NetApp's bid for grid

In a world that has seen the cost of disk drives drop to nearly that of tape, selling storage solutions at a 60% gross margin is almost impossible. Yet that's precisely what Network Appliance has been able to accomplish - while maintaining its startling 30% annual growth rate.

NetApp CEO Dan Warmenhoven readily admits the company, which made its name in the early '90s for its network-attached storage (NAS) systems, isn't for storage managers who just want the lowest cost per gigabyte. "If you're looking for cheap storage, you're talking to the wrong guy," he says. "We get asked all the time, 'How do you expect to sell disk drives at 60% gross margin?' The answer is, 'It's not about the disk. It's not about the storage. It's about the data-management services.' "

Analysts and customers have given NetApp kudos for the innovative design of its operating system, Data OnTap. Peter Cole, an independent investment analyst, credits the price and performance benefits of this system - and a savvy board and management team - as key to NetApp's success at sustaining its high growth rate and reaching $1.6 billion in revenue in its 2005 fiscal year, which ended in April 2005.

Simon Robinson, sector head for storage at The 451 Group, agrees. "NetApp's core strength is in Data OnTap and the fact it has a unified architecture that allows access to shared file storage. It's very easy to install and very easy to use. But the company also built a rich set of additional applications around that for file management and for snapshots," he says, noting NetApp's pioneering role in the adoption of disk-based snapshot technology.

Rock-solid and workhorse are two terms that Jeff Cobb uses to characterize the NetApp FAS840 system. "It's probably the most reliable piece of hardware we have, as well as absolutely the easiest thing to configure," says Cobb, a network manager with the University of California, Berkeley's extraterrestrial-seeking SETI@home project.

Moving beyond NAS

NetApp will push the bounds of Data OnTap as the company strives to break out of the original NAS niche that made it famous.

Already making headway into enterprise data centers, a single NetApp system now supports data reads and writes for high-end applications that prefer block-based, storage-area network (SAN) protocols such as Fibre Channel and iSCSI, or direct-attached SCSI formats - in addition to Network File System and Common Internet File System Windows and Unix protocols. The company's ability to make its portfolio SAN-capable has long-term competitive significance,analysts say.

Also important is NetApps' integration of Spinnaker Networks' Distributed File System technology, acquired two years ago, into its core operating system. That version, called Data OnTap GX, is expected to let the system to scale exponentially into even petabyte range.