Cray stays relevant by reinventing itself


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.”

[Virtual] Reality Check

[Virtual] Reality Check

Seattle companies will cash in on the coming VR explosion. How it plays out beyond gaming is the next big question.
After years of hype about virtual reality, it stands ready to move from The Matrix and Avatar into real life, with applications ranging from gaming to e-sales, from collaborative product design to remote surgery. What’s more, many companies in the Seattle region will reap the benefits.
“It is a paradigm shift,” says Bob Berry, CEO of Envelop VR, a virtual reality startup in Bellevue. “It’s a new form of computing that is just as transformative as mobile was. We are entering the age of immersive computing.”  
Those heralding the arrival of market-ready VR aren’t merely the ones developing the technologies. Investors have become true believers, too. Matt McIlwain, managing director of the tech-oriented Madrona Venture Group, says he was a VR skeptic until recently. “Eighteen months ago, I started meeting with a group of companies that had very early developer kits,” says McIlwain, who noticed two things had changed from earlier efforts. First, the VR experience was “pretty darn good.” Second, he adds, “I didn’t feel woozy coming out of the experience.”
Forest Key, CEO of Pixvana, a Seattle startup developing cloud-based tools for VR, couldn’t agree more. “VR in the 1990s made me vomit,” Key relates. But thanks to rapid advances in the underlying technologies, such as faster processing, better graphics and new methods for tracking movements, says Key, virtual reality systems that will hit the consumer market this year are more immersive and much less likely to induce “simulator sickness.”
“For hundreds of dollars, or certainly in the low thousands, you can build a rig that is superb in its capabilities and fully capable of tricking your brain into the effect that virtual reality strives for,” Key says. “Once done correctly, it’s like time travel, teleportation and science fiction all in one. It magically transports you to different places and profoundly allows you to have a psycho-perceptual experience that is different than watching a rectangle on a web browser.”
The launch this spring of three much-anticipated VR headsets — Facebook’s Oculus Rift, the HTC Vive and Microsoft’s HoloLens — spurs the optimistic frenzy. The Oculus Rift costs $600 and the HTC Vive goes for $799; both are aimed at the consumer market. Microsoft is selling 
HoloLens as part of a developer’s kit for $3,000. It’s aimed at game makers as well as those developing practical applications. 
Of the three companies that have introduced new headsets, only Microsoft calls the Seattle region home. But HTC, which developed its Vive headset in partnership with Bellevue’s game colossus, Valve Corporation, headquarters its United States operations in Bellevue, and its VR offices are in Pioneer Square, about a mile from the SoDo site where Oculus VR recently opened an R&D office.  
Los angeles, Silicon Valley and Seattle constitute the three major hubs for VR development, but Seattle may be ideally positioned to benefit most favorably from the coming VR explosion. While Los Angeles has a large pool of entertainment talent to draw from and Silicon Valley has an edge in hardware development, Key says Seattle has two major advantages: companies with long experience in game development and a vast knowledge of cloud services. While single-person VR experiences can run on isolated computers, Key notes, running interactive VR applications requires a cloud-based infrastructure.
“In three years,” he predicts, “no one will be debating whether the hardware is ready. It’s going to entirely become a question about software, about content.” In fact, Tom Furness, a professor of industrial engineering at the University of Washington and considered by many to be the godfather of VR, says, “The hardware is here. Now it’s about the content and tools to help us develop content easier and better. We don’t have those tools right now.”
Furness recently joined Berry’s Envelop VR as its senior scientific adviser. He says he chose to work with Envelop because it is developing what he considers “the most essential component” for the VR industry. “It is the superglue that brings together and integrates all of the hardware, software and experience design components that make VR an empowering tool for mankind,” Furness says.
Madrona Venture Group has been a lead investor in many of the burgeoning VR companies in the region, including Envelop and Pixvana. McIlwain believes the concentration of game and cloud application developers makes the Seattle region the natural location for developing VR content and the tools required to create and deliver the content.
“The gaming ecosystem in Seattle is really good,” notes McIlwain. “But, then, this is also the cloud capital of the world. I can go down the street and talk to my buddies at Microsoft and Amazon and ask, ‘What kind of use cases are people using you for? What are the next things you’re building? Why do you need to support this kind of video encoding?’”
Key says gaming will be the primary driver of consumer VR sales, but investors and developers alike see VR as a much broader game changer — from education to health care to manufacturing. “[For example,] meetings and conferences,” Key observes. “Meeting with your doctor or your trainer. Any kind of one-to-many or one-to-one communication will be very powerful in VR.  It might be education, or therapy.” 
Furness matches Key’s excitement at VR’s potential for bridging distances. “It’s basically a transportation system for the senses, where you can meet with other people even though you’re not physically co-located,” Furness notes. “You can bring people together and get bandwidth not only to the brain but between brains.”
It’s not quite the Vulcan mind meld Mr. Spock used to great advantage in Star Trek, but it’s close. “[VR] will let us look through somebody else’s eyes, let us communicate our perspectives and [give us a space] where we work on things together,” Furness told KUOW last year.
In the training sphere alone, whether it’s showing surgeons how to remove a gallbladder or giving aircraft technicians a how-to on painting a helicopter — without wasting any paint — VR promises to revolutionize how teachers teach. 
Even Seattle companies you wouldn’t immediately associate with VR are getting into the act. Boeing, which has long used augmented reality for flight training, used VR in the aforementioned example on painting helicopters. Amazon and Vulcan are hiring software engineers with VR expertise, Amazon apparently with an eye on its growing position in film and television production and Vulcan expressing a vague interest in “developing cutting edge solutions in augmented and virtual reality technologies.” 
“There are a lot of exciting applications that are in the commercial realm in addition to the consumer realm,” adds McIlwain. He envisions a group of architects “walking around” inside a building in VR, discussing design changes. “Or I can Skype into an interactive session to help a doctor figure out a diagnosis, or help someone repair something in a manufacturing facility. I don’t have to be physically present.”
Microsoft designed HoloLens primarily for such nongaming markets. At its Redmond campus last fall, the company demonstrated HoloLens by giving users a full-size 3-D view of a new Volvo sedan, with the ability to look under the hood and remove elements to explore the chassis and power train. Volvo is exploring having its engineers use HoloLens in the design process. One Microsoft video shows a designer looking at a motorcycle and simply touching and pulling on the gas tank, for example, to change its shape.    
E-commerce constitutes one of the most immediate and massive nongaming markets for VR. Imagine, Berry says, shopping on for a tent that sleeps six. How big is that tent, really? Big enough for six large people?
“I have no way to reason about the actual size of that tent other than looking at 2-D images, or maybe a little 3-D model I can spin around,” Berry says. But imagine clicking on a button next to the tent to summon up a VR view. “Suddenly,” he explains, “you’re inside the tent at scale and you can actually get a sense of how big the thing is. VR allows you to sense scale in a way that your brain can actually understand.”
As game makers move into the VR space, new startups in Seattle zero in on developing the tools that will simplify developing those games, as well as any other type of VR application.
Envelop VR, which launched in July 2014, developed a VR shell that goes around the Windows computer, allowing users wearing an Oculus Rift headset to work in Microsoft Windows in a 3-D environment. A camera on the Rift headset offers the user a view of the keyboard or mouse so he or she can control the immersive experience of Windows.  
The company is also building tools that let developers convert 2-D objects created in, say, AutoCAD, into 3-D objects in a virtual app in the environment. Besides allowing users to explore tents in 3-D while shopping online, the technology can be used in other sectors, such as manufacturing. “An engineer on an auto manufacturing line could put a headset on, export a 2-D design into a VR environment and walk around the object, lean their head into it and evaluate in a much more intuitive way,” Berry says.  
Pixvana focuses on delivering a cloud-based video-processing and delivery platform for virtual reality applications. After working on the Silverlight team at Microsoft, and before that as a visual effects specialist at Industrial Light & Magic, Key was aware that VR hardware, to be effective, will require new technologies for processing video at required speeds, especially when interactive applications require cloud services.
The new VR applications, says Key, “will require new kinds of tools, new kinds of production process, new kinds of experiential viewing processes. That’s what Pixvana’s mission is.”
As engineers put the finishing touches on the soon-to-be-released VR headsets and technologists of various specialties prepare the infrastructure the headsets will run on, industry insiders are not entirely specific on how VR will affect the economy and society. But they are convinced the impact will be huge.
In the near term, McIlwain predicts VR products will be adopted quickly. “Smart headsets will become pretty ubiquitous in two to four years,” he says. “Based on what I’ve seen, this stuff is pretty high quality and the chances are good that we are going to get some pretty good headsets out there in the second quarter. And then we’re going to have a big uptake cycle for the holiday season.”
As for the longer term, Key believes VR will be as disruptive to earlier technologies as cinema was to vaudeville. “The idea of sitting and watching a static rectangle on a screen will be very passé in 10 years,” he predicts, “because virtual reality is so fundamentally compelling. It’s magical.”  
Thanks to that magic, VR pioneer Trond Nilsen told a meeting of the Washington Technology Industries Association last November that we’re all going to live at least part of our lives in virtual reality at some point. “[And] the world,” Nilsen promised, “is going to get strange.”