NetApp takes a more even handed approach to the SAN NAS wars

Rethink IT, Oct, 2004 by Caroline Gabriel

* The storage religious wars are over for Network Appliance. And if it gets its way, they will be over for everyone.

If you take a long look at Network Appliance, usually known as NetApp, its product set has matured over the past few years so that it doesn't care which storage religion dominates a particular user. It can work with any of them.

"A few years ago, we were purely a NAS company, much of our business came from tier two and three environments. With our product innovations over the last few years, we have emerged as the new best choice for tier one storage as well," said CEO Dan Warmenhoven at this quarter's analyst briefing.

FAVORABLE COMPARISON

"Our SAN solutions and high end systems such as the FAS 980 compare favorably to the biggest systems our competitors offer based on price, performance, scalability, and availability. Customers like Qualcomm, SAP, Southwest Airlines, Zilinks, and several of the large financial institutions on Wall Street trust NetApp fliers with their tier one mission critical applications," he said.

SAN installations already make up 17% of revenues at the one-time NAS-only company, and although the great bulk of that is in iSCSI SAN, it is just as much at home installing a Fibre Channel SAN if that's what the customer wants. Again, no religious legacy.

In fact the company has coined a new term for this combination of NAS and SAN, as Fabric Attached Storage (FAS) and now it places itself in fourth place in the market, with around an 8% market share, and says it is gaining share every quarter. Fabric is a word used extensively by the SAN switch makers to convey a feeling of storage being everywhere.

According to IDC's Worldwide Quarterly Disk Storage Systems Tracker, during Q2 2004, year over year NetApp grew revenue in the worldwide networked storage market 26.5% versus the market growth of 17.9%. Of the reported vendors, NetApp grew revenue the fastest in the networked storage market.

"In the quarter nearly 25% of our SAN bookings contained both Fibre Channel and iSCSI, including companies like Hertz, which was using its Oracle database using both protocols on several FAS systems," added Warmenhoven.

IDC has NetApp in a strong lead in the iSCSI storage market mapped during the first half of 2004, holding 46.9% of the market by value and 57.4% of the market in terabytes shipped. Those two statistics alone say something about its pricing.

KEY TO SUCCESS

NetApp says the key to its success is in keeping the entire storage market as simple as its own name suggests and it tries to continually push the word 'appliance' when it talks about its product line. The word appliance is intended to give the feeling that it is storage that just plugs and plays, regardless of what environment it lives within.

"Customers are moving to storage solutions that support all types of applications and all tiers of data, all unified with one common architecture and file system," explained Warmenhoven. So much has NetApp found this to be true that it can no longer break out its figures by application areas. NetApp is already having trouble breaking its number out by operating system for the same reason, companies are using its storage to support Windows, Linux and Unix, all at the same time.

It hasn't always been this way for NetApp and although it is one of the only enterprise suppliers in our Rethink 50 list that can claim to have an over 50% compound growth since it went public in 1996, it has taken the last three years to get back to where it has just produced a record quarter again.

Warmenhoven points out that the company has just been through three years of rebuilding, targeting its product line on saving customers money, taking it up into tier one installations and broadening both its product line (in effect ending the NAS versus SAN religious wars) and rejuvenating both direct sales and its channels business.

NetApp unveiled more new partners this quarter, with partner offerings with McData, Ontrack Data Recovery, Oracle, Secure Computing, Symantec and Trend Micro.

GROWTH QUARTER

The NetApp revenue for the quarter ended on July 30th was $358m, a growth of 37.6%, with a net margin of 13% and a net income of $46.9m, almost double this time last year. The only companies in our Rethink 50 that grew faster through genuine momentum and not by acquisition were Research and Motion, which grew 158% in the quarter, and Symantec, which is getting much of its growth from the consumer market. Texas Instruments had about the same type of growth figures as NetApp. So the last quarter is a performance that puts it in distinguished company.

Perhaps this is because NetApp is now a company offering Fiber Channel SAN; iSCSI SAN; big, medium and small NAS fliers; local cache appliances; its SNAPShot software that gives it a big foot in the business continuity market; its Nearstore system using cheap ATA drives to compete with tape backup; and, a grid strategy courtesy of its $300m Spinnaker acquisition which can keep track of enormous amounts of distributed data using its global names space system.