The stretch run of 2019 finds NetApp striving to regain momentum in enterprise storage.
Heading into its NetApp Insight 2019 user conference, the largest independent storage vendor is in transition. Along with a sudden sales slump, NetApp is adjusting to the retirement of founders Dave Hitz and longtime senior executives Tom Mendoza and Joel Reich.
NetApp data storage revenue had been on the upswing since 2017, closing the gap with rivals Dell EMC and Hewlett Packard Enterprise. But NetApp sales plunged in mid-2019, prompting it to lower full-year fiscal revenue projections by 10% from its original forecast of nearly $6 billion.
Company executives blamed the revenue reversal partially on recessionary fears among large companies. NetApp said it will ramp up hiring to shore up key markets in North America.
External storage systems vendors are under pressure from public clouds and technology shifts, but NetApp has been the hardest hit. Pure Storage, for example, forecast lower-than-expected revenue for two consecutive quarters, although its global storage revenue grew 28% last quarter.
Based on a draft of the NetApp Insight agenda, NetApp data storage hardware will be a secondary player again at this year's show. NetApp executives talked about the cloud so much at Insight 2018 that Hitz said he had to assure one customer that the company plans to keep selling hardware.
Application containers, cloud and data mobility figure to dominate most sessions this year. However, NetApp does plan to showcase broader use cases for NetApp HCI, its hyper-converged infrastructure based on SolidFire all-flash arrays.
Where does NetApp go in flash?
One thing to watch is how rapidly NetApp data storage customers adopt emerging NVMe flash and storage class memory (SCM) technologies. NetApp has implemented NVMe SSDs in its All Flash FAS (AFF) systems and rack-scale EFF. The next step for NetApp will be full end-to-end integration of PCIe-enabled NVMe.
NetApp has not publicly discussed its roadmap schedule for integrating SCM, but that follows a pattern. NetApp trailed competitors in bringing both an all-flash array and hyper-converged infrastructure to general availability.
After misfiring on developing its own in-house flash system, NetApp turned its traditional FAS array family into a successful all-flash platform. It then acquired all-flash startup SolidFire in 2015, leading with it as part of a "flash first" sales strategy.
With large customers decreasing spending, NetApp is sharpening its game plan to win new customers. The recent revenue slide indicates NetApp's need to diversify the customer base, said Eric Burgener, a research vice president of storage at IDC.
Sales of AFF, EFF and SolidFire arrays helped NetApp zoom to the No. 2 position in all-flash, according to IDC. But most the all-flash growth came from sales to customers who previously used NetApp's spinning disk storage.
"A lot of that fuel has been spent, so NetApp's revenue growth is going to be dependent on its ability to bring in new customers," Burgener said.
NetApp's cloud partnerships
NetApp's shift from hardware to a software-centric strategy started in 2015 with the launch of NetApp Data Fabric. It set NetApp up to seamlessly shift data across locales and storage media, both on premises and the cloud.
NetApp Data Fabric allows customers to move its flagship Ontap clustered file storage between public clouds. Kubernetes orchestration in Data Fabric enables users to launch container clusters that scales to hundreds of users.
The vendor must continue tacking on NetApp data storage management features to satisfy changing consumption patterns, said Henry Baltazar, a storage analyst at 451 Research in San Francisco.
"NetApp was ahead of the game with the Data Fabric strategy. The biggest challenge is transitioning to an OpEx sales model. Instead of having homerun hitters who close big deals every three years, NetApp has to transition from selling a box of storage to helping you with data mobility, performance and reliability in the cloud," Baltazar said.