CRN Exclusive: Pure Storage CEO Giancarlo On A.I., Innovation, And M&A Strategy
On A Roll, Ready For What's Next
Pure Storage has done something few storage vendors have done in the past couple decades: In only a few years since it was founded, the all-flash storage company has grown revenue to over $1 billion, completed a successful IPO, and started turning a profit.
However, the company knows that the IT world does not revolve around high-performance flash storage just for the performance. Pure Storage has in the last few months showed that it can innovate as much as its larger rivals with a strategy that focuses on the nascent artificial intelligence industry in partnership with Nvidia, Cisco, and Arista to bring A.I. out of the scientific community and into the enterprise.
Charles Giancarlo, a former Cisco and Avaya networking executive who also spent time in the venture capital industry before taking over as Pure Storage CEO in 2017, told CRN that his company is looking to artificial intelligence and the cloud for ways to continue innovating beyond the pure storage play the company has until now been best known for.
Click our slideshow for more on what the future holds in store for Pure Storage, according to Giancarlo. And don't be surprised if you do not see the phrase "flash storage" in the conversation.
Artificial intelligence was a big focus of this year's Pure Accelerate conference. Does Pure Storage see artificial intelligence as a key differentiator?
The answer is yes. Let me put it in context. There are two things. We believe that data is becoming more core to helping customers manage their business. And whether that is to simply bring more of it online, or to do analytics, or whether they are going all the way into artificial intelligence or machine learning, this is the direction they're heading. By being part of that, and A.I. is close to the end of that [move], we're showing them the architectures they need to be able to do that and at the same time solving other problems as well.
But this isn't a major part of the business yet, right?
I think any numbers you can put together will show this to be a small minority of the business right now. But there are always visions or goals that drive people to the next generation of architecture. That's really one of the reasons why were highlighting it.
Also, A.I. was a thing when I was in college. For decades, it didn't go anywhere. Not only is it going somewhere now, but I kid you not, I think a majority, 70 or 80 percent of enterprises in the C-suite, are saying they have to do something about A.I. So it's of tremendous interest. As we grow as a company, if it's creating thought leadership, it also helps us to penetrate these new accounts.
While Pure Storage is emphasizing A.I., it's interesting to see your rival NetApp put its focus on the cloud, and on moving data between on-premises and the cloud. Is cloud a focus for Pure Storage?
It is, but it wasn't the theme for [May's Pure Accelerate] conference. Look, I think that NetApp's a little further along that journey than us. They started it earlier. I would say that our focus has really been on penetrating the major accounts in [those accounts'] core environments. But also we are focused on re-architecting those environments to be more data-centric and enabling [enterprises] to scale those environments. I think anyone would tell you that, and in a sense it's no different from A.I., the cloud business is still a very small minority of overall sales. Which is not to say that we don't want to be there as well. But we've chosen this approach as our first strategic foray into what we think is the next stage of our business. Cloud is very much on our minds, and the ability to make it easier for a customer to operate in a multi-cloud environment is also very much on our minds.
What are some of the areas where you would like to see Pure Storage focus more in terms of development and innovation?
Well, you already mentioned one of them: obviously, cloud. That's an area where we have more work to do. A lot of work to do, frankly.
One thing customers love about Pure is that we make their lives easier. It's easy to install. It's easy to operate. It's easy to manage. In fact, in many cases they just forget we're even there. We're self orchestrating. They would like us to bring that set of values to other things that exist in their data center environments. I've always thought of hyper-converged as being two different things come together. On the one hand, you have what many people think of as hyper-converged. You have boxes that have compute, storage, and networking in them. Replicate the boxes, and you're able to scale. But if you really dig down into it, what customers really appreciate is not that specific physical model.
What they really appreciate is that you could have a single pane of glass, and it's easy to build and scale and configure. The more automated that can be, the better. We believe in the data-centric model which has disassociated compute and storage. But there's still that desire to do a better job of orchestrating the entire stack in a more automated way. Technology in that area is of great interest to us.
But from there it's a very small step to hyper-converged. Not necessarily the full appliance model like Nutanix, but maybe the NetApp HCI model with separate computer and storage, but yet much more integrated than Pure Storage's FlashStack converged infrastructure.
Yes I agree.
Pure Storage's top partner from a revenue and technology standpoint is Cisco, followed at a distant second by Nvidia. Are there any other big technology partners Pure Storage is working with?
You saw with our AIRI launch that we also work with Arista. So those three vendors are our top-tier vendors. But we also work very closely with many software vendors. It turns out that this business is a little bit different from what I'm used to in the networking business. The integration of software with storage is very, very tight, especially when you're dealing with databases such as Mongo and [Amazon] Redshift, but even with operating systems like Red Hat, the ability to integrate well, to operate at performance and be provisioning and managing orchestration, that requires a lot of close working together. And so, I don't know that I could call out anyone in particular, because there are so many that we work with in that area. And it's not so much go-to-market partnerships as it is partnerships to make sure that our products work well together.
Pure Storage in the first quarter reported 40-percent revenue growth year-over-year. Is that growth rate sustainable over the long haul?
I have to be a little bit cautious here. If my CFO were here, he'd be kicking me under the table. We've forecasted long-term growth at 30 percent. But of course, if we forecast at 30 and delivered 20 [percent], people would be upset. It turns out in this market that if we forecast at 30 and deliver 30, they're upset as well. So we try to forecast conservatively, and try to beat our forecasts.
T hat's neither a yes nor a no. …
You don't want to get me in trouble.
Well, if it made a great story for me, why not?
OK, Pure Storage has not done any acquisitions to date. Does the company have an acquisition strategy? Are there things you would like to buy?
You know my background [at Cisco]. I think it's fair to say when I came onboard here that we really didn't have an acquisition strategy. I think it would be fair to say that today we do. But we've obviously not yet announced one.
Here's your big chance.
Whether we were in this interview or sitting in a bar with a beer, I would tell you the same thing. I've been involved in, and this is literally true, in over 100 acquisitions in my career. Either as part of an M&A team, or as part of the sponsor buying the asset, within a company or as a private equity guy. I can tell you, and anyone who is engaged in M&A will tell you, that you could be in the hunt until 10 days before a deal actually closes and not know if it's going to come together. And so it's very difficult to predict these things. There's a lot of serendipity involved in it.
OK, can you respond in more general terms?
I'll give you some general areas, whether it's cloud or adding more value to the products that we have today or areas such as hype- converged or so forth, where we may be looking for new technology. First of all, we want to know everybody in the space so we can pick not just the best and brightest but also the best fit for what we do. But even then, they may not be ready to sell, or the price may not be right for us. There's a lot of reasons that [a deal] may not come together. So it's very difficult to predict these things.
Yes we do have a strategy. It's a strategy that's constructed, meaning there are areas we want to go into, companies that are in those areas, diligence taking place. We are looking.
Over the past couple years we saw a few storage companies born at about the same time as Pure Storage including Nimble Storage and SimpliVity get acquired, and others go out of business. What did Pure Storage do that was different?
We are the only [storage] company to still be public, frankly, to last more than two years as a public company, since NetApp went public 20 years ago in the storage space. It's a difficult business, and you need a certain amount of scale in order to survive. On the way up, the amount of investment made in Pure could only have been made at that time. That's why I say Pure is a lucky company. A tremendous amount of investment went in prior to going public. It went public at a time when you could go public with a company that was at a loss position. Frankly, from my point of view, we were lucky that nobody attempted to buy us. As a public company, these are things you are not fully in control of.
What about the possibility of Pure Storage being acquired some day? The lifespan of independence storage vendors is not that long anymore.
I took that into account when I decided to come to Pure. I didn't want to be looking for a job anytime soon. And my evaluation, which remains the same today, is that I think we have a very good opportunity to stay independent for some time. I think the major storage players have already chosen their dance partners, if you will. Or they are not really investing at the level that would be required for them to even consider buying us at our valuation. As long as we continue to execute, I think we could stay independent. I can tell you that our company wants to continue to grow and thrive as an independent company. But of course we're a public company. One always has to do what's right for the shareholders. But we believe right now that our ability to drive shareholder value comes from growth. It exceeds what a one-time buyout would bring.
So how did a networking executive like you become head of a storage company?
Crazy Board [of Directors]. No, I'm teasing you.
You know I'm going to use that.
I think it was just because of my general experience. When I joined Cisco, it had just had its first $250 million quarter. (On an annual basis) that's a billion dollars. I was part of Cisco's growth, hopefully not sitting idle. I was part of that growth from $1 billion to $45 billion. A lot of that involved new technologies, getting into new markets, and M&A, which we believe is part of this business as well. Part of scaling is knowing what it looks like just around the corner before you turn that corner.
I think Pure wanted someone who has been involved in innovation before, someone who has been around the block a few times, in my case maybe many times, and someone that fit well in the culture. Apparently I do.