyota, and XM Satellite Radio to refine its software. The company also has an iPhone app for voice dialing.

VoiceBox was incorporated in 2001, and is led by its co-founder, chairman, and CEO Mike Kennewick, a former manager at Digital Equipment Corporation and then Microsoft. Kennewick previously founded Saros, a document management software company that was bought by FileNet in 1996. As of January 2008, VoiceBox had not taken any venture funding, but was considering taking a round, according to VentureBeat.

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The Obama administration has allocated $19 billion in incentives for hospitals and practices that make meaningful use of electronic medical records systems, and everyone is biting their nails, waiting to find out the meaning of “meaningful.” But sitting 8,000 miles away from Washington, DC, I’m spending my summer internship focused on healthcare IT that’s measured in Rupees crores (tens of millions of rupees) instead of billions of dollars, helping Infosys define their offering for the Indian healthcare IT market.

At roughly $325 million per year, the market for healthcare IT in India is dwarfed by that in the US, which is in excess of $40 billion—more than 100 times as large. So why should you and Infosys care about this tiny market? For the same reason that IBM, Wipro, Tata Consultancy Services, Perot Systems and many local players are elbowing their way in: it’s all up and to the right set to hit $1 billion by 2014.

In this column I aim to give you a primer on one of the fastest moving and most exciting healthcare markets in the world. This is some of what I’ve learned over the last two months, by interviewing doctors, nurses, managers, and C-level executives at hospitals, payors, and third party administrators that are all betting on the Indian healthcare market.

Macro Forces Driving Growth

India has one of the lowest ratios of hospital beds to patients in the world, at 0.7 beds per 1000 people. This is less than a third of the world average of 2.6 and well below other countries such as Sri Lanka, Brazil, and China (2.9, 2.6, and 2.2 respectively).

But incomes are rising rapidly and studies show that when they do, a higher proportion is spent on healthcare. Rapid urbanization will mean a more concentrated population that can be served by larger hospitals located in metropolitan areas. A more concentrated and urban patient population is very attractive to private equity investors, who pumped $450 million into Indian hospitals in the first half of the 2008-9 fiscal year, triple the $150 million in the previous year.

As more and larger (100+ bed) hospitals are built, they will spend more on IT, typically 1-2 percent of their revenue but sometimes as high as …Next Page »

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The Seattle area is known for its technology giants like Microsoft, Amazon, Boeing, and RealNetworks. It’s also known for its popular tech startups like Zillow, Wetpaint, Pet Holdings (I Can Has Cheezburger), iLike, and Big Fish Games. But there are dozens of other sizable tech companies operating behind the scenes, quietly executing on their vision to change the world. You don’t see these companies mentioned in the media very much. They generally aren’t built on large venture funding rounds, and they tend to be not very flashy. That’s why I call them unsung heroes.

I’m going to point out five of them here. This is not a “Top 5″ list, and it’s not the end of the story—it’s just the beginning. Here are my (admittedly arbitrary) criteria. I looked for privately held companies with tremendous engineering talent and a strong influence on their particular market—proportional to their size and the amount of attention they get. I looked across different tech sectors like Internet, business software, consulting services, gaming, and entertainment. I also looked for companies that have weathered the recession to this point and have kept charging forward. Lastly, I wanted companies that mainstream readers may not have heard about lately.

The problem with a list like this, of course, is that it’s subjective. There are plenty of other companies around town that could be on the list—and I want to hear about those too. But for now, here’s a snapshot of five Seattle-area companies that are quietly delivering the goods:

.

Jetstream Software (Kirkland, WA)
Mike Moskowitz, CEO

This 15-year old applications development firm makes software products for big companies and startups alike. Its list of customers includes Microsoft, Intel, IBM, F5 Networks, Captaris, SnapIn Software, HouseValues, and the University of Washington. In fact, if you pick any prominent organization around town, there’s a good chance Jetstream has done work for them. The company has developed tools for Microsoft that shipped with Office and Windows Media Center, for example. And the firm often serves as the entire development team for Web startups, say, that want to create a user interface or product. The 25-person company, largely made up of senior engineers, works on projects across software publishing, …Next Page »

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The reality in the IT world, as one executive at Marlborough, MA-based Netezza (NYSE: NZ) puts it, is that “the cost of adding more data to disks is getting closer to zero every day.” That’s not great news if your traditional business is selling high-performing servers at $60,000 per terabyte. So to keep growing, Netezza is getting more competitive on price.

Netezza’s newest data warehousing appliance, set to launch Monday, isn’t a custom-built box with all the elements specified and integrated by Netezza, like the company’s previous generations of machines, but rather an off-the-shelf blade server from IBM that’s got Netezza hardware and software inside. The new product’s price? $20,000 per terabyte, or one-third of what Netezza was charging before. [Update: Thanks to Curt Monash, publisher of the database industry blog DBMS2, for helping with clarifications to this paragraph.]

Called the Netezza TwinFin, this new product can actually hold a lot more data than its predecessors. The company hopes the radical price reduction, and better performance, will open up the market for data warehousing hardware to companies and industries that wouldn’t previously have considered using such specialized and expensive hardware.

In general terms, data warehousing means storing historical data (as opposed to real-time, transactional data) that can be mined for trends or insights to guide business decisions. For example, wireless operators use data warehouses to store cell-phone calling records and identify users who could be invited to switch to more profitable calling plans. The pitch at Netezza—whose 2007 IPO was one of the most successful in New England, raising more than $100 million—has always been that the company’s patented hardware architecture speeds up the database queries that companies must run against such data to draw out trends. The architecture relies on massive parallelism (doing many calculations at once) and some clever filtering of data through chips called field programmable gate arrays (FPGA) as it streams off of hard drives.

The performance of commodity blade servers from IBM and other companies has advanced to the point that they can handle the type of query volumes typically placed on Netezza appliances, says Phil Francisco, Netezza’s vice president of product management and product marketing. Netezza has relied on IBM’s latest blade servers, which include a slot for an expansion card, also known as a “sidecar,” in order to make the product faster and cheaper.

“We’ve used that sidecar technology from IBM to incorporate some of the secret sauce of Netezza, the field programmable gate arrays, which acts essentially as a turbocharger to speed up query processing and the decompression of data as it comes off the disk,” Francisco says. “It allows us to get the best of both worlds—the commodity platform along with the Netezza secret sauce.”

Francisco says the TwinFin is the first in a family of four appliances that will include an even cheaper, entry-level product, a high-capacity version for customers with huge datasets, and a memory-intensive version for “highly interactive or very operational deployments.” This, too, is a departure for Netezza, as the company’s previous appliances have varied only in their storage capacity, not their basic capabilities. The related appliances will be unveiled at the company’s user conference, Enzee Universe, in Boston in September.

By lowering the price of its systems, Netezza wants to get data warehousing appliances into small and mid-sized companies that wouldn’t have had the wherewithal to spend $60,000 per terabyte. “What we are trying to do is open up the market for anyone who has databases sized from a few hundred gigabytes up to a petabyte, which is a pretty wide swath.” The TwinFin will appeal to Netezza’s big customers in the retail, telecommunications, financial, digital media, pharmaceutical, and government sectors, Francisco says, but also will be affordable to smaller players in those niches.

So, at one-third the price, will Netezza be able to make up the revenue difference by selling at least three times as many appliances? “Certainly we anticipate that,” says Francisco. “That’s the whole point of being able to appeal to a wider set of customers.”

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Is it just me, or is the roundup of New England technology and life sciences deals news getting a little longer each week?

—Matrix Partners of Waltham, MA, reportedly raised $600 million for two new funds. A $450 million main fund is to be invested in software, mobile, consumer Internet, communications, and systems startups, and a $150 million special opportunities fund will be used to back companies outside of Matrix’s core fields.

—Drug developer Avila Therapeutics, also of Waltham, closed a $30 million Series B round of venture capital led by the Novartis Option Fund. Abingworth Management, Advent Venture Partners, Atlas Venture, and Polaris Venture Partners joined the deal.

—Waltham’s Phase Forward (NASDAQ: PFWD), a provider of software for data collection and analysis during clinical trials, acquired Indianapolis, IN-based Maaguzi for $11 million in cash. Maaguzi’s online system is used to collect data reported directly by patients.

—Cambridge, MA-based Cerulean Pharma raised $10 million in a Series B financing round. Polaris Venture Partners, Venrock Associates, Lux Capital, and Bessemer Venture Partners—all return investors—participated in the deal, which will help support clinical trial’s of Cerulean’s lead drug, a nanoparticle-based version of the anti-cancer molecule camptothecin.

—FRX Polymers, a maker of eco-friendly, flame-resistant plastics based in Chelmsford, MA, said it has raised $6 million from Israel Cleantech Ventures and Capricorn Venture Partners.

—Needham, MA-based Extreme Reach, a provider of management tools for online and mobile video advertising, raised an unspecified amount of new financing from Village Ventures, Greycroft Partners, and Long River Ventures.

—Ounce Labs, a Waltham, MA-based maker of security and compliance software, was acquired by IBM for an undisclosed amount. The company’s technology scans the source code of programs during software development to identify potential vulnerabilities early on, and can also help spot sources of security and compliance trouble in legacy systems.

—Burlington, MA-based software maker Vela Systems completed a $10.5 million equity financing from unnamed investors. Vela, whose technology allows construction companies to manage their paperwork using mobile devices, took in the first $6 million of the round in July 2007.

—Cambridge-based Forma Therapeutics inked a drug-discovery deal with Swiss drug giant Novartis; specific terms of the arrangement weren’t disclosed.

—Dana-Farber Cancer Institute spinoff MSM Protein Technologies announced partnerships with Germany’s Merck KGaA, and Switzerland’s Debiopharm Group. The deals will give the European firms access to the Medford, MA-based startup’s technology for analyzing complicated biological molecules called multi-spanning membrane proteins, which are the targets of many drugs.

—Vertex Pharmaceuticals (NASDAQ:VRTX) of Cambridge scored $105 million up front in an amended deal with Mitsubishi Tanabe Pharma. The agreement gives Mitsubishi rights to sell and manufacture Vertex’s experimental hepatitis C treatment, telaprevir, for use in combination with the existing drugs interferon and ribavirin in Japan and the Far East.

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Where I grew up in the Midwest in the 1970s and early 80s, Cray was synonymous with supercomputing. Back then, a supercomputer was a top-flight machine that could perform a few hundred million floating point operations per second (”flops”). That was good enough to help scientists do intensive calculations in areas like weather forecasting, climate modeling, and nuclear weapons simulations. Cray’s first supercomputer, the famed Cray-1, was bought by Los Alamos National Laboratory for $8.8 million in 1976; eventually, some 80 of the machines were sold, for $5 million to $8 million a pop.

Today, your average desktop computer is far more powerful than a Cray-1, and so the definition of “supercomputer” keeps changing to keep up with the times. But one thing has not changed. Cray (NASDAQ: CRAY) is still a major player in the space, despite a long history of ups and downs. The company, which began in 1972 as Cray Research in Chippewa Falls, WI, was bought by Silicon Graphics in 1996 for $767 million, and then was reborn in Seattle in 2000 following a $50 million merger with Tera Computer (which was renamed Cray). Since then, it has been a long uphill climb to get back near the top of the supercomputing heap against heavyweight competitors like IBM and Hewlett-Packard.

Nobody better to tell that story than Peter Ungaro, the chief executive of Cray. I recently had a chance to speak with Ungaro by phone at his Spokane, WA, office about his company’s strategy and recent history, the technical challenges involved in modern supercomputing, and innovative ways of gaining new customers (how do you sell someone a $10 million machine?). What impressed me was his ability to lay out the financial concerns of his company while also diving deep into the technological aspects of supercomputers—how they will interact with cloud computing, how computational records will continue to be broken, and when computers might exceed all processing capabilities of the human brain.

First off, I wanted to know how Ungaro (left) defines a “supercomputer” these days. Some would say it should be one of the 500 fastest machines in the world. Others would say it’s a machine used for scientific and technical problems that costs more than a certain amount. Ungaro’s definition is simple and focuses on the bottom line. “We like to think of supercomputers as costing more than a million dollars,” he says.

Ungaro, a Washington State University alum, joined Cray in 2003 to run sales and marketing as senior vice president. He had been at IBM for 13 years, most recently running its high performance computing group, a $2 billion business inside Big Blue. Why did he make the jump to Cray? “I really loved the supercomputing space,” Ungaro says. “Customers are doing really interesting things. I really wanted to try and see what a smaller company was like. Even at $2 billion, you’re only 2 percent of IBM’s revenues.” In short, like many entrepreneurs, he wanted to have more impact. “There was no better place to go than Cray. It was a natural move.”

But Cray had its share of problems. The company had struggled to get its next-generation supercomputer product ready, and 2004 was “really rough,” Ungaro says. Cray was losing money and …Next Page »

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IBM announced today that it has acquired Waltham, MA-based security and compliance software firm Ounce Labs for an undisclosed amount. The move could help Big Blue meet its clients’ growing need to reduce the costs and risks associated with increasingly complex security and business regulations and policies.

Corporations constantly struggle with security and compliance issues, especially as enterprise systems increase in sophistication and complexity. Ounce Labs technology could help nip the problem in the bud by scanning the source code of an application and identifying potential sources of compliance or security trouble early on in the software development process, when it is presumably easier and less costly to fix, according to a press release. The technology can also help assess the risks posed by legacy software.

The Ounce deal comes on the same day that IBM announced it has agreed to buy business analytics software firm SPSS for approximately $1.2 billion in cash. Ounce is the technology behemoth’s 13th Bay State acquisition since 2003, joining the ranks of Rational, Ascential, Cognos, Diligent, and a host of others. We will be updating our map of IBM’s Massachusetts purchases soon.

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Mohamad Ali, IBM’s senior state official for Massachusetts, has left Big Blue after more than 13 years to join enterprise communications equipment company Avaya, Ali announced in a personal e-mail this afternoon. Ali, who started at Avaya on Wednesday with the title of senior vice president of corporate development, has responsibility for all M&A activity for the New Jersey-based company as he seeks to help it overtake Cisco as the leader in enterprise communications equipment, he said in a phone call this afternoon.

“That’s going to be my key role here initially, to drive the M&A,” he says. He also will play a leading role in Avaya’s strategic partnership activities, among other responsibilities, and report directly to CEO Kevin Kennedy.

Ali, our newest Xconomist, says he has also joined the board of Boston-based Ember, which makes wireless mesh-networking chipsets for communications between devices such as thermostats and utility meters.

Joining Avaya, an AT&T spinoff, offers “an opportunity to participate in and shape a whole new era of intelligent communications for healthcare, financial services, government and other industries,” said Ali in his note. Avaya was taken private after agreeing to an $8.2 billion buyout by Silver Lake and TPG Capital in June of 2007. “This represents a unique opportunity to potentially participate in one of the largest IPOs in the coming years,” Ali said in his e-mail.

Ali’s departure takes away one of IBM’s most visible and eloquent representatives in the Bay State. He has built a reputation as a leading thinker on innovation, taking an active role in how Massachusetts can position itself for further technology leadership—and drew accolades for his appearance last month on IBM’s half at XSITE, the Xconomy Summit on Innovation, Technology, and Leadership.

He also led IBM’s worldwide software M&A activities, and last year his group accounted for more than half of IBM’s entire M&A efforts. Additionally, Ali’s team was behind IBM’s 2007 acquisition of Canadian business intelligence software firm Cognos for just under $5 billion, the largest deal in Big Blue’s history.

He will continue wearing his M&A hat at Avaya. The whole communications market is in turmoil, and old players are in trouble, he says—and Cisco, the leader in enterprise communications equipment, is clearly in his sights. “There’s a tremendous opportunity for Avaya to come out of this as the strongest player in this market space,” he told me.

In addition to his M&A responsibilities, Ali says he will be in charge of Avaya’s strategic partnerships, as well as organic emerging products. “That means home grown ones that aren’t necessarily part of the core offering today—so adjacent space expansion,” he says.

Even though Avaya is based in Basking Ridge, NJ, Ali will be remaining in the Bay State, working initially out of Avaya’s Waltham offices (the company also has offices in Chelmsford). He will continue to serve on the board of the Massachusetts Technology Leadership Council, among other non-profit activities.

“I’m so passionate about the Boston area. There’s this tremendous asset base, all this capability. And turning that into a powerhouse, it seems like we’re always just missing it a little bit,” he says. “And there’s no reason for it. I really want to help that transformation.”

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Now I know why venture capitalists walk the halls at the University of Washington—you never know who you might run into. My timing was impeccable yesterday as I sat down with Kai Li, the co-founder and chief scientist of Data Domain (NASDAQ: DDUP), the Santa Clara, CA-based data storage company that just got bought by EMC (NYSE: EMC) for $2.1 billion in cash.

Li, who is a computer science professor at Princeton University (he has been visiting the UW for the past year and has some strong Seattle connections), made time for me despite his busy schedule. The deal with EMC has been in the works since June 1, when the Hopkinton, MA-based data storage and management giant launched its bid to acquire Data Domain despite a pending acquisition attempt by rival NetApp (NASDAQ: NTAP) initiated in May. Many twists and turns ensued, culminating in yesterday’s announcement by NetApp that it had taken itself out of the running, clearing the way for EMC’s takeover, at a bid of $33.50 per share.

Data Domain’s story is a compelling one. Li co-founded the company in 2001, together with Brian Biles (currently vice president of product management) and Ben Zhu (former chief research officer), with the idea of developing advanced “deduplication” software to get rid of redundant data before it gets stored, thereby saving companies storage space, time, and money. Li served as chief technology officer and CEO in the early days of the company, but since 2002 has been a consulting chief scientist and director. Over the next few years, Data Domain gained traction in the data backup and disaster recovery market and went public in June 2007, raising more than $110 million in an IPO.

In a wide-ranging interview, Li (left) talked about Data Domain’s technical approach, its market strategy, a little bit about the EMC deal, and the broader future of data storage. Here is an edited account:

Xconomy: So how does the EMC acquisition affect you?

Kai Li: I don’t know yet. EMC has been the leader in storage systems in general. They’re bigger than other players in the storage market, comparing with NetApp, IBM, HP, Dell, and Sun (now part of Oracle). EMC is the premier storage vendor for data centers. We haven’t been communicating with EMC because of the definitive agreement with NetApp, so I haven’t talked to EMC yet.

X: How does the deal affect Data Domain’s operations?

KL: EMC has written a letter to Data Domain employees. They said they’ll keep Data Domain …Next Page »

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Here’s a rare bit of good news from the venture capital world. Boston-based Excel Venture Management has nailed down a $125 million fund to invest in new life sciences companies that it hopes will have broad potential to shake up a variety of industries, including information technology and alternative energy.

Excel has been operating for the past 18 months, but has been tight-lipped about its strategy because it hadn’t yet closed its fundraising. The fund is led by a group of managing directors that formerly worked together for years at CB Health Ventures—including Rick Blume, Enrico Petrillo, and Steve Gullans, as well as Juan Enriquez, the founding director of Harvard Business School’s Life Sciences Project. I got an up-close look at what the firm is trying to accomplish from Enriquez.

The fund’s strategy is to look for ideas that have their roots in life sciences, but have broad potential as “platforms” that can be applied in other industries like IT, energy, agriculture, textiles, and chemistry, Enriquez says. This is becoming possible as biology is becoming more of a digital science, he says. The opportunities in life sciences are already starting to make an increasing impact on the financial statements of industrial giants like General Electric (a big maker of medical devices), DuPont (owner of Pioneer Hi-Bred International seeds), and even classic tech companies like Microsoft, IBM, and Google, which are betting big on digitizing healthcare and life sciences.

“About one-fourth of GE’s earnings come from healthcare and life sciences companies, which is getting larger, while the share of financial services is getting smaller,” Enriquez says. “At DuPont, the single largest driver of earnings is Pioneer seeds. For a lot of companies in a lot of industries, life sciences is the place they are looking for future growth.”

So that’s the lofty vision, but how is this supposed to work out financially? Plenty has been written about how the life sciences venture model is broken, partly because new drug development typically takes a decade or more, costs hundreds of millions of dollars, and has about a one-in-10 success rate in clinical trials. Excel’s answer to that? It will strictly invest in companies …Next Page »

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The healthcare industry is facing a shakeup in the way it uses information technology, and this is creating all sorts of opportunities for entrepreneurs in New England. This was the take-home message from some of the top minds in the Health 2.0 field, who we gathered together last week for a jam-packed panel discussion at the XSITE event at Boston University.

We heard from expert panelists on the front lines of this transformation in healthcare—such as John Halamka, chief information officer of both CareGroup Health System/Beth Israel Deaconess Medical Center and Harvard Medical School, and Joseph Kvedar, the director of Partners HeathCare’s Center for Connected Health—about how their respective organizations are changing the way they use the Web and other technologies to improve the delivery of medical treatment, among other aspects of healthcare. And IBM’s Bruno Nardone, the company’s national segment leader for state and local healthcare, filled us in on how Big Blue is working in the Boston area on such initiatives as a virtual radiology theater to enable new ways for radiologists and their colleagues to interact online.

It’s no mistake that there was a big crowd of more than 100 people for the Health 2.0 panel; there’s a lot doing at the crossroads of IT and healthcare these days. For one, President Obama is calling for nationwide adoption of electronic health records to help control the rising costs of healthcare in the U.S., and his administration tucked $19 billion into the historic $787 billion stimulus package this year to cover some of the costs of the major undertaking. That’s a potential boon for Boston-area companies that provide electronic health records such as Athenahealth (NASDAQ:ATHN). Locally, we’ve seen a recent surge in startup activity in the Health 2.0 arena, including the launches of young firms like Connected Health and Life Image. (For details on more startups in this field, Wade delineated Boston’s growing Health 2.0 cluster about a year ago.)

Here are some of the bigger themes covered during the Health 2.0 discussion:

—Leveraging technology to reach patients wherever they need care. At Partners’ Center for Connected Health, Kvedar says, his team of doctors and innovators are searching for ways to …Next Page »

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