NetApp's bid for grid

NetApp wants to parlay its strong NAS base into a leadership position in storage grids.

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.

More importantly, NetApp is positioning Data OnTap GX, as of press time in beta testing, as the cornerstone of its grid computing strategic vision.

If NetApp delivers on storage grid it might leap ahead of competitors, says Tony Asaro, a senior analyst with Enterprise Strategy Group. "There are seven vendors that do over $1 billion in storage systems revenue. Those are Dell, EMC, [Hitachi Data Systems], HP, IBM, NetApp and Sun," he says. "If NetApp is going to become No. 1, it needs to reinvent what it has today and offer something with magnitude value over its current solutions. . . . Realizing the [storage grid] vision could get it there. The advancements it has made over the last couple of years - including virtualization, thin provisioning, writeable snapshots, and iSCSI and Fibre Channel - support this goal."

 NetApp and the NW200

REVENUE RANK: 49, at $1.8 billion


PROFIT RANK: 37, at $254 million

CASH AND SHORT TERM INVESTMENTS: $1.1 billion

In response to industry detractors who complain about NetApp's delay in integrating Spinnaker technology, Warmenhoven says the process was much harder than anticipated. But he's quick to put it into perspective. "This is as significant a step in terms of the capabilities of the system as Microsoft went through when it went from the basic Windows to [Windows] NT. Think about the scope and scale of one of those styles of transitions. It's pretty enormous," he says.

The end of April and the anticipated release of OnTap GX should mark the close of a pivotal fiscal year for NetApp, one that has seen the company increase its workforce by one-third, and acquire technologies from Alacritus (virtual tape library functionality) and Decru (data storage encryption). In February, the company broadened its data protection portfolio with integrated product lines based on these acquisitions.

NetApp has broken new ground with OEM deals, such as with data search start-up Kazeon Systems, and continues to make headway following the deal it signed last April letting IBM distribute re-labeled NetApp products. Although no significant sales percentages have materialized from the IBM deal, most analysts say they expect NetApp to benefit from IBM's more pronounced global reach, as well as its presence in enterprise data centers.

What's not known is whether NetApp will meet Warmenhoven's vision to be "the innovator and the pioneer" in addressing customers' latest business problems. The same is true regarding Warmenhoven's belief that NetApp will some day eclipse its biggest competitor. (This goal, he admits, may not be realized during his time as CEO.)

Users such as Dan Werthimer, director of SETI@home, appear less concerned with such industry aspirations. In his case, he's sure of one thing when it comes to NetApp: "When E.T. calls, NetApp is going to be there."

Hope is a freelance writer who covers IT issues surrounding enterprise storage, networking and security. She can be reached at mhope@thestoragewriter.com.


< Previous story: Avaya bets on Web services | Next story: RSA ups the token ante>

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.

More importantly, NetApp is positioning Data OnTap GX, as of press time in beta testing, as the cornerstone of its grid computing strategic vision.

If NetApp delivers on storage grid it might leap ahead of competitors, says Tony Asaro, a senior analyst with Enterprise Strategy Group. "There are seven vendors that do over $1 billion in storage systems revenue. Those are Dell, EMC, [Hitachi Data Systems], HP, IBM, NetApp and Sun," he says. "If NetApp is going to become No. 1, it needs to reinvent what it has today and offer something with magnitude value over its current solutions. . . . Realizing the [storage grid] vision could get it there. The advancements it has made over the last couple of years - including virtualization, thin provisioning, writeable snapshots, and iSCSI and Fibre Channel - support this goal."

 NetApp and the NW200

REVENUE RANK: 49, at $1.8 billion


PROFIT RANK: 37, at $254 million

CASH AND SHORT TERM INVESTMENTS: $1.1 billion

In response to industry detractors who complain about NetApp's delay in integrating Spinnaker technology, Warmenhoven says the process was much harder than anticipated. But he's quick to put it into perspective. "This is as significant a step in terms of the capabilities of the system as Microsoft went through when it went from the basic Windows to [Windows] NT. Think about the scope and scale of one of those styles of transitions. It's pretty enormous," he says.

The end of April and the anticipated release of OnTap GX should mark the close of a pivotal fiscal year for NetApp, one that has seen the company increase its workforce by one-third, and acquire technologies from Alacritus (virtual tape library functionality) and Decru (data storage encryption). In February, the company broadened its data protection portfolio with integrated product lines based on these acquisitions.

NetApp has broken new ground with OEM deals, such as with data search start-up Kazeon Systems, and continues to make headway following the deal it signed last April letting IBM distribute re-labeled NetApp products. Although no significant sales percentages have materialized from the IBM deal, most analysts say they expect NetApp to benefit from IBM's more pronounced global reach, as well as its presence in enterprise data centers.

What's not known is whether NetApp will meet Warmenhoven's vision to be "the innovator and the pioneer" in addressing customers' latest business problems. The same is true regarding Warmenhoven's belief that NetApp will some day eclipse its biggest competitor. (This goal, he admits, may not be realized during his time as CEO.)

Users such as Dan Werthimer, director of SETI@home, appear less concerned with such industry aspirations. In his case, he's sure of one thing when it comes to NetApp: "When E.T. calls, NetApp is going to be there."

Hope is a freelance writer who covers IT issues surrounding enterprise storage, networking and security. She can be reached at mhope@thestoragewriter.com.


< Previous story: Avaya bets on Web services | Next story: RSA ups the token ante>

Learn more about this topic

NetApp: What's driving this anti-EMC company? Part 1

NetApp: What's driving this anti-EMC company? Part 2

NetApp dives into virtual tape pool

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IBM, Net App team on storage

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