News Stay informed about the latest enterprise technology news and product updates.

NetApp says flagging economy could boost its sales

The current economic downturn may actually help boost NetApp's appeal to storage users, according to company officials at Analyst Day.

The downturn in the U.S. economy that NetApp Inc. blamed for shortfalls in its revenues last year is now being hailed as a growth trigger by company officials. Executives speaking at NetApp's Analyst Day today said diminished storage budgets could actually help it sell more storage.

NetApp executives said economic pressures will drive organizations to rethink their current storage infrastructures with a focus on improving capacity utilization and reducing power and cooling to lower operating expenses. According to CEO Dan Warmenhoven, "As customers rethink the issue of storage and data management, we think we have the best solutions for them to turn to."

Data center consolidation "plays directly into NetApp's strengths," said Tom Georgens, chief operating officer. Founder and executive vice president Dave Hitz added that NetApp storage systems are more efficient than competitors' based on NetApp's RAID 6, thin provisioning and data deduplication for primary storage. "These benefits are additive, meaning the savings increase when using multiple features," Hitz said.

NetApp didn't have much product news at Analyst Day. Following its official name change from Network Appliance to NetApp the previous day, executives emphasized that better branding and name recognition can bring it into more deals and its technology can help it win those.

More on storage vendors
EMC chases Iomega for consumer storage

Dell storage VP: Dell goes from storage reseller to storage developer

NetApp ships 12TB StoreVault iSCSI SAN

Unified OS to combine GX and OnTap 7G

In perhaps the best news of the day for NetApp customers, Georgens hinted that upgrades to OnTap 7G and GX operating systems are close, with a converged OS that incorporates GX's clustering capability into the main OnTap OS right behind. Customers have been waiting for clustering features in OnTap since NetApp acquired Spinnaker Networks in 2003.

"Both the next release and the unified release are in tests now," Georgens said. "As far as our development teams are concerned, they have already converged." However, Georgens did not give a time frame for any release dates.

Looking to new technologies for new opportunities

NetApp executives said they expect to pick up customers as storage shops shift to disk-based backup, Ethernet-based storage and server virtualization. Georgens said corporations are more likely to look beyond their incumbent vendors when they undertake those types of implementations.

Like its main rival EMC Corp., NetApp has focused on replication between disk systems and disk-based backup hardware such as the NearStore VTL and SnapLock archiving system rather than tape backup. It also recently released new features for its FAS systems, such as automatic provisioning and disaster recovery functions., which are aimed at VMware users.

NetApp also leads the iSCSI SAN market, according to the most recent numbers from IDC. NetApp has 19.6% market share, ahead of EMC's 17.4%, according to IDC.

To reach its target growth, NetApp will likely have to go beyond its traditional strengths and do a better job of competing with large Fibre Channel SAN vendors. One NetApp customer said it is weakest in that area.

"NetApp is very efficient when it comes to CIFS and NFS [NAS protocols], because that's what the system was originally designed for," said Tom Becchetti, storage engineer for a large medical manufacturing company he declined to name because its policy prevents him from representing it in the press. "Fibre Channel for them seems like kind of an afterthought."

Becchetti claims NetApp's products lack some of the high-availability features of Fibre Channel SAN competitors he's used in previous jobs. For example, he said he has had to take FAS3000 series filers down to add Fibre Channel cards or update disk-drawer firmware.

He's also unhappy about how NetApp handles snapshots on Fibre Channel LUNs. Becchetti said OnTap requires 100% overhead for those snapshots. He could thin-provision that space, but there is a 12 TB size limit on aggregates and he's worried about running out of space and having to migrate LUNs to a different aggregate as the snapshot volumes fill up.

Enterprise Strategy Group analyst Brian Babineau agrees with NetApp's claim that data center consolidation will prompt customers to look at more vendors, potentially opening the door for NetApp. "Users looking to alter their data centers are going to automatically bring in other vendors, if only for the price competition," he said. Babineau said that if NetApp competes aggressively, the increased competition could improve prices for users regardless of the vendor they choose.

Babineau said data reduction technologies also represent a big growth area, but warned that NetApp should not try to recover capacity revenues with software license fees. "NetApp just needs to keep pricing in mind, as it relates to the benefits of cost-saving technologies, especially if they're looking to take advantage of an uncertain economic environment," he said. "It's a balancing act."

Sales force boost cuts into profits

NetApp is making new investments in its quota-carrying sales force to support its new efforts to compete in the market. Executives declined to specify how much is being spent or how many people will be added, but did forecast diminished operating profits for the first half of 2009 as a result of the investments. Fiscal 2009 "will be a tale of two halves," according to chief financial officer Steve Gomo, with profits projected to be 11% of revenue for the first half of the year and 16% for the second half.

NetApp forecasted revenue of $3.79 billion to $3.95 billion for fiscal 2009, which would represent 15% to 20% growth over 2008.

NetApp also revealed plans for another initiative to raise awareness of the company. A new annual user conference, NetApp Accelerate 2009, will be held for the first time on Feb. 23,2009, in San Francisco.


Dig Deeper on Storage vendors

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.