Cray stays relevant by reinventing itself

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When the federal government wanted to develop a system to root out fraud, it turned to the Urika, a platform skilled at uncovering relationships among disparate data even experts might not see. The Centers for Medicare & Medicaid Services, which makes a half-trillion dollars a year in health care payments, wanted to find a way to identify and go after more than $60 billion annually in fraudulent claims.

The Urika graph appliance comes from a subsidiary of Seattle-based Cray Inc. and is part of a broader effort by Cray to reinvent itself as it seeks to respond to explosive growth in the new market widely referred to as “Big Data.”

Big Data, which seeks to pull meaningful intelligence on consumers, trends and markets from massive amounts of information, is all the buzz these days. But for Cray, it’s old hat. For decades, the company has been supplying powerful computers and ultra-sophisticated software to address intensive computing needs of a broad range of sectors that have long handled huge amounts of data, from medical research, weather forecasting and oil exploration to aircraft modeling and government analysis.

With the advent of the internet, e-commerce and cloud computing, hundreds of companies now have access to data they can mine for competitive advantage. IDC, the market research firm, valued the supercomputer market, including hardware, software, storage and services, at $21.2 billion last year. The hardware portion is worth $11.1 billion and grew by 29 percent in the same period. Cray has a 19 percent share of the $3.76 billion market for supercomputers that cost $3 million and up. IBM has a 45 percent share of that market.

IBM could easily eat Cray for lunch— its market cap is more than 20 times Cray’s $816 million. So how does Cray survive? “The answer is focus,” says Cray CEO Peter Ungaro.

“The way companies stay ahead of the game is by offering very specific products and at Cray, our whole focus is on supercomputing.”

Cray made its name and fortune by being the go-to supercomputer company for government agencies and research institutions. But increasingly, crunching large amounts of data has shifted from computers that used a handful of superfast processors to those that enlist hundreds or thousands of processors to sift through information. Cray is going after those new markets by offering customers a large lineup of systems at a broad range of price points. It is also responding to customer demand for related software required in crunching Big Data, including storage systems to hold all that data.

By creating a new storage division and developing new supercomputer models that target commercial customers such as Exxon, Boeing and GE, Cray has boosted sales to nongovernment customers to a point where they account for roughly 10 percent of total revenue.

Cray’s expertise in dealing with very large-scale problems—the mother’s milk of the supercomputer business—is the key to the company’s recent growth spurt. “This whole Big Data problem is increasing the number of customers who need our class of fast data access and fast data processing,” says Barry Bolding, Cray’s vice president of corporate marketing.

Traditional Cray installations cost tens of millions of dollars. Blue Waters, a petascale supercomputer at the National Center for Supercomputing Applications (NCSA) at the University of Illinois Urbana- Champaign campus, cost $188 million, including five years of support. One of the many Cray computers at Tennessee’s Oak Ridge National Laboratory cost roughly $100 million. Today, the company is offering lower-cost, “entry-level” Cray systems in the $300,000 range. And with its acquisition last year of Californiabased Appro International for $25 million, Cray has added a new line of highperformance computers in the $200,000 range. Those systems appeal to financial services companies as well as managers of high-end server installations.

The rising star on Cray’s horizon may well be the California-based YarcData subsidiary, which produces the Urika graph analytics computer system that is being used to tackle Medicare fraud. The computer has a breakthrough hardware architecture that can deal with 10 to 20 times more data at once than other computer systems. “If you can’t hold that data inside [your computer] for that big a problem, you can’t deal with the problem,” says Steve Conway, IDC’s research vice president for high-performance computing. The Urika system also has the ability to move data around and process it quickly, taking into account the newest data. Conway believes Cray will emerge as one of the leaders in Big Data.

Supercomputing systems in the past have excelled at data mining information, as long as the data were already within its database. (Remember IBM’s Watson supercomputer on Jeopardy!?) YarcData’s computer is designed to continue to search through more and more information, looking for “patterns in shifting sands” with the goal of uncovering relationships among the data that the system can later focus on to find more quickly what it is looking for.

The Medicare/Medicaid fraud issue is a good example of how YarcData’s analytics approach a problem. Each year, the Centers for Medicare & Medicaid Services process billions of claims, which typically must be paid within 14 days. While the organization has all the information it needs to do health care fraud analysis, it doesn’t have the time to do a good job, says Jeff Nichols, associate laboratory director at Oak Ridge. “In a perfect world,” he says, “it would be great if they could do real-time analysis of the claims that are coming in, and check for fraud and abuse.”

To make that happen, Oak Ridge is mining through years of beneficiary claims to understand the relationships between beneficiaries and providers or the correlations between the health of an individual and the various costs associated with the patient’s care to find patterns that might be used in the future to identify areas where fraud could be occurring. The lab is also setting up a system that would allow administrators to ask “what if?” questions about the Medicare and Medicaid operation.

One anticipated result of the project, which could take 10 years or more to complete, is to create a system that could identify health care fraud in real time, thus enabling the center to spot fraudulent payment requests upon submission and to stop payment on those submissions.

Nichols says YarcData’s computer is one of the few massively threaded architectures that can handle the graphic analytics needed. “We’re still in a learning mode in what [YarcData] can provide and how to use it,” he adds. Market researcher Gartner put YarcData on its 2013 Gartner Cool Vendor list for content and social analytics.

All this demand for Big Data analysis has helped push Cray’s stock price to more than double where it was a year ago, although the stock fell back after the company recently released disappointing earnings. IDC’s Conway remains upbeat on the company and believes the stock’s price drop is temporary.

Five years ago, says Cray’s Bolding, the firm was dependent on serving longtime customers of its old legacy systems. By investing in new software for its traditional systems, acquiring such innovative companies as YarcData and Appro, and building its storage business, Cray has found new sources of growth that will take it into new markets and bring in new customers.

“We’re a fairly conservative company,” he says, “picking markets for growth carefully and expanding year by year. But that’s our plan: to grow all these businesses to be significant.”

Welcome to the Drone Economy

Welcome to the Drone Economy

A new industrial sector is arriving — and nobody’s at the wheel.
| FROM THE PRINT EDITION |
 
 
 
Jim Tracy runs a company that maintains and repairs wireless communications towers, many of them in some of the most rugged and remote country across eight Western states.  Just getting to the towers sometimes requires off-road vehicles and snowcats, says Tracy, the CEO of Legacy Towers in the Kitsap County community of Burley. Then there’s the climb up the towers, which can range in height from 100 feet to 1,700 feet. Aside from the risk posed by the height, there are other hazards presented by things like the weather or nesting wasps. And if inspection of the relay antennas at the top reveals the need for a part or a tool the technician didn’t bring up on the first trip, there’s another climb down and back up to be made. If only there were a way to inspect towers for hazards and to diagnose the problem from the ground, reducing risks and time spent on the job.  But there is, one already known to amateurs and hobbyists and one increasingly being used in scores of businesses — the drone, or, more properly, the unmanned aerial vehicle (UAV).
 
Legacy Towers got its first UAV in late 2013 and has found them useful in making climbers safer and their tasks more efficient. “If you can throw a drone in there,” Tracy explains, “you can cover more ground with less fuel use.” A camera-equipped drone can be dispatched to the top of a tower to read the bar code on an antenna, look for damage or check to see if it has been knocked out of alignment.
 
“The first one you get, it’s kind of cool,” Tracy acknowledges. “[But] at the end of the day, it’s just another tool.”
 
The power and potential in that tool are such that people are finding applications faster than technology developers or regulators can keep up. They’re also finding more places to deploy these devices.  Most of the attention has gone to things that fly — think Amazon’s experiments with drone deliveries — or operate on the highway, with Google, Tesla and every major auto manufacturer pursuing hands-free operation of cars. But driverless/pilotless/autonomous vehicles are also finding their way to, and doing work now, on rail networks, on farms and on the seas.
 
In the process, the people who write the software; make the antennas, sensors and other pieces that make the technology possible; build the trucks, cars, planes and boats that employ it, and apply it to problem solving in virtually every industry, as well as to those who collect and analyze data from drones, are building what might be called, for lack of a better term, the Drone Economy.
 
This drone economy isn’t a “maybe someday” promise of a flourishing economic sector. It’s already here. Much like the developing local space-business cluster (Seattle Business, January 2016), Washington is becoming one of the nation’s centers of research, development and commercialization of drone tech, with dozens of companies actively involved in it.
 
Creation of a new job-generating tech sector won’t be the only way the Drone Economy’s influence will be felt, either in this region or globally. Entire industries, and not just those dealing directly in transportation, stand to be reshaped by the products and services they already are bringing to market.
 
The activity and potential of the Drone Economy has caught the eye of state government, which in October convened the first meeting of the Unmanned Systems Industry Council. John Thornquist, who heads the state’s Office of Aerospace, says the council’s purpose is to get people in the industry talking to one another and to officials at all levels of government, to hash out issues that may limit the sector’s potential and “to help that ecosystem thrive.”
 
The idea of cars, boats, trains and planes that pilot themselves has been the stuff of science fiction and futuristic museum displays for decades. Some pieces of the technology have been around for years as well, as any kid with a remote-control car, boat or plane can attest. Real-world, full-size applications aren’t rare, either. Sea-Tac Airport’s subway system between terminals operates without on-board drivers. So does the SkyTrain system in Vancouver, British Columbia. Remote-controlled locomotives have long been used in switching yards.
 
But those applications are in closed spaces or networks, and the rail industry has had much less success applying the technology to long-distance freight networks. The Drone Economy is being built on the idea of getting autonomous vehicles, aircraft and vessels onto roads, into the skies and on the water.
 
A convergence of factors allows this transition to happen. Paul Kostek, a past president of the IEEE Aerospace and Electronics Systems Society and a Seattle-based contractor and consultant to tech companies, says the technologies that make autonomous vehicles and aircraft possible started out as solutions to other problems. In aviation, for example, where “weight and space are always critical,” the continuous drive for lighter and stronger materials made drones possible by dramatically shrinking the size, weight and power requirements. In automobiles, technologies developed to make driving safer, such as parking assistance and collision warning and avoidance systems, can easily be extended to help remove a human driver from the process.
 
 
Jim Tracy of Legacy Towers sees drones as another handy item in the toolbox.
 
Drone development has also borrowed from technology developed for use in fields outside transportation. WiBotic, a University of Washington-based business developing wireless recharging systems for aerial, marine and land drones, started with a charging platform for implantable medical devices like artificial heart pumps. “Drones need a way to scale in a way that power is not going to be a limiting factor,” says Ben Waters, WiBotic’s cofounder and CEO.
 
Technology has improved not just the vehicles themselves but also the images onboard cameras produce (thanks to stabilization) and the flight controls for operating UAVs. Adoption of the technology in the commercial sector has been accelerated, Thornquist says, by the low cost to buy and try one, and the often quick return on investment.
 
Kostek cites one other important factor propelling the Drone Economy: “Very rich people are interested in this.” With people like Tesla’s Elon Musk and companies like Google putting money into drone development, Kostek says the sector, much like commercial space, is being driven by “outsiders with capital to spend.”
 
Consumers also deserve credit for taking what were dismissed as toys and demonstrating their commercial potential, particularly for aerial photography, Waters notes. “They provided a unique perspective on how to do things.”
The result: An explosion of R&D and commercialization, much of it driven by a passel of regional companies and institutions:
 
■ Boeing-subsidiary Insitu, based in the Columbia Gorge town of Bingen, has been regularly winning multimillion-dollar contracts from the military for its surveillance drones. The company has expanded its commercial products and services, set up a business unit specifically for that purpose and participated in a project with BNSF Railway to use drones to inspect rights of way in remote areas.
 
Aerovel, based in White Salmon and founded by Insitu alumni, has been developing drones small enough to be launched from a fishing vessel, to look for schools of fish. An Aerovel Flexrotor was used to provide aerial scouting of routes through the ice of the Beaufort and Chukchi seas for a workboat fleet retrieving mooring anchors.
 
■ Thanks to Insitu, the Columbia Gorge has developed a mini-cluster of drone-related companies like White Salmon-based 
Sagetech Corporation, which makes small transponders to identify and control military and civilian drones.
 
■ Bellevue-based Paccar was playing with remote-control technology at its Mount Vernon research center as far back as the 1990s. More recently, it showed at an annual meeting a video of a demonstration of maneuvering and parking a truck at a Walmart distribution facility. Its European subsidiary DAF was one of a half-dozen truck manufacturers participating in an on-highway test of platooning — a tightly spaced convoy of trucks in which the trailing vehicles are driverless.
 
■ Few industries have leapt into drone technology with the enthusiasm of agriculture. Washington State University’s Center for Precision and Automated Agricultural Systems in Prosser has multiple research projects underway, including using an eight-rotor octo-copter to monitor irrigation in vineyards.
 
■ If you’re going to have a drone industry, you might want to have people trained in their operation and maintenance. Green River Community College offers an associate’s degree in unmanned aerial systems and a certificate for UAV operators; Big Bend Community College in Moses Lake has launched programs in mechatronics, sensor analysis and flight operations.
 
■ The University of Washington’s College of Engineering, meanwhile, has its Autonomous Flight Systems Laboratory to “support advances in guidance, navigation and control technology” for UAVs, and to integrate the technology into flight mechanics and controls courses in the university’s Department of Aeronautics and Astronautics.
 
■ Tech-sector senior statesman Tom Alberg, cofounder and managing director of Madrona Venture Group, co-authored a widely discussed think piece proposing the devotion of part of Interstate 5 between Seattle and Portland to autonomous vehicles. “We cannot predict the specific adoption rate for autonomous vehicles, but we believe that widespread adoption of autonomous vehicles is inevitable and will be here sooner than most observers expect,” the essay says.
 
■ Alberg adds Madrona has been backing its belief in the coming of the drone/autonomous age with a significant investment in Bellevue-based Echodyne Corporation, which is developing small, lightweight radars that could be used in UAVs and autonomous vehicles.
 
Clockwise from left: Aerovel's Flexrotor is designed to operate over oceans and remote areas; WSU Professor Lav Khot
prepares to fly an octo-copter over a vineyard; an Autel Robotics drone equipped with WiBotic wireless power solutions.
 
A drone economy could well reshape businesses directly involved in the production or use of UAVs. Commercial real estate services firm CBRE recently issued a report on the impact of technologies including autonomous vehicles on its industry. Driverless trucks, for example, will increase the distance and hours those vehicles can operate, reducing costs. Supply chains will be able to operate with fewer but larger distribution centers, but those warehouses will have to be built to receive and deploy the new generation of autonomous delivery trucks.
 
The speed with which technologies are being readied for market is also one of the barriers to their adoption, as lawmakers and regulators scramble to keep up and deal with thorny practical issues like safety, liability and traffic management on the ground and in the air (e.g., how do vehicles and aircraft operate in the same space at the same time?), not to mention broader societal issues such as privacy and job gains and losses.
 
“The technology is going to be ready before the world is ready,” says Paccar President and CEO Ron Armstrong.
 
Mike Dozier, general manager of Kenworth, a Paccar subsidiary, says many of the technologies that make autonomous trucks possible have been showing up on trucks for years — lane-departure warning systems, drowsy-driver monitoring, even adaptive cruise controls that use GPS data to tell the engine to apply more power when the vehicle is approaching an uphill grade.
 
The truck is packed with data-generating sensors and equipment, for which costs have been steadily declining, adds Paccar SVP Kyle Quinn. The issue, Quinn points out, has been “how do you manage all the information coming off the sensors and interpret it?” 
 
Answer: creating breakthroughs in image processing and artificial intelligence. In other words, software is starting to catch up with the capabilities of hardware.
 
It may be some time before drivers are banished from the truck cab, the Paccar brass cautions. Drivers have duties beyond steering, accelerating and braking, such as securing the load and making sure it stays in place. They’re also needed to handle unexpected situations that autonomous systems aren’t sure how to manage.
 
Still, none of those barriers seem as daunting as what the commercial space business faces, and it’s been able to grow in spite of the challenges. Further, if regulators aren’t moving as fast as many advocates of drones and driver-free vehicles would like, they also aren’t saying, “No way.” 
 
For example, the Federal Aviation Administration issued its Part 107 compendium of rules in mid-2016 to govern use of commercial drones according to weight, speed, height, operator certification and other criteria. While it’s a long list, it does give those interested in the technology’s use some certainty. The FAA has also authorized research projects on flying UAVs beyond the operator’s line of sight, such as the Insitu-BNSF experiment.
 
The industry itself can do a lot to allay some of the safety fears of regulators and the public, Waters says, by “moving reliability from pretty high with top-of-the-line consumer devices” to commercial units with virtually no potential points of failure, and which have safety devices in place in cases of power loss or collision.
 
The technology also has the potential to mitigate problems it creates and solve others. Driverless trucks, for example, threaten the jobs of drivers. But the trucking industry has long been dealing with a chronic shortage of drivers; the American Trucking Associations reported the turnover rate at large fleets was 83 percent in the second quarter of 2016. And even as they eliminate jobs in some sectors, drones and other autonomous vehicles could create more in others. The FAA news release on approval of Part 107 says the new rules could help generate more than 100,000 new jobs in the next 10 years. 
 
Regulators and legislators will be under pressure to keep up with the explosion of applications. Forest fires can be monitored closely but safely. Insurance companies can inspect storm damage on homes — and transmit images to the home office — without sending an inspector onto a potentially precarious roof. Kostek, a resident of Seattle’s Green Lake neighborhood, came up with the idea of using drones to monitor the lake’s health. Farmers are already working with autonomous trackers guided by GPS. Underwater drones can inspect boat hulls. A local police department has used aerial drones to document auto accident scenes, allowing officers to reopen roads sooner.
 
Waters expects the boom to be even bigger in a few years, when companies now seeking  funding bring their products to market.
 
Kostek agrees. “We’re still early, early on as to how these technologies will be applied,” he predicts. “Somewhere, there’s a smart kid playing around with an idea none of us has thought of.”