NAS Goes Mainstream

Tough times aren't keeping the technology from gaining acceptance in corporate IT departments

November 3, 2001

3 Min Read
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This years plunge in information technology spending has obscured amajor strategy shift by IT managers. Despite the painful purchasingslowdown, the deployment of network attached storage (NAS) filers is quicklymoving from the realm of niche product for engineering geeks to an IT staplethroughout corporate departments in fields ranging from manufacturing tomedicine.

As recently as a year ago, NAS appliances were used mainly by technologycompanies, dotcoms, and engineering departments. Along with the rest of thefallout in tech spending, overall NAS revenues at vendors like Network ApplianceInc. (Nasdaq: NTAP)have dipped during the last couple quarters. But, while sales of NAS filersto technology-centric business units have stagnated, mainstream businessesin other vertical markets have spotted the value of NAS and are increasingspending accordingly.

NetApp CEO Dan Warmhoven noted at a Prudential Securitiesconference this week that his company has experienced an $80 millionquarterly revenue shift. During the quarter ending in April 2000, justbefore the economy began to unravel, 70 percent of NetApp’s $200 millionrevenues were sales to technology businesses and departments and to dotcoms. Theremaining 30 percent were to non-tech business units.

By the quarter ending July 2001, when revenues were again $200 million,the numbers were reversed. Now, 70 percent of sales are to non-tech businesssegments. (NetApp will announce its financial results for its October quarteron Nov. 13.)

The key industries NetApp now sells to are telecom services, financialservices, energy, manufacturing, life sciences, and government. NetApp beganits relationships with major customers by first selling to their engineeringdepartments. Now the company sells to various departments within majorclients like Merrill Lynch & Co.Inc. (NYSE: MER), Citigroup, and The Hartford, notes Rod Mathews, NetApp's director of investorrelations.An EMC Corp. (NYSE: EMC)spokesman says his company has been selling its NAS products across variousdepartments at major enterprises for a longer period. But he declined togive a breakdown.

Industry analysts are convinced that rapid NAS deployment acrosscompanies of all sizes will quickly become a no brainer. That’s because thetechnology is quickly and cost effectively scaling to the low end for smallworkgroup uses and to the high end for large databases.

“Until very recently, NAS boxes were not able to reach the database side,” says Arun Taneja, an analyst with The EnterpriseStorage Group Inc. He says that now, thanks to some emerging products from companies likeNetwork Appliance and startup BlueArcCorp., even big Oracle databases can be cost-effectively accessed with NASfilers. He adds that several other startups are also poised to penetrate thehigh-end market.

Meanwhile, Auspex Systems Inc. (Nasdaq: ASPX), the company that pioneered the first NAS boxes in 1987and hopes to return to its former glory, is starting to see its equipmentdeployed across large enterprises. For example, French oil and technologyconglomerate Schlumberger originally purchased high-end NAS boxes fromAuspex to use in its software development department. Schlumberger recentlyupgraded to Auspex’s NS 3000 models and uses them for its entire emailsystem and for software downloads worldwide, says Mark Amelang, Auspex's director ofmarketing.

Vendors selling low- to mid-range NAS products are seeing more widespreaddemand but also much more competition. Over the last year or so, severaltraditional storage and computer companies have dived into the market forlow-end NAS products and are rapidly driving down prices. They include

Maxtor Corp. (NYSE: MXO), Dell Computer Corp.(Nasdaq: DELL), Compaq Computer Corp.(NYSE: CPQ), IBM Corp. (NYSE: IBM), and Quantum Corp. (NYSE: DSS),through its acquisition of Snap Appliances.Snap got its foot in the door with a large soft drink manufacturer byselling its filers as temporary storage for the manufacturer’s Windows 2000migration project. “Now, we’re getting calls from other departments therewith storage problems,” says David Bangs, Quantum’s vice president of U.S.sales for NAS products.

Parsa Rohani, vice president of marketing and strategic planning at

Procom Technology Inc., says his sales over the last 10 months have moved more into thefinancial services arena at companies like UBS Warburg. Radiology departments at hospitals are also becoming key customers, hesays, as “they now have a huge need for online storage.”

— Tom Davey, special to Byte and Switch

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