Have Enterprise Storage Players Had Their Market Pulled from Under Their Feet?

Two of the enterprise storage “superpowers”, Pure Storage and NetApp, have both reported worse than expected revenue results this month.  Financial journalist Gary Alexander at seekingalpha.com has gone as far as calling NetApp a storage dinosaur, but while I won't argue with his assessment of the financials, his underlying understanding of NetApp’s technical offering is flawed.

I would agree that the financial future for both NetApp and Pure look worrying. In the case of Pure, you have to scratch your head and wonder how and if they will ever be able to make a profit.

However, from a technology buyers’ point of view, this really doesn’t matter. Neither company is going out of business, and neither companies’ products are going to disappear. With this in mind, whether they hit earnings expectations or whether they grow by 2% less than expected is inconsequential to the solution that you purchase.

That’s why when financial journalist such as Gary refers to NetApp as a “Dinosaur”; they are doing a disservice to the fundamental core of what NetApp’s reason should be. Number one is building great technology that customers desire. If they can do that, revenue and earnings will follow. If indeed they are a storage dinosaur then they won’t meet the most important priority of building great technology.

However, NetApp is not a dinosaur; in fact, their data fabric strategy is pioneering for a storage company and places them right at the front of building storage architecture for digital transformation. It comes with a dose of hype, but it also has real deliverables and far from playing slave to their old generation technology. They grasped where an enterprise storage player needs to reside in the era of multi-cloud and have been fast in building cutting edge technology to take them there. Does that sound like a storage dinosaur to you?

Here is the problem, and it's one that I contend will affect the entire storage industry. To avoid dinosaur status, storage players need to embrace multi-cloud strategies, but in doing so, they cannibalise their own revenue pie. In the old days, when a player like NetApp, EMC or even Pure own a large account, they “owned” that account. Purchase orders for more capacity rained to that chosen vendor as data volumes exploded.

A multi-cloud storage strategy ultimately means the storage vendor has to share those GBs with cloud storage, which even if they manage, they may not provide the underlying hardware. For the end users of storage, they don’t care what the underlying storage hardware is at the cloud provider; they only care about simplified ubiquitous management and that performance levels are met. The net effect is that by building an open cloud storage strategy, the storage vendors can no longer pin down and secure 100% of their customer’s storage capacity needs. At the same time, if they don’t offer a multi-cloud approach, they will lose footprint altogether.

With this in mind, that’s why hyperconverged players like Nutanix have also started stealing part of the storage pie. A dinosaur wouldn’t be able to react to that, but it’s NetApp and not the new kid on the block Pure, that were able to launch their own HCI offering to get a foothold in that market.

So in short, I don’t disagree with the idea that the financial outlook for these companies looks highly challenging. However, I do take issue with the assessment of these companies’ technological standing. The market is changing, and my assessment is that even though companies like NetApp are building great technology in response, its effects their ability to grow revenues.

Now, from a technology buyers’ perspective, it doesn’t matter. If the solution is sound, the companies’ share price is irrelevant. Ignore the soundbites of the financial analysts and focus on whether the solution is sound and delivers what you need. NetApp (or Pure) technology and solutions will be around for the life of your investment in them, of that there is no doubt.

IT HARDWARE DOESN'T MATTER ANYMORE

The major hardware vendors already know something – when it comes to IT managers running IT departments the hardware they choose to use is becoming increasingly less important.

Cloud computing has been a catalyst for this. When a workload is moved to cloud the IT manager no longer has to spend a second thinking about the hardware that is being used to support that workload. It becomes about service levels not the hardware delivering compute and storage.

The decline of hardware as a strategic part of the IT decision making process is not just about cloud, it has extended into the on premise datacenter.

SOFTWARE DEFINED – these two words explain why the specific brand or manufacturer of hardware being used for compute, storage or networking is becoming increasingly less important to IT Directors.

Software defined is about using to software to create a layer of abstraction between hardware and the person managing that hardware. Early steps in software definition including things like virtual volume manager on disks and then the concept of virtual machines on servers.

We have moved to a point where every part of the IT stack can be software defined. A layer of software that manages any storage, any server and any networking hardware.

IT managers become less worried about compatibility between hardware vendors.

IT manages service level rather than hardware.

The focus of IT revolves around workloads and applications the software layer ensures appropriate hardware resource is allocated based on service level.

In truth the type of underlying hardware does make a difference, as an example flash disk will still perform faster than spinning disk, but for the IT managed through software, the type of disk doesn’t matter. The administrator simply asks for storage that meets a given criteria then the software intelligently allocates it.

Software Defined Datacenter removes dependence on a single hardware vendor, it allows interoperability between hardware from multiple vendors, it also de-risks decisions to try new technologies from new and start up vendors.

The net effect is that the large enterprise hardware vendors are having to reinvent themselves, they have to embrace software defined approach but in doing so they open up “their” accounts to working with other vendors.The approach is changing. At Zerto we talk about protecting workloads and workload mobility. It’s a message that is increasingly resonating with IT directors. The Zerto approach is not only hardware agnostic it is even hypervisor agnostic. This resonates because the application and workload is becoming the primary concern of the IT department. Software that abstracts the underlying infrastructure allows IT directors to focus on application service level and at the same time de-focus on keeping IT running – The net effect is that hardware decisions will continue to become less strategic.