CRN Exclusive: Pure Storage CEO Charles Giancarlo On Growing In An Extremely Competitive All-Flash Storage Market
2018: A Very Good Year
All-flash storage vendor Pure Storage early this month reported that 2018 was the first year it broke the billion-dollar revenue mark and was cash-flow-positive for the full year, and that its fourth quarter was its first to show profitability. That's quite an achievement for a company that is a relative newcomer to a market as highly competitive as all-flash storage, where it has to vie with traditional large vendors pouring resources into flash storage as well as a host of startups focusing on the technology.
Charles Giancarlo, CEO of Pure Storage, recently spoke with CRN to talk about not only the financials, but about the industry as a whole and where Pure Storage fits. He told CRN that the growth of Pure Storage is only starting as the Mountain View, Calif.-based company is beating competitors to the punch when it comes to the technology needed for artificial intelligence, machine learning and supercomputing.
Here's insight into how an upstart like Pure Storage can stand toe-to-toe with its rivals in an incredibly dynamic industry like all-flash storage.
Congratulations on your first billion-dollar year.
It's a good year. We promised that we'd be above a billion dollars, and we beat the billion dollars. And we said we'd reach profitability in the quarter, and we beat the forecast on that as well. We're also forecasting next year to have good growth, 30 percent-plus growth, as well as profitability, so we're very excited about that. And, by the way, another surprise perhaps is we were free-cash-flow-positive for the entire fiscal '18. So, all really good stuff.
So, are you profitable yet?
Well, we showed profitability in Q4, so it's profitable in Q4, not the full year. And we're forecasting a full year of profitability next year. The year we're in now.
Actually, this last quarter was also good for the storage industry in general. IBM grew, HPE showed strong growth for the first time in years, and NetApp is looking at a $2 billion run rate for just its flash alone. What's making storage look so good now?
I think what you're seeing is a good infrastructure quarter. I wouldn't just leave it at storage. It's a good infrastructure quarter. And I think it's showing that customers for a while were holding back, not really knowing which way to go, cloud or internal and so forth, and I think they're getting much more comfortable with the overall forecast for how much they're going to do in cloud, and how much they're going to do internal. I think that's opened up some amount of spending.
If infrastructure spending as a whole is up, doesn't that increase pressure on Pure Storage, which focuses exclusively on flash storage, a part of the market where practically everybody is a player and also growing?
Oh, no. We had 48 percent year-over-year growth last quarter. I'm not too worried about that. We're growing the overall storage market, and we keep growing and picking up market share in that market. ... We've got two revenue products, both growing at very high rates, FlashArray and FlashBlade. And we continue to innovate. So, no, we plan on picking up more and more markets here in the storage market for some time.
What is the competitive environment for you, given that there are a lot of vendors out there, and all doing well?
Yeah. All doing well. But we were at zero five years ago. We're at a billion dollars today, or this past year. Which, by the way, if you look at all the different enterprise players in the last 25 years, we're one of the fastest if not the fastest grow-to-a-billion-dollars of any enterprise IT company in history. We're growing very fast. And we've got a lot of opportunity ahead of us. So, yeah, in a good quarter everybody does well. But we're picking up market share and the others aren't.
Who do you still see as your primary competition then?
It roughly breaks out according to market share in the industry. So Dell EMC, being biggest market share, they're the ones we see most often. Probably followed by NetApp, and then IBM, and Hitachi, et cetera. But across the board, our wins are picking up quarter after quarter.
Pure Storage has not made any acquisitions, right?
We have not. That's correct.
Is acquisition something that Pure Storage might look at as a way to build its total addressable market or to fill in some technology that it hasn't brought to the market yet?
I think any mature company has a 'make-partner-buy' philosophy. So [acquisitions have] got to be one of the arrows in our quiver. But we won't be talking about any of those until the day you hear about it as an acquisition target.
Would Pure Storage consider being an acquisition target itself?
Well, I didn't join the company with that in mind, to be direct. When I looked at Pure Storage, I saw a company that could be a very successful, independent company.
Is the flash storage business growing large enough so that a pure flash storage company like Pure Storage can see continued growth into the future?
The overall reduction in flash pricing over time is going to allow flash to play not just in tier-one opportunities in storage, but eventually in tier-two as well. We're already starting to see some of that with rapid restore, which is a traditional backup market. But certain customers want to be able to recover quickly from a failure of their primary data. … That's classically a tier-two environment that's already being penetrated by flash. And as flash declines in price faster than magnetic [disk], we're going to be able to open the overall TAM [total addressable market]. We believe we're competing in all aspects of storage, and we have certain expertise that we're expanding.
Are you ready to declare the death of disk drives yet?
No. Even tape's still around. These things never die. They just go into obscurity.
What part of Pure Storage's business goes through indirect channels?
It's in the very high 90's. It's mainly only the meta service providers that we go direct [with], and even they resell their services. So outside of that, it's 100 percent reseller. … It's about productivity and it's about a reach and breadth. We do have a direct touch model, to be very clear. And by working with the channel, it just provides a huge amount of efficiency for us as a vendor.
Any new verticals that you're looking at targeting this year?
It's not entirely new, but we're highlighting AI, analytics and machine learning. ... It's almost a greenfield for us, and we're probably the only vendor that can really satisfy the demand of these data-hungry applications. And so it's been a real focus for us since the introduction of FlashBlade. It's growing very rapidly, and so I would call those out.
Outside of that, we're continuing to expand internationally. It's about a quarter of our sales right now, and we believe that it's going to be a greater percentage of our overall sales in the next few years.
Why do you say that Pure Storage is really the only company that can meet the demand for AI and so on?
Well, it's really what we're seeing competitively. When we go into accounts that are using either huge arrays of high-end Intel servers or more recently [NGX supercomputer] from Nvidia, we are either called in, or when we go in, we're seeing customers that have used a variety of other storage systems and they just can't feed the data fast enough. And so it's been our experience that no other solution is really able to provide the kind of force that we do in these environments. We're just getting tremendous customer traction in AI, analytics and machine learning.