While attending Cloud Field Days in the Bay area recently, I spent time with both NetApp and Rubrik. I visited NetApp on its campus the day before Cloud Field Days actually started. While there I met with a number of different executives to talk about their current situation and their future plans. As for Rubrik, I got to enjoy an animated presentation by Rubrik’s Chief Technologist (and former Cloud Field Day’s delegate himself), Chris Wahl and his excellent technical team.

For those unaware of these two companies, here is a very brief, and over-simplified introduction.

NetApp, tried and true

NetApp, is a big, burly, well-established global storage and (of late) data management company. NetApp has ranked in the Fortune 500 since 2012 and was founded way back in 1992 with its IPO occurring in 2005. NetApp has made some major acquisitions over its history, most recently that of all-flash storage vendor SolidFire. The deal, worth close to $1 billion, was seen by many as an opportunity for NetApp to inject itself with a healthy dose of cloud antibodies, in an effort to transform its business from being primarily about hardware sales, to one of being a true software company.

The newcomer, Rubrik

Rubrik sells a converged data management system and platform with hardware that offers backup and recovery-related functionality. It offers live data access for recovery and application development by fusing enterprise data management with web-scale IT, and eliminating backup software. The company was founded in 2014 and is based in Palo Alto, California and has received almost $300 million in venture funding in its short life to-date. With impeccable timing, Rubrik yesterday announced that it has achieved a $150 million revenue run rate and, only three years since its inception, was included as a visionary in Gartner’s latest Magic Quadrant.

Since there is a lot to unpick about these two vendors, this will be a multi-part article published over several days. Part one is a look at NetApp – its history and its present.

Turning a supertanker around

In his seminal 1997 book, The Innovator’s Dilemma, Clayton Christensen opined on how successful companies can do everything “right” and yet still lose their market leadership as new, unexpected competitors rise and take over the market. Most readers will have read the book at least once, but for those who haven’t, Christensen suggests that there are two key parts to this dilemma;

  1. Value to innovation is an S-Curve: Improving a product takes time and many iterations. The first of these iterations provide minimal value to the customer but in time the base is created and the value increases exponentially. Once the base is created then each iteration is drastically better than the last. At some point the most valuable improvements are complete and the value per iteration is minimal again. So in the middle is the most value, at the beginning and end the value is minimal.
  2. Incumbent sized deals: The incumbent has the luxury of a huge customer set but high expectations of yearly sales. New entry next generation products find niches away from the incumbent customer set to build the new product. The new entry companies do not require the yearly sales of the incumbent and thus have more time to focus and innovate on this smaller venture.

NetApp, and other legacy technology vendors (SAP, Oracle, EMC etc.) are often labeled as displaying serious signs of innovators dilemma. I’ve lost count of the number of times I’ve sat in analyst sessions where my fellow analysts and I fumed in frustration at the fact that the vendor in question failed to grasp which (from our perspective) was staring them right in the face. Of course, it’s unusual for a vendor to actually be stupid and, rather than ignorant of what was going on, market forces keep these vendors from truly changing.

A publicly listed company would be crucified for showing poor financial performance, regardless of the fact that the poor performance was tied to the company ensuring its longer term future. Since disruptive technologies often have different economics (as Christensen pointed out) legacy companies have a strong incentive to NOT innovate. Indeed, many of the reasons that Michael Dell gave for taking Dell public revolved around giving himself the breathing room to do what was needed to ensure long-term survival.

NetApp’s acquisition of Solidfire was less about gaining an all-flash offering, but much more about changing the internal culture at NetApp. NetApp saw Solidfire as the sort of antibody that could cause a systemic reaction within NetApp that would short-circuit much-needed changed. And to an extent, there seems to have been some success with this strategy. When NetApp asked 10-year CEO Tom Georgens to fall on his sword in June 2015, they appointed George Kurian as CEO. That began a series of executive and corporate changes – Mark Bregman came on board as CTO (ironically putting the writing of a book all about innovation on hold) and the M&A department started to spin into action.

Bregman’s appointment can be seen as something of a shining-light for NetApp, indicating a new, or at least renewed, focus on innovation. At the time of his appointment, NetApp stated that:

Bregman leads the company’s portfolio strategy and innovation agenda in support of the Data Fabric, NetApp’s vision for the future of data management. His responsibilities include evaluating where the biggest technical opportunities and risks are and helping to set and maintain a culture of innovation within NetApp’s engineering team

This focus on innovation is critical – while a decade ago NetApp was widely regarded as being at the forefront of innovative product development, is has, in recent times, been seen more as a dinosaur trying to perpetuate existing revenue streams and simply paying lip service to modernization. Arch-rival EMC, while itself a bit of a dinosaur, has invested in spin-out Pivotal, itself been acquired by Dell Technologies, and generally been a bit more Nimble than NetApp.

Anyway, the SolidFire purchase seems to have mixed success. Word on the street is that SolidFire marketing has essentially taken over NetApp’s own marketing department. That said, much of the SolidFire talent, and some of the more well-respected members of NetApp’s own team have moved on, so the jury is out on how well those antibodies have invaded their host.

Disruption on all sides

The problem that NetApp, and its ilk, faces is that they are suffering full-frontal attacks on a number of battle lines. Virtualization vendors such as VMware are rushing into hyper-convergence and, whereas they formerly offered mainly compute products, now going the full hog and offering compute, storage and networking. Public cloud offerings such as AWS, Microsoft Azure, and Google Cloud Platform are growing massively. NetApp can innovate around the edge of its hardware, but hardware is increasingly the very thing that organizations are trying to avoid.

As more and more greenfields application opportunities become “cloud first,” a dramatic shift happens whereby the center of data gravity moves from the on-premises data center and over to the cloud. Organizations still have data on-premises of course, but it is slowly (and, in some cases, not so slowly, diminishing in importance.

And so NetApp needs to become something new and so, a few years ago, they announced a data fabric vision, one in which they were no longer going to focus on being a storage hardware vendor, or even a storage vendor at all, but rather would be all about managing data.

And so the move began. NetApp’s ONTAP storage offerings were extended into more cloud-like models – NetApp software running on customers’ own infrastructure or even “gasp horror” within AWS. Indeed, at Cloud Field Days NetApp was keen to point out that its deal to offer ONTAP on top of AWS would mean that customers could easily SnapMirror data across clouds as they wished. This has also been extended to Microsoft Azure so Azure customers can run ONTAP Cloud as a NetApp appliance running in Azure. NetApp’s Data Fabric vision is to have NetApp storage wherever its customers have data and have all of the data managed in a consistent way.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

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