NetApp Plans to Continue Scaling To New Heights

At its recent meeting for industry analysts, NetApp not only trumpeted its most recent successes in the market and demonstrated its current wares, but executives also revealed the vision and strategy that they believe will allow the company to continue on its yellow-brick road of growth.

David Hill

June 9, 2011

7 Min Read
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At its recent meeting for industry analysts, NetApp not only trumpeted its most recent successes in the market and demonstrated its current wares, but executives also revealed the vision and strategy that they believe will allow the company to continue on its yellow-brick road of growth.

Now, NetApp is as pure a storage vendor as you can find. More specifically, NetApp is a disk array company. The only other pure storage player of enterprise-class size today is Hitachi Data Systems (HDS), as EMC has significantly broadened its portfolio to become an information infrastructure company. The real value-add of modern disk arrays comes from the software that works in conjunction with them, starting with the storage OS and including a wealth of storage management solutions focused on physical storage processes and data management, including snapshot and replication software.

Tom Georgens, NetApp’s president and CEO, presented the company update and strategy. One of his primary responsibilities is to increase shareholder value. The fact that NetApp just finished its fiscal year 2011 up 30% in revenues, to $5.1 billion, has not been lost on the financial markets, which have rewarded NetApp with an increase in share price (roughly $60 share). Georgens pointed out that NetApp is of large enough revenue size to be bought by investment houses, and that there were only half a dozen or so IT companies (such as Google) with a dedicated product focus that could fall into that category. From an IT perspective, that means that NetApp seems to be doing a lot of things right.

Georgens stressed the importance of corporate culture as a competitive differentiator. The fact that NetApp has scored high on best places to work surveys is nice, but what that translates into from a company perspective is employee dedication, focus and innovation, which has translated into continuing growth. He also emphasized that NetApp is a product company and not a services player. Although professional services are important and NetApp will provide some service, NetApp will continue and even extend its emphasis on partnerships and third-party relationships, such as with VARs, system integrators and OEMs.

Georgens believes that, through product leadership, NetApp can take advantage of market growth opportunities and use that emphasis to take market share from competitors. Thus, the company can continue to evolve from being viewed as a technical computing company to also being considered a business computing company from a storage perspective.

Although the global macroeconomic outlook is dreary, NetApp plans to pour on the investment even at the risk of overshooting a little. The company doesn’t want to let opportunities slip away by being too cautious. As an analyst, I feel this approach by a number of IT vendors, not just NetApp, offers a higher upside reward than downside risk even though no one has a crystal ball on the economy.Manish Goel, executive VP of product operations, and other NetApp executives then went into a discussion on NetApp innovation and product strategy. The company views its first decade of innovation (the 1990s) as being about performance, such as in optimized file systems. The second decade (the 2000s) added an emphasis on efficiency as a basis of innovation, such as thin provisioning and deduplication. The new decade (2010s) adds a third point of emphasis on scale. NetApp intends to focus on maximizing the benefits of virtualized environments, as well as enabling a flexible, shared storage infrastructure at scale. While still focusing on performance, such as in the use of flash drives and on efficiency both from a cost and operational perspective, scale takes center stage.

NetApp believes that storage will evolve from shared virtualized storage and scale-out NAS today to a unified architecture at scale, which means the ability of unified storage (SAN plus NAS) to work effectively without having an upper boundary on performance or capacity. The company plans to extend its unified architecture approach with the release of Data ONTAP 8.1 in the near future.

Until its acquisition of Engenio, NetApp had only one storage OS to its credit--Data ONTAP. ONTAP 8.0.1 is now available, but this is really the stage that 8.1 will start to exploit in a major way the capabilities that are necessary for a unified architecture at scale. Note that this is the start of a 10-year innovation agenda that NetApp has planned, so the end goals are not going to be achieved with 8.1, although it is a strong start to the journey.

Now, NetApp was a pioneer in unified storage, but the company emphasized that its unified architecture will be about much more than mere protocols. Scaling will focus on three dimensions: performance, capacity and operations. Storage efficiency will continue advances in areas such as compression and thin provisioning. Cost/performance will deliver new ways to exploit technologies such as flash cache and SSD.

NetApp stresses a comprehensive program for data protection that it calls integrated data protection that includes strong snapshot technologies. Tying everything together is a strong focus on management and ecosystem integration, including unified management, secure multitenancy and support for multivendor virtualization solutions that would seem to be mandatory to facilitate customer acceptance in many IT environments.

Data ONTAP 8.1 expands system scalability to 24 nodes and a single name space. However circuitous a path NetApp followed, I don't know, but this provides thecapabilities that the company sought with its Spinnaker acquisition and surfaced briefly as GX. The key is that the capabilities are now in Data ONTAP 8.

NetApp has numerous objectives for its 10-year agenda, but two of them are “infinite and immortal.” Infinite in this sense does not mean the mathematically pure definition of infinity, but rather that scale becomes so large that there are no real size boundaries. Storage containers will be able to scale up, scale out and scale down to handle petabytes of data and billions of objects as necessary. In NetApp parlance, immortal simply means that workloads can be moved non-disruptively and in an operationally transparent manner, such as in migrating data in an old array to a new one. By nearly any measure, NetApp has an ambitious agenda, but its goals seem to be realistic.NetApp recently acquired Engenio from LSI. This means that NetApp now has a second line of disk array products and one with a different storage operating system. The company has no plans to merge the two different platforms, which seems like a good idea.

NetApp stated that its unified architecture based on Data ONTAP will continue to target IT and cloud infrastructure markets while Engenio will focus on the "big bandwidth" applications, such as full motion video capture, digital video surveillance, and seismic and weather modeling. NetApp bets that the "big bandwidth" market will be an essential part of big data along with big analytics and content repositories.

Now, having a second and distinct product line is likely to cause some cognitive dissonance on the part of at least some NetApp personnel. However, other large IT vendors have successfully managed much larger acquisitions and greater portfolio diversification. NetApp will simply have to learn to adjust if it wants to succeed in attaining its growth objectives.

This all seems to be pretty good news, but it does not mean that NetApp lacks challenges of its own--challenges that it recognizes. One is that server heritage companies--such as Dell, HP and IBM--may increasingly emphasize and sell integrated solutions to customers, meaning NetApp won’t even get a chance to bid in those circumstances. A second is that OEM customers focused on commodity storage continually evaluate, whether it is best to work with NetApp or do it themselves, so NetApp has to continually demonstrate how its products and strategies are really in the OEMs' best self-interest. A third is that competitors with ever-expanding focus areas and solution sets, such as EMC, have a number of strengths, including financial muscle and product development strategies, that a specialty firm like NetApp will find difficult to address or beat.

That said, during the course of its analyst event, NetApp seemed level-headed, down to earth, practical and realistic. For example, it recognizes the potential in both the cloud and big data, but puts them in perspective in the overall storage scheme of fulfilling both current and future customer needs. NetApp also has a history of successful execution and innovation, and it seems reasonable that the company should be able to continue that tradition. Overall, this suggests that NetApp should continue to be a considerable competitor in the disk storage system market. This all suggests that the ongoing data storage wars should continue to be interesting, with customers being the greatest beneficiaries.

At the time of this publication, NetApp is not a client of David Hill and the Mesabi Group.

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