McData's acquisitions of Nishan Systems and Sanera Systems last week put it in the middle of a select group of manufacturers - including Brocade Communications and Cisco - that are embedding applications in their Fibre Channel switches.

The company's acquisition of Nishan for $83 million and Sanera for $102 million cash will increase not only McData's director-level switching capabilities but also add intelligent applications, iSCSI network support and Fibre Channel over IP distribution of data over distances to its portfolio of products.

"The combination of Sanera with a great core switching architecture, as well as Nishan with is ability to do [storage-area network] routing, is beneficial," says Jamie Gruener, a senior analyst with The Yankee Group. "As customer SANs have gotten larger and larger, there has been a need for McData to figure out how they are going to deal with that issue."

McData sees that adding application support to its switches will help it enable data movement and virtualization of storage within businesses. Virtualization is used to give a logical representation of disparate physical storage so it can be managed, allocated and monitored more easily.

Nishan, a vendor that was funded for $90 million, manufactures Fibre Channel over IP (FCIP), Internet Fibre Channel Protocol (iFCP) and iSCSI products. FCIP lets users distribute Fibre Channel data over the IP network. The iFCP converts Fibre Channel data to IP for transmittal over IP networks. The iSCSI protocol lets Fibre Channel data be transported over the Ethernet network. McData says it will integrate Nishan's products into its line of director-level switches.

Sanera, on the other hand, builds a 256-port director-level Fibre Channel switch that can be partitioned into zones for easier and more secure management in enterprise-size businesses. The start-up, which was funded for $101 million, makes the DS10000. McData will continue to market this product and over time will integrate its features into its own McData director-level switches.

McData is not the only company snapping up start-ups that make intelligent Fibre Channel switches. Last year Cisco acquired Andiamo Systems for an estimated value of $2 billion and Brocade bought Rhapsody for $175 million. Earlier, Cisco made its entry into storage with the acquisition of iSCSI gateway vendor NuSpeed. Of the vendors that make director-level Fibre Channel switches, only CNT/InRange has yet to acquire a company that would let it add intelligent applications to its products.