Q&A: NetApp CEO Lays Out Competitive Road Map7:03 PM EST Mon. Nov. 02, 2009
There has been a lot of talk about what will happen with NetApp in the face of its failed bidding war with EMC to buy Data Domain. In addition, NetApp may face new competitive pressures if EMC/VMware and Cisco improve their strategic alliance. However, Tom Georgens, who in mid-August became president and CEO of NetApp, said his company is stronger than ever and more than prepared to meet these challenges. He recently sat down with Channelweb.com's Joseph F. Kovar to answer storage solution provider questions about the channel, cloud computing and the competition.
You recently said in a Barron's article that a buyout would make sense for NetApp. Solution providers get concerned when they hear something like that. Could you explain what you meant?
OK, I never said a buyout would make sense, at least not in as simple terms as that. The simple fact of the matter is, NetApp is not for sale, we are not entertaining offers and our overwhelming desire is to remain independent.
I think that the amount of true growth of companies in the IT industry is going to be small. And I think the companies in that category are going to generate a lot of shareholder return.
As long as we think we can gain share, as long as we think that this market will come back someday, then I think that the opportunity for NetApp to be one of those companies is high.
The simple fact of the matter is, if anybody wants NetApp so bad they're willing to overcome all that, this is America, and everything has a price. But our goal is to stay truly independent, and I think we're going to generate better returns for our shareholders if we do that.
There's talk about companies like Cisco acquiring a storage vendor like EMC or NetApp. Are there are any kinds of companies that you think might be interested in a company like NetApp?
At least on paper, there's a handful of companies that certainly could use a storage product in their portfolio and that have the financial resources to do it.
But I'm pragmatic. I mean, if someone loves us so bad that they're ready to make an outrageous offer, we have to pay attention to it. At that point, it's not my decision. It becomes a matter for our shareholders.
I'm not going to say "never." Certainly there's a lot of money splashing around in the system. But NetApp has the wherewithal, both technologically and in terms of go-to-market, to go it alone and generate significant shareholder returns.
With EMC's acquisition of Data Domain, what can we expect from NetApp in terms of future offerings in secondary storage and deduplication perspectives?
Those are two different questions. From a deduplication perspective, I think we feel just fine about deduplication of primary storage. We're really the only viable player. It's a big part of our momentum.
So, what we were really looking for with Data Domain was a disk-to-disk backup offering and, more specifically, a heterogeneous disk-to-disk backup offering. When we sell the primary storage ... the attach rate of secondary storage to NetApp primary is high.
However, NetApp is a company with market share in the teens. There's a big market out there where NetApp [could sell] a disk-to-disk backup solution where somebody else has the primary. And that's what Data Domain was to solve for us.
Of course, our opportunity is someone else's loss. And I think that EMC was concerned that it might be them, and as a result made a more aggressive play for defensive reasons than we were prepared to make for offensive reasons.
Next: Georgens On Cisco, Cloud Computing And The Channel
How does NetApp view Cisco's Unified Computing System [UCS] strategy, including its close relationship with EMC and VMware? Are there any challenges for NetApp?
I think there are challenges all the way around. Cisco's a great company, and this is a new venture for them. I'd never underestimate a company of that quality. But it's a tough market.
I think why they're interested in partnering with VMware is clear. VMware is going to be instrumental in virtualized infrastructures, which will be the dominant data center architecture in the future. Likewise, it enables a lot of greenfield opportunities there.
It's important to [VMware] that they are perceived as being independent. I think the last thing they would like to do is be perceived as being too close to Cisco. For all the impact of Cisco, they don't have anywhere near the server market share that IBM and HP do. And I think they'd be reluctant to scare HP and IBM toward the Microsoft [Hyper-V] camp.
As far as EMC, I think there's no doubt that Cisco would like to leverage EMC's installed base. On the other hand, our relationship with Cisco is quite good as well. And once you get past EMC's incumbent accounts, I would contend that NetApp is just as viable if not a more attractive partner to Cisco when dealing with customers than EMC is.
And I think the EMC thing also has backlash. We'll see how this goes. I think that, as EMC gets closer to Cisco, Cisco is clearly making a lot of the industry players uncomfortable.
What is NetApp's strategy for cloud computing?
I see people looking to build a broad horizontal server infrastructure that they can dynamically map applications to. If they want Oracle running on 30 servers today and 35 tomorrow, or they want to run 50 servers in the day and 10 at night, I see the broad horizontal model breaking down the silos.
And from the storage perspective, I think the same is true. No matter where they go, [users] need to have access to their storage. So storage needs to be networked. And data needs to be mobile. If your applications are going to move internal to external, or data center to data center, then the storage needs to be able to support that.
[For external clouds, or IT as a service], we're not going to be a data center operator. We're not going to offer storage services over the cloud, or through the cloud. That's not our scale. We're going to be a supplier to those companies who do.
So the cloud is going to effectively consolidate a lot of customer demand in one place. And that represents an enormous amount of opportunity for us. [Partners] represent a consolidator of demand, and that generates a tremendous amount of sales force leverage for us.
How is NetApp positioned against its competitors in terms of solid state storage technology?
Solid state is going to be a big deal. I'm not a big believer in simple one-to-one replacement of [hard] drives with solid state drives. But I believe large amounts of Flash is a big deal. We recently came out with our Performance Acceleration Module, which allows us to put terabytes of Flash in our systems. And we can deduplicate it to make it more efficient as well.
So I think Flash is going to be a big deal. Flash is going to have much, much higher performance than any disk drive. Now that we've got Flash economically, we can put a tremendous amount of Flash in a system to soak up most of the random I/O workloads. As a result, the need for Fibre Channel drives goes away. And, if Fibre Channel drives go away, there's really no need to tier storage either, because there's no migration problems from Fibre Channel to ATA over time because [the data] is stored on ATA in the first place.
How is NetApp's channel business doing?
Our channel business remains very, very strong. I think it's a big part of our story. Last [fiscal] year was a record new customer acquisition year for us. And 80 percent of those [new cases] came through the channel.
How many new customer acquisitions are we talking about?
At [our recent] analysts day, we basically talked about two categories. We talked about our "Storage 5000," which are the 5,000 largest storage buyers in the world. And in that particular category, we had 150, which is an all-time record for us, even when we were growing at a higher rate. And then, in the midsize enterprise, we actually added 2,000 more. And that doesn't include new customers through IBM, which roughly doubled those.
What is the situation with NetApp in terms of offering services from design through professional services through the channel, and can we expect more? I think as we built out our service infrastructure, we were making a big investment in professional services. I fully believe that, in order to be successful in customer environments, in many cases professional services has to be a component of the solution. However, I'm not of the belief that NetApp has to provide that in every circumstance. NetApp is a product company, and a technology company. If [our] partners are capable of providing the quality of services that the customers expect, then I am completely happy with having our partners do that.
We've actually developed a plan for rationally transferring or making available all of our intellectual property and all of our tools around services to our partners who are willing to commit to training.
How far is NetApp in terms of pushing services through the channel?
We've been doing it for some time, for at least a year. Our Authorized Professional Services Program -- for people willing to sign up -- we're willing to make it available to them. I don't know how many partners are in it, but it's a substantial number.
For those that can't make that kind of investment, we've got ourselves and other people whose services they can resell. For those that can make the investment, we're not going to fight them over it. In fact, we're going to encourage them to make that kind of investment and provide those services to their clients.