NetApp CEO Tom Georgens says the battle for storage supremacy is increasingly becoming a two-horse race between his company and EMC.
During NetApp’s earnings conference call Wednesday, Georgens painted large acquisitions such as Hewlett-Packard’s buying 3PAR and Dell grabbing Compellent last year as attempts by those vendors to catch up on innovation. Despite those deals, NetApp and EMC continue to take market share.
NetApp’s product revenue for last quarter increased 27% year over year – at least twice the storage revenue growth of server vendors HP, Dell and IBM. EMC, which has more overall revenue than NetApp, grew its storage product revenue around 17.5% over last year in its most recent quarter.
“Nobody buys storage from a server vendor unless they also buy their servers,” Georgens said. “And they’ve all lost a lot of ground, so they’re effectively re-loading by acquiring companies out there that actually have innovated.
“Companies like NetApp and EMC – as much as a hate to say it – are actually going to be the innovators because I think we’re going to be the only guys who are able to sustain the level of investment to stay competitive.”
He did say some customers still prefer best of breed, and that’s why NetApp is working on integrated stacks such as its FlexPod architecture with Cisco and VMware, and partnering with others such as Microsoft, Citrix, SAP and Accenture.
Georgens said EMC’s recent VNX unified storage system hasn’t changed the competitive dynamic between EMC and NetApp, but “it actually creates separation of us and EMC from the rest of the pack … it’s going to be more and more difficult for the rest of the storage industry to keep pace.”
He said EMC’s recent Project Lightning announcement involving server-side flash in a PCIe card underscores the importance of flash in storage, a technology NetApp has embraced with its storage-side Flash Cache card.
“I expect there will be flash in large quantities deployed in servers,” he said. “And I think there will be various ways of utilizing it, some simply as cache, some as permanent storage. I expect flash to be a big deal, and I think the Flash Cache has been very effective for us. And we’ve got aspirations to do more with it over the next couple of years.”
One server vendor NetApp is watching closely is IBM, because it is both a partner and competitor. IBM sells NetApp’s flagship FAS storage systems as well as the Engenio storage line that NetApp acquired from LSI this month for $480 million. But IBM also internally develops storage products that compete with NetApp’s.
“IBM has aspirations to have products in this space, and they’ve had that all along,” Georgens said. “The desire by their internal groups to make their own products makes the positioning very complicated. And are we happy with the positioning? No. On the other hand, our engagement with IBM’s customer facing groups, the people who actually have to put solutions in front of customers, is actually exceptionally strong. If we continue to out-innovate them and introduce products to market faster, then we’ll preserve the business.”
As far as more acquisitions, Georgens said NetApp is more likely to make smaller ones such as it did with Akorri and Bycast over the past year than large deals such as Engenio, but “when it’s the right transaction at the right price and appropriately strategic, then we’ll move ahead.”
Georgens said NetApp would refrain from selling Engenio products through its own channels that compete with those systems sold by OEM partners such as IBM and Dell. He said the relationship between NetApp and Engenio’s OEM partner Teradata could help NetApp move into the data warehousing market. He said the two vendors do not compete have complementary technologies. “I’m optimistic about that one,” he said of Teradata.