NetApp Growth and the Waves of Virtualization and Convergence

While NetApp has not changed it's tagline from "Go further, faster", they talked about having a goal of being Infinite and Immortal, so I thought a Highlander reference was in order.

At NetApp’s analyst event this week, CEO Tom Georgens and his executive staff put forward a strong vision of how NetApp will continue to maintain growth for many years. The company recently posted FY11 results of $5.1B, an impressive 5-year 20% CAGR and now has over 11,000 employees. Georgens framed the success by sharing that the only technology companies with over $4B in revenue and 5 years of organic growth over 20% are: Apple, eBay, Google, Huawei, Amazon and NetApp. NetApp believes that it has plenty of room for growth for many years since 1.5% market share growth in storage is 20% growth. NetApp’s focus is to be an innovation leader, with strong go-to-market breadth, strong support and services and a big focus on having the best team. NetApp is quick to dismiss the server vendors and frame the battle as EMC vs. NetApp, stating that IBM, Dell and HP don’t sell storage where they don’t sell servers. Over last 2 years – NetApp 45% growth, EMC 17%, IBM and HP nearly flat at 1% and Dell -12%. While storage shows no signs of weakness, there are significant new trends that are transforming datacenters and beyond to service providers and clouds. NetApp talked about its vision for creating storage that is “infinite and immortal” and while this seems like a good BHAG, will the waves of virtualization and cloud wash away the competitive advantage of the independent storage companies?

There is a limited budget for IT and therefore there is a constant industry wide tug-of-war as to how much intelligence (and therefore dollars) should go into servers, network and storage devices. Server virtualization pulled intelligence and dollars away from the server manufacturers and into the hypervisor. Server virtualization had a ripple effect on storage and networks, which the industry is now fixing with virtual storage and virtual networks (fabrics). NetApp and EMC are heavily invested in having “vm-aware” storage and customer say that they are doing the best job of creating storage that is integrated with storage. The balance that the independent storage vendors must keep is driving towards making storage “invisible” to manage in virtual or cloud environments, yet still maintain differentiation so that fast followers can not displace the leaders.

The related trend to virtualization is convergence. NetApp defined truly converged storage as being not only multi-protocol, but also a single set of technology with a single set of tools across all markets. This message is similar to a fully converged stack of compute, network and storage. NetApp is working closely with Cisco to create FlexPods to try and displace single vendor stacks like HP’s Converged Infrastructure solutions (see my write-up of VCE Vblock, NetApp FlexPod and HP CI). HP is blurring the line between compute and storage and VCE and HP both managing the full stack with a single management tool. NetApp readily admits that it is not the natural center of IT orchestration, rather it partners with VMware, Microsoft, Cisco, BMC and CA for full stack management. As convergence solutions gain prominence, there is a requirement for management of IT silos to transition to more IT generalists. The challenge for independent storage vendors is that storage administrators are typically the biggest proponent of buying best-of-breed devices, so a continued push to be relevant to virtualization administrators and cloud architects is critical.

NetApp does have a number of server vendors that OEM its filers, but in recent years there has been more coopetition with NAS when IBM launched SONAS and HP acquired IBRIX. While the technology focus of NetApp’s recent Engenio acquisition is at hyper-growth environments where there needs to be a different cost structure than traditional storage, the purchase increases OEM ties with a number of server vendors. NetApp understands that it needs to leverage OEM, SIs and service providers to reach a broad enough market to continue growing against competition that will always have more people.

One thing that was very clear from the many meetings is that there is a clear vision as to where the company is going and that everyone is pulling in the same direction. The shared vision and enthusiasm of the employees, partners and customers that were at the analyst event are testament to how NetApp’s culture and success. While there can be limits to how long NetApp can continue its growth rate without expanding to other portions of the stack or other adjacencies, the waves of change have not moved that fast yet.

 

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  • Paul Sorgiovanni

    Great Write up Stu. 

    As a NetApp, VMware, Microsoft and Cisco partner i have found that the success that NetApp have seen and the staggering growth over the past few years is linked to their channel first mentality. NetApp is investing heavily in channel enablement which extends the reach of their salesforce incredibly. I think another reason is that their partnerships with other vendors promote a share the risk and reward investment strategy and that is visible by the success they have seen with Flexpod architectures. Partners are able to share in these investments and its the customer who benefits from this kind of model.

    While we have seen diversity come into the organisation with the Commvault OEM, Engenio purchase etc their strategy is clear and executed with precision.

    The organisation I work for has put its trust in NetApp as our Storage partner and NetApp have delivered with out Storage Sale revenue tripling in under 6 months and generated what i believe is the Largest Flexpod sale in the world

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  • http://twitter.com/rjweeks70 Roger Weeks

    “As convergence solutions gain prominence, there is a requirement for management of IT silos to transition to more IT generalists”.

    [Disclosure: NetApp employee]
    I have a problem with this statement – and I’m not blaming you for it, Stu. It seems to be accepted knowledge now that IT specialists in storage, networking and servers will all be replaced with generalists, especially when people are talking about cloud and/or virtualized data centers.

    Here’s my problem: cloud and virtualized environments still continue to be made up of servers, storage and networking. All of these technologies are incredibly complicated. Troubleshooting them requires advanced knowledge and specialists that know HOW to troubleshoot those environments.

    Just because there exists a nice orchestration layer that lets you easily deploy applications across an infrastructure, does not mean you can repeat that deployment 50 times without any problems. After nearly 20 years in IT, I have yet to work in any environment that does not experience issues that require advanced knowledge to troubleshoot and fix, especially when you are talking about large deployments that span multiple physical locations.

    Just my .02. I think that the death of the IT specialist has been greatly exaggerated.

  • http://blogstu.wordpress.com stu

    Roger,I generally agree with your point. I would say that specialists don’t go away, but the expectation is that there will be a lot less of them (and some companies may choose to outsource that expertise to the vendor or service provider). While “silo” experts are not going away, there are likely to be more virtualization experts and cloud architects than people focused solely on storage or network. Thanks for the comment!Stu