CRN Exclusive: Pure Storage CEO Dietzen On Pure's Software Focus, Profitability Goals And HCI Views
All-Flash Storage Is Not All About Speed
Pure Storage just came off what CEO Scott Dietzen said is a good first fiscal quarter 2018. The company enjoyed 31 percent revenue growth to $182.6 million for the quarter and saw its losses narrow to $62.4 million.
Dietzen said the highlights of Pure Storage's business are that it is growing market share in all-flash storage; protecting its customers' investments as they start migrating to new protocols like NVMe; and preparing for next month's Pure //Accelerate conference in San Francisco, where the company will be focused less on hardware and more on software.
"Dietz," as he is known in a company where everyone adopts a one-syllable name, sat down with CRN to discuss the all-flash storage business and Pure Storage's place in it.
What can partners expect at your event next month?
We've already made our big hardware announcements for the year with launching FlashBlade at the start of the year, and then launching FlashArray//X, which by the way shipped for revenue in the first quarter. But what's coming is software. We will have major new software releases for //X as well as for //M, and for FlashBlade. So, lots of new software innovations coming to market at Accelerate.
There will also be a lot of our larger customers there talking about their use cases. We're particularly keen on some of the predictive analytics. We've got customers that are pushing the envelope in deep learning and other advanced AI (artificial intelligence) techniques. And we're going to showcase some exciting examples of that work.
When you talk about changes to the software, what are the primary focuses?
The one that has been discussed is support for synchronous replication. So the same data living in multiple data centers simultaneously. We've not shed light on exactly how we're accomplishing it, and what we're doing to transform the way people think about this challenge.
You'll have to come to Accelerate.
Is your company able to sustain itself through profitability?
Absolutely. We've been making material progress towards profitability. In fact, in the more recent quarter, we improved 12 points year-over-year. The way we wanted to get to profitability is the simple path of growing revenues faster than we grow expenses. Revenues have continued to grow very well, and expense growth has trailed, so the business is on-track to cross over to cash-flow positive in the second half of this [fiscal] year … We've not specifically specified third or fourth quarter, but we'll move into sustained cash-flow positive. We have a subscription part of our business. So we become cash-flow positive first, and then profitable thereafter. There will certainly be excitement in the business community when we have gotten there.
Why has this taken so long?
Keep in mind, we could have been profitable years ago. The reason we specifically chose not to is, we wanted to invest in continuing this explosive ramp. We are reiterating our guidance that we will deliver a billion dollars in revenue this [fiscal] year, just our sixth year of selling. We're the first storage company to make it to that threshold in many, many years. And I believe NetApp was the last independent [storage] company to drive a billion dollars in revenue. Certainly many other companies have done a billion dollars. But it has not happened in storage for quite some time.
Does Pure Storage have plans for the hyper-converged infrastructure market?
We continue to focus on converged infrastructure rather than hyper-converged. Converged infrastructure is much more popular for cloud workloads. One of our key markets is the cloud. More than a quarter of our revenue is coming from that segment. And converged infrastructure is much more popular in the cloud.
We continue to sell into the enterprise, and enterprises in the big data centers favor converged infrastructure for performance, scale, efficiency, and the new next-gen data applications that we've been targeting. These are workloads where people are running predictive analytics including machine learning and AI (artificial intelligence). Again, those workloads strongly favor converged infrastructure, not hyper-converged. So in the markets that we're playing in, converged is where the sweet spot is.
How would you characterize the current all-flash storage environment and Pure Storage's place in it?
The market continues to be astonishingly good. This is a $35 billion total addressable market. And we have the luxury of going up against technologies that were designed north of 20 years ago, designed for mainframes, and designed for client servers. They didn't have the cloud computing model in mind. Also, our core competitors are all retro-fits for flash. One of the things that comes out of this is, as flash devices get bigger and bigger [in capacity], our competitors' performance falls through the floor. In fact, when you get to 15-TB SSDs, which are coming, flash performs like mechanical disks. That's not true at Pure, but it is true at all of our core competitors.
What does that mean in terms of competition?
Because we've pushed the envelope on such cloud-native protocols as NVMe, we're in this position where Pure Storage is big and fast where our competitors are big and slow. They just don't have the cloud automation, the cloud business model, the simplicity for lights-out automation that are required in these markets.
So we are very confident that we'll continue to accumulate share. [In the last eight quarters,] we've basically and consistently grown our business absolutely, and all of our core competitors' businesses are in rapid decline.
And by the way, 70 percent of our new business was driven by the channel.
When you say "core competitors," who do you include?
I would include Dell EMC, HP Enterprise, NetApp, and IBM. We say it is good to be blessed with competitors that are richly deserving of competition.
Where does Pure Storage rank now?
We're actually number seven in worldwide market share [according to IDC]. The others in that list are Oracle and Huawei. But we're the growth story in the top-ten. The majority of the other players continue to watch their shares decline, their share of the market shrink. The primary benefactors are Pure and the public cloud.
Wasn't Pure Storage in the top 5 flash storage vendors?
[I was talking about] all storage. Spinning disk and flash. I don't have the current data on all-flash. I will say those stats are tougher to read because what our competitors are doing, their overall businesses have been shrinking. They've been converting their installed base towards all-flash. And they project that as growth. So the all-flash business is growing inside of an overall shrinking slice of the pie. Once the all-flash piece gets to the majority [of the market], it will continue to shrink, we believe, along with the rest of the business.
How much of Pure Storage's business is accounted for by the new NVMe protocol?
Keep in mind that NVMe has been part of the FlashArray//M product line since its inception. We use the technology for performance inside of FlashBlade. FlashArray//X is fully NVMe-enabled. But it is a journey.
I would say the core difference is that we're protecting all of our customers' investment. For those that don't start with //X, that start with //M, they're not sacrificing their investment to get to a 100-percent NVMe environment. We're the only storage vendor that is providing that investment protection along the path. Everyone else is saying, well, when we get to NVMe, you're going to have to throw everything away and buy all-new storage. We don't ever want to put our customers in that situation where we're not protecting their investment. That's something that's fundamentally different about Pure vs. the competition.