It’s no secret that NetApp has had a tough go of things these past few years, but I’ve just returned from its annual industry analyst meeting and it was clear to me during this full day discussion that NetApp today is not the NetApp of yesterday. In our internal discussions these past few years, we acknowledged that it had an excellent technology foundation, had made some good acquisitions but executed bad integrations, and needed a significant overhaul - a transformation, if you will - including getting beyond selling storage boxes. For example: up leveling the discussion rather than selling speeds and feeds; expanding the portfolio beyond storage to deliver more value; ridding itself of the antibodies that prevented acquired technology from thriving; and being bold(er) in its marketing. NetApp was famous for technology innovations it never told anyone about (while other, bolder vendors claimed first mover advantage!) In the past two years, it has transformed to the point that the discussions we are having with it today are completely different than those we have had in the past. It is certainly not your father’s NetApp!
It is still early days in the transformation, but I am feeling more positive about the company than I have in a long time (better than I even felt before the "dark" days). Why? I’ll focus on the three things that stood out most during the analyst meeting: team, technology, and execution. Let’s take a look at each.
- Team. The executive team has transformed. That's not to say the old team was bad - but sometimes even the most talented and skilled leaders can get too caught up in holding onto the things that made them successful, and NetApp was indeed a very successful company. But in a time of very swift technology change, what made NetApp successful in 2010 was not going to make it successful in 2015 and beyond. ONTAP and WAFL were and are innovative and powerful technologies. But the market has moved well beyond filers sold as toasters. To be fair, the executive team seemed to realize that and made a number of acquisitions, including Spinnaker, Onaro, Bycast, and Akkori, but it seems that the internal antibodies that held onto the thinking that ONTAP and WAFL could solve world hunger given enough time and investment prevented the acquired technologies from thriving and helping to drive growth the way they would have if they had been embraced. Tom Georgens, the CEO at the time, brought in talented outsiders like George Kurian in the executive ranks, but looking at it from the outside in, it seems too many "tree huggers" remained. Now that Kurian has assumed the CEO role, he's brought in new talent almost across the board at the executive levels, while hanging onto those people dedicated more to making the company, rather than core technology, successful. He has also instituted a large measure of accountability to drive organizational transformation down the ranks.
- Technology. The technology has transformed. We did not have one single presentation about ONTAP. NetApp is no longer a storage array company - it is a software company that helps IT organizations manage, protect and secure data in hybrid cloud environments. We heard about how a data fabric (it is underscored by ONTAP; the tech has not disappeared) ties together multi cloud environments and provides a data management software platform that can run anywhere, allowing you to run workloads anywhere. In other words, solutions that meet the needs of organizations undergoing digital transformation and looking to leverage information for business value. To do that, you need a robust data management layer that can work in concert with and run on the latest infrastructure technologies (like SSD, NVRAM, NVMe, HCI & CI, public and private clouds) to allow IT to attain the agility to get a competitive edge. Even looking at the products page of the website – no mention of unified storage or ONTAP. It is a completely new NetApp.
- Execution. This is the wild card, where vision and technology come together, and tightly related to team transformation. So far, so good--just look at the numbers. Revenue, top and bottom line, is growing. Margins, both gross and operating, are growing. The Solidfire acquisition is going well, and the company is shipping integrated products in the form of a new HCI appliance, (hear more about that here), while hitting a record run rate for the Solidfire product. All while NetApp’s AFA revenue grew 170% y/y and Flexpod had a record year. The salesforce transformation - itself a huge effort - is well underway under the new management of Henri Richard. There is a new cloud group headed by Anthony Lye responsible for driving cloud-native solutions that has a broad portfolio and, while still a small part of the business, is generating multiple millions in revenue. And the new CMO, Jean English, is helping NetApp shape and tell (loudly!) a new, BOLD (NetApp’s word….at last!!) story and executing on building the necessary lead gen and follow up systems for NetApp to grow. NetApp especially needs to execute on its data management software vision, continuing to drive new discussions, so the story and bold marketing execution is especially important. But (and there is always a but) – there are some things to consider. If NetApp is going to be the Data Authority for a Hybrid World, as Jean English says, they will be dragged into discussions about data security privacy and compliance. Whether they partner or do it themselves (via acquisition or engineering) they'll need to figure out their play, given that security is the top concern for IT execs everywhere. And it is still relatively early in the integration of Solidfire. Also, NetApp was undoubtedly late to the HCI market: There is even debate about whether the HCI product is HCI, given the lack of shared compute. Of course, value can usually outweigh semantics, but NetApp will no doubt have to address this challenge from the competitors. So NetApp needs sustained execution - it needs the Solidfire technology to thrive for the company to thrive. It needs to demonstrate to the market the success of its HCI platform and multi-cloud data management solutions and build upon that with deeper data management capabilities. It needs the sales teams to execute on business-focused solution sales. It will be interesting to check in next year – execution on team, technology and go-to-market will show in the numbers.
NetApp's CEO, George Kurian, characterizes the past few years as NetApp's Transformation 1.0 stage, and has mapped out the 2.0 phase. It executed well on 1.0, if it executes as well on 2.0 then NetApp will truly be back and a force to be reckoned with. Will it be difficult to compete as a standalone company against the behemoths like Dell EMC, IBM, and HPE? Yes, though those companies have execution challenges of their own. But today, NetApp is in a much stronger position than it was yesterday.
Of course this discussion could be much longer - there are many more things at play here and if I went into detail on everything it would be good bedtime reading. Running a company is much more complex when you are responsible for the bottom line than it is to someone looking from the outside in. It’s good to see the company come out of the doldrums and the team should be proud as it celebrates its 25th anniversary this week.