Five years ago, Network Appliance was an $800 million company with a clear identity as a NAS provider. Today, it has transformed itself into a $2 billion company and is growing at an annual rate of about 30 percent a year. Its product line now spans NAS, SAN, data and storage management software, and professional services.
So what happened?
“NetApp has embarked on multiple, major new product initiatives over the last five years in order to diversify its product base,” says John Webster, an analyst at IT consultancy Illuminata. “Software is an increasingly important part of the mix, now accounting for 36 percent of annual gross revenue.”
But he also points out that services have expanded to the point where they now account for 14 percent of the total, and that this is one of NetApp’s biggest growth areas. As a result, NetApp hired 1,500 additional services personnel in recent months.
SAN Success
Perhaps the most unexpected area of NetApp strength is in the SAN market. According to Illuminata, 35 to 40 percent of NetApp’s business is SAN-based, and this is growing even faster than services. The company’s product line straddles both Fibre Channel and iSCSI-based SANs. When coupled with its NAS products, it makes it an increasingly attractive proposition to enterprise customers.
“In a way, it’s not surprising that NetApp is taking SAN market share from the traditional SAN vendors,” says Webster.
As an explanation, he lays out the company’s track record of overcoming obstacles. When NAS was considered unsuitable for database-oriented and transaction-driven applications, for example, it proved otherwise. As a result, 40 percent of its installed NAS base now supports database applications such as Oracle.
Then it faced the formidable threat of Microsoft Windows Storage Server. It was no mean feat to shrug off that challenge, particularly when Windows Storage Server 2003 came out with a wealth of new features.
Webster believes that NetApp has been gaining steadily in the SAN field at the expense of EMC because of how the company addresses the market.
“Some time ago, NetApp executives decided that being protocol-agnostic was the best way to generate continued growth,” says Webster. “The internal debate between ‘NAS heads’ who argued in favor of file-based storage, and ‘block heads’ who championed block storage, ended in a draw — both won. As a result, NetApp is now a full-service, independent supplier of storage, data and storage management software, and storage-related services.”
By combining product development with acquisition, NetApp has gained strength in the data protection and archival storage markets. A recent product launch, for example, included virtual tape library (VTL) and associated software.
This path toward broader, more enterprise-ready offerings is leading NetApp into a place it once could only dream of — the large-scale enterprise marketplace. Once EMC’s domain, while it satisfied itself with much smaller NAS deployments, NetApp has quietly muscled its way into the high-end turf.
“The largest expansion of our customer set continues to be large-scale enterprise customers and their data centers,” says Rich Clifton, vice president and general manager of the networked storage business unit at NetApp. “We are focused on providing customer value through simplifying their data management. To deliver this, we continue to expand and refine our portfolio: our FAS storage, our Ontap software, our services, and new product lines like our Decru data encryption appliances.”
Gartner analyst Stanley Zaffos agrees with that assessment.
“NetApp has strong customer relations and is beginning to gain name recognition in enterprise environments,” says Zaffos. “Its NAS technology has evolved into a unified storage architecture that, without blades or gateways, provides file- and block-level services, CIFS, NFS, Fibre Channel and iSCSI connectivity, write-once-read-many capability, robust replication facilities by midrange standards, and thin provisioning.”
Future Paths
Can NetApp continue as it has in the last few years and maintain existing growth rates? Webster doesn’t think so.
“It can’t maintain long-term growth by simply adding new storage products,” says Webster. “We believe NetApp will alter its traditional posture of simply being a quality product supplier, to becoming a more aggressive, full service, fully supportive, independent storage vendor. In short, NetApp growth will come at the expense of its competitors, most notably EMC.”
A “Data Center Proven” initiative, for example, is aiming to demonstrate that NetApp is more responsive than its rival. The company will also attempt to convince people that it supports higher application availability and offers better business value.
“We believe NetApp’s management team is up to the task,” concludes Webster.
Not surprisingly, Clifton concurs. He says that NAS capabilities will continue to be a primary focus. He believes NAS file protocols still offer high value. Therefore, the company is investing heavily in R&D to make continuous advancements in NetApp’s underlying storage capabilities.
“Advancements like our new GX capabilities are providing the next generation of NAS features,” says Clifton. “The GX architecture allows virtually unlimited scalability of storage capacity in a single name space, and it enables extreme performance on both individual files and entire file systems.”
Article courtesy of Enterprise IT Planet
