"We have created the next-generation data management solution at Network Appliance," explains Dan Warmenhoven, chief executive officer of Network Appliance. "There are two reasons we've been able to do it. One is the whole concept of the appliance the simplicity of it and the fact that it can significantly reduce the complexity of global data management, especially in large enterprise environments. The second is that we understand mission-critical storage should be accessible to all computing environments rather than being captive in a server. That is part of what I mean by a next-generation solution. It's a different way of thinking about the problem. In the past, companies would buy an application, load it on the server, buy the storage from that same server vendor and all day the storage is captive to that machine. Our thought is that data is too valuable for that kind of approach. Data should be an enterprise-wide resource, much like a network is an enterprise resource. With a network, you can communicate with anybody or anything globally, and there's no reason why you shouldn't have access to information the same way," explains Warmenhoven. "Once you unlock and separate the storage from the server, you've essentially increased its value because you can move it to where it is going to be most effective and you can have multiple applications looking at the same information."
"We pioneered the concept of an appliance in this industry the simple, easy-to-use, single-function system. In our view, an appliance is definitely not programmable. An appliance is designed to do one thing and do it very well. It is optimized and highly efficient. Other people use the term appliance for a variety of different things, but they don't conform to any of what I would consider to be the fundamental definitions. You can think of our systems as information refrigerators. Plug one in, set a couple of knobs, store things in it and retrieve them. You don't manage the refrigerator, and it doesn't do anything but store food. In our case, our appliance stores your information," states Warmenhoven.
"Our first product went to market in 1993. It was a seven-gigabyte system composed of seven one-gigabyte drives. Now our systems are shipped with 72-gigabyte drives, and pretty soon they're going to support 144- gigabyte capacities. Companies that several years ago were managing what was considered a big system had 10 gigabytes now are building multiterabyte NetApp systems that scale across their entire network enterprise infrastructure. We currently ship a terabyte on a shelf. It's 14 drives across, and each drive is 72 gigabytes," explains Warmenhoven.
Warmenhoven joined NetApp in October of 1994, and he led the company's initial public offering in November of 1995. "When I joined the company, we already had a product and had been marketing it for about a year," says Warmenhoven, "but they hadn't quite found the right formula, they hadn't quite found the target customers and they hadn't really been able to articulate the value proposition very well. Additionally, the distribution strategy had some flaws which had been raised, if not resolved, by Tom Mendoza, who is currently our president. Tom joined NetApp as head of North American sales a few months before I got here. Together, we refined the product strategy, the positioning in the marketplace and the target markets. I completely supported Tom's recommendations for the distribution strategy he proposed to sell direct and target particular application environments that were data intensive and required high performance. We've been partners in this ever since I walked in the door," states Warmenhoven.
One of the milestones in Warmenhoven's career at NetApp involves the company's initial public offering. "When I joined the company, we finished the year with $15 million in revenue. The year we went public (1995), we finished with three times that $45 million. We were profitable when we went public, and going public really gave us a high degree of visibility and credibility." Since the initial public offering, Warmenhoven has led the company to 21 straight quarters of greater than 70 percent growth. (Editor's note: After this interview was conducted, the company reported fiscal 2001 revenues that exceeded $1 billion.)
Other NetApp milestones include the NetApp multiprotocol filer. Warmenhoven explains, "Our initial product addressed only UNIX environments. Then we developed the Windows capability and, in particular, the ability to share data transparently between UNIX and Windows systems. In fact, we developed the capability to not only share the data, but share security models and access control models. The next big milestone was winning the support of major database vendors such as Oracle and IBM. That provided a whole new opportunity for us, and now databases are approximately 20 to 25 percent of our business and the fastest growing segment," he explains.
"The other major milestone for NetApp was the development of our content delivery strategy. The first substantiation of that was the caching products we brought to market in late 1997. We felt there would eventually be a convergence of caching and data management technologies. I feel we had a very distinctive vision in that area. We felt as though caching was not a standalone market or application it was part of a company's global data management fabric. In fact, I was disappointed at the length of time it actually took for these two technologies to converge. We thought it was going to happen a couple of years ago, but only recently have companies really started to understand that content delivery and data distribution require an integrated solution. I think the convergence occurred this past year. We've seen our competitors really fall back because it is not only a caching issue, but a linking of information from a data center right to the edge of a customer's network from Center-to-Edge," explains Warmenhoven. "We've converged the technologies, and I believe that's why we've risen to the market leadership position in content delivery."
The explosion of data and the overall size of the market represent a huge opportunity for NetApp. "Based on recent market data, the size of the storage market in aggregate is $39 billion for 2001, and the portion of this market that we can address is the $25 billion NT and UNIX external storage piece. We think we have a superior solution for that entire $25 billion market opportunity. With respect to the total market, we have to grow as fast as possible to secure our market share position. We have moved up very nicely every year in terms of rank and market share. Last year we were number six overall in external storage, and we hope to keep that up," says Warmenhoven. "Looking at the $25 billion, roughly half is associated with database storage structured information and the other half is flat files. We've been well received in the flat file space, and it's only more recently that people have started to recognize the benefits we can bring to the database side. A lot of positive things have happened to advance our recognition in that area. Certainly, the Oracle endorsement was one. When Oracle, the world's premier supplier of databases, began an ASP service for their technology, they chose Network Appliance. I think that speaks volumes about the suitability of our approach and its advantages. In fact, a recent study by INPUT, a Web-based IT marketing services firm, showed that we have a significant cost of ownership advantage in database storage. A lot of that lower cost of ownership is based on simplicity, not just cost of the products. It is based on the reduced requirement for system and database administrators. One of the metrics used by many of our customers," explains Warmenhoven, "is gigabytes managed per person the efficiency ratio of data administrators. That's important because if the amount of data you have is doubling every year, you either have to double your staff every year or you have to double the productivity every year. I would argue that you can't double your staff every year even if you wanted to do that. You wouldn't have the money and you wouldn't be able to find enough people, so you have to find an approach to double the productivity. With a NetApp solution, you can actually manage four times as much with the same amount of people. That's why it has been so rapidly adopted."
Even faced with the challenges of the current economic slowdown, Warmenhoven has ambitious plans for NetApp's future. "We are continuing to invest in the expansion of our worldwide sales force and strategic R&D initiatives for future growth. During the last 18 months, we have scaled our high-end systems to 12 terabytes. We are going to keep scaling to larger environments. We expanded our product lines at the entry level to about $15,000 for a half terabyte of capacity. That's quite an entry-level system," emphasizes Warmenhoven.
Looking ahead, Warmenhoven anticipates a significant restructuring of the storage marketplace. "Right now about 70 percent of the market is owned by server vendors, and the customers buy the storage from those server vendors. I anticipate this market will experience a radical shift. Customers are beginning to recognize storage and the data that is contained within it as an infrastructure component that they don't want tied to a server. Customers want and need storage to be a global resource that can be used by all. There are three factors influencing this market evolution. They are the desire to have storage be independent from the server environment so that it can be used anywhere, the speed of the interfaces which allow networking without suffering a performance degradation, and the requirement to scale effectively," he explains.
"We have added value to key application environments such as Microsoft Exchange Server, Oracle and a variety of others. You will see a tighter integration of some of those applications. You will also see more data management services such as mirroring and backup alternatives, and you will see more in the way of content delivery support. You'll see more 'data-at-the-edge' emphasis in the future. You'll also see that the basic architecture of the filer will change over time. We're headed down a path to make it more virtual. One of our major partners is Storage Networks. Their business essentially is managed storage. They have multiple customers who would like to have a single, large system partitioned among multiple clients, but their clients don't want that unless it is absolutely firewall safe. We can provide that. We can take one NetApp filer and chop it up into several pieces, or we can take several NetApp filers and aggregate them to one. This enables our customers to scale the capacity they need independently of performance requirements," explains Warmenhoven.
With favorable market projections for enterprise storage purchases, NetApp can look forward to continuing success. Reflecting on his current position, Warmenhoven comments, "I can't see myself doing anything other than this. It's tremendously fulfilling. I'm running a billion dollar entity that I've helped lead from a small startup to a market leader in several segments. If I could point to anything in terms of my personal success, I would say it is developing the unique corporate culture that we have here at NetApp. We have a very healthy culture that makes it easy for us to attract and retain stellar talent. There's an enormous emphasis on teamwork and partnering. Even though everyone is placed under very severe demands for performance, there is little turnover. Everyone really enjoys coming to work, even though we all work very hard. I have never seen the degree of unanimity of purpose and unified sense of direction and cooperation as we have at NetApp."
Warmenhoven and the entire NetApp team obviously work very hard to insure that the next time you open your refrigerator, you'll be reminded that Network Appliance can satisfy your company's appetite for storage.
Network Appliance Fact Table
Publicly Traded (NASDAQ NTAP)
Register or login for access to this item and much more
All Information Management content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access