NetApp gets the OpEx model right

Ever since the Dot-Com Boom, enterprise storage vendors have had “Capacity on Demand” programs that promised a pay-as-you-use consumption model for storage. Most of these programs met with very limited success, as the realities of the back-end financial models meant that the customers didn’t get the financial and operational flexibility to match the marketing terms.

The main cause of the strain was the requirement for some sort of leasing instrument to implement the program; meaning that there was always some baseline minimum consumption commitment, as well as some late-stage penalty payment if the customer failed to use as much storage as was estimated in the beginning of the agreement. This wasn’t “pay-as-you-use” as much as it was “just-pay-us-no-matter-what”.

NetApp has recently taken a novel approach to this problem, by eliminating the need for equipment title to change from NetApp to the financial entity backing the agreement. With NetApp’s new NetApp OnDemand, NetApp retains title of the equipment, and simply delivers what’s needed.

An even more interesting feature of this program is that the customer pays NOT for storage, but for capacity within three distinct performance service levels, each defined by a guaranteed amount of IOPS/TB, and each of these service levels has a $/GB/Mo associated with it.

To determine how much of each service level is needed at a given customer, NetApp will perform a free “Service Design Workshop” that uses the Netapp OnCommand Insight (OCI) tool to examine each workload and show what the IO Density (IOPS/TB) is for each. From there, NetApp simply delivers storage that is designed to meet those workloads (along with consideration for growth, after consulting with the customer). They include the necessary software tools to monitor the service levels (Workflow Automation, OnCommand Unified Manager, and OCI), as well as Premium support and all of the ONTAP features that are available in their Flash and Premium bundles.

Customers can start as low as $2k/month, and go up AND DOWN with their usage, paying only for what they use from a storage perspective AFTER efficiencies such as dedupe, compression, and compaction are taken into account. More importantly, the agreement can be month-to-month, or annually; the shorter the agreement duration of course, the higher the rate. This is America, after all.

The equipment can sit in the customer premises, or a co-location facility- even a near-cloud situation such as Equinix, making the Netapp Private Storage economics a true match for the cloud compute that will attach to it.

A great use case for NetApp OnDemand is with enterprise data management software, such as Commvault, which can be sold as a subscription as well as as a function of capacity. Since the software is now completely an OpEx, the target storage can be sold with the same financial model – allowing the customer to have a full enterprise data management solution with the economics of SaaS. Further, there would be no need to over-buy storage for large target environments, it would grow automatically as a function of use. This would be the case with any software sold on subscription, making an integrated solution easier to budget for as there is no need to cross the CapEx/OpEx boundary within the project.

This new consumption methodology creates all sorts of new project options. The cloud revolution is forcing companies such as NetApp to rethink how traditional offerings can be re-spun to fit the new ways of thinking in the front offices of enterprises. In my opinion, NetApp has gotten something very right here.

NetApp gets the OpEx model right

NetApp + SolidFire…or SolidFire + NetApp?

So what just happened?

First- we just saw AMAZING execution of an acquisition.  No BS.  No wavering.  NetApp just GOT IT DONE, months ahead of schedule.  This is right in-line with George Kurian’s reputation of excellent execution.  This mitigated any doubt, any haziness, and gets everyone moving towards their strategic goals.  When viewed against other tech mergers currently in motion, it gives customers and partners comfort to know that they’re not in limbo and can make decisions with confidence.  (Of course, it’s a relatively small, all-cash deal- not a merger of behemoths).

Second -NetApp just got YOUNGER.  Not younger in age, but younger in technical thought.  SolidFire’s foundational architecture is based on scalable, commodity-hardware cloud storage, with extreme competency in OpenStack.  The technology is completely different than OnTAP, and provides a platform for service providers that is extremely hard to match.   OnTAP’s foundational architecture is based on purpose-built appliances that perform scalable enterprise data services, that now extend to hybrid cloud deployments.  Two different markets.  SolidFire’s platform went to market in 2010, 19 years after OnTAP was invented – and both were built to solve the problems of the day in the most efficient, scalable, and manageable way.

Third – NetApp either just made themselves more attractive to buyers, or LESS attractive, depending on how you look at it.

One could claim they’re more attractive now as their stock price is still relatively depressed, and they’re set up to attack the only storage markets that will exist in 5-10 years, those being the Enterprise/Hybrid Cloud market and the Service Provider/SaaS market.  Anyone still focusing on SMB/MSE storage in 5-10 years will find nothing but the remnants of a market that has moved all of its data and applications to the cloud.

Alternatively, one could suggest a wait-and-see approach to the SolidFire acquisition, as well as the other major changes NetApp has made to its portfolio over the last year (AFF, AltaVault, cloud integration endeavors, as well as all the things it STOPPED doing). [Side note: with 16TB SSD drives coming, look for AFF to give competitors like Pure and xTremeIO some troubles.]

So let’s discuss what ISN’T going to happen.

There is NO WAY that NetApp is going to shove SolidFire into the OnTAP platform.  Anyone who is putting that out there hasn’t done their homework to understand the foundational architectures of the VERY DIFFERENT two technologies.  Also, what would possibly be gained by doing so?   In contrast, Spinnaker had technology that could let OnTAP escape from its two-controller bifurcated storage boundaries.  The plan from the beginning was to use the SpinFS goodness to create a non-disruptive, no-boundaries platform for scalable and holistic enterprise storage, with all the data services that entailed.

What could (and should) happen is that NetApp add some Data Fabric goodness into the SF product- perhaps this concept is what is confusing the self-described technorati in the web rags.  NetApp re-wrote and opened up the LRSE (SnapMirror) technology so that it could move data among multiple platforms, so this wouldn’t be a deep integration, but rather an “edge” integration, and the same is being worked into the AltaVault and StorageGRID platforms to create a holistic and flexible data ecosystem that can meet any need conceivable.

While SolidFire could absolutely be used for enterprise storage, its natural market is the service provider who needs to simply plug and grow (or pull and shrink).  Perhaps there could be a feature or two that the NetApp and SF development teams could share over coffee (I’ve heard that the FAS and FlashRay teams had such an event that resulted in a major improvement for AFF), but that can only be a good thing.  However the integration of the two platforms isn’t in anyone’s interests, and everyone I’ve spoken to at NetApp both on and off the record are adamant that Netapp isn’t going to “OnTAP” the SolidFire platform.

SolidFire will likely continue to operate as a separate entity for quite a while, as sales groups to service providers are already distinct from the enterprise/commercial sales groups at NetApp.  Since OnTAP knowledge won’t be able to be leveraged when dealing with SolidFire, I would expect that existing NetApp channel partners won’t be encouraged to start pushing the SF platform until they’ve demonstrated both SF and OpenStack chops.  I would also expect the reverse to be true; while many of SolidFire’s partners are already NetApp partners, it’s unknown how many have Clustered OnTAP knowledge.

I don’t see this acquisition as a monumental event that has immediately demonstrable external impact to the industry, or either company.  The benefits will become evident 12-18 months out and position NetApp for long-term success, viz-a-viz “flash in the pan” storage companies that will find their runway much shorter than expected in the 3-4 year timeframe.  As usual, NetApp took the long view.  Those who see this as a “hail-mary” to rescue NetApp from a “failed” flash play aren’t understanding the market dynamics at work.  We won’t be able to measure the success of the SolidFire acquisition for a good 3-4 years; not because of any integration that’s required (like the Spinnaker deal), but because the bet is on how the market is changing and where it will be at that point – with this acquisition, NetApp is betting it will be the best-positioned to meet those needs.

 

NetApp + SolidFire…or SolidFire + NetApp?

Parse.com – R.I.P. 2016 (technically 2017)

Today we witnessed a major event in the evolution of cloud services. 

In 2013, Facebook purchased a cloud API and data management service provider, Parse.com. This popular service served as the data repository and authentication/persistence management backend for over 600,000 applications. Parse.com provided a robust and predictably affordable set of functionalities that allowed the developers of these mobile and web applications to create sustainable business models without needing to invest in robust datacenter infrastructures. These developers built Parse’s API calls directly into their application source code, and this allowed for extremely rapid development and deployment of complex apps to a hungry mobile user base.

Today, less than three short years later, Facebook announced that Parse.com would be shuttered and gave their customers less than a year to move out. 

From the outside, it’s hard to understand this decision. Facebook recently announced that they had crossed the $1B quarterly profit number for the first time, so it’s not reasonable to assume that the Parse group was bleeding the company dry. Certainly the internal economics of the service aren’t well known, so it’s possible that the service wasn’t making Facebook any, or possibly enough, money. There was no change in pricing that was attempted, and this announcement was rather sudden.

No matter the internal (and hidden) reason, this development provides active evidence of an extreme threat to those enterprises that choose to utilize cloud services not just for hosting of generic application workloads and data storage, but for specific offerings such as database services, analytics, authentication or messaging- things that can’t be easily moved or ported once internal applications reference these services’ specific API’s. 

Why is this threat extreme? 

Note that Facebook is making LOTS of money and STILL chose to shutter this service. Now, point your gaze at Amazon or Microsoft and see the litany of cloud services they are offering. Amazon isn’t just EC2 and S3 anymore- you’ve got Redshift and RDS among dozens of other API-based offerings that customers can simply tap into at will. It’s a given that EACH of these individual services will require groups of people to continue development, and provide customer support, and so each comes with it an ongoing and expensive overhead. 

However, it’s NOT a given that each (or any) of these other individual services will provide the requisite profits to Amazon (or Microsoft, IBM, etc) that would prevent the service provider from simply changing their minds and focusing their efforts on more profitable services, leaving the users of the unprofitable service in the lurch. There’s also the very real dynamic of M&A, where the service provider can purchase a technology that would render the existing service (and its expensive overhead) redundant. 

While it’s relatively simple to migrate OS-based server instances and disk/object-based data from one cloud provider to another (there are several tools and cloud offerings that can automate this), it’s another thing entirely to re-write internal applications that directly reference the APIs of these cloud-based data services, and replicate the data services’ functionality. Certainly there are well-documented design patterns that can abstract the API calls themselves, however migrating to a similar service given a pending service shutdown (as is faced today with Parse.com) requires the customer to hunt down another service that will provide almost identical functionality, and if that’s not possible, the customer will have to get (perhaps back) into the infrastucture game.

Regardless of how the situation is resolved, it forces the developer (and CIO) to re-think the entire business model of the application, as a service shuttering such as this can easily turn the economics of a business endeavor upside-down. This event should serve as a wake-up call for developers thinking of using such services, and force them to architect their apps up-front, utilizing multiple cloud data services simultaneously through API abstraction. Of course, this changes the economics up-front as well. 

So for all you enterprise developers building your company’s apps and thinking about not just using services and storage in the cloud, but possibly porting your internal SQL and other databases to the service-based data services provided by the likes of Amazon, buyer beware. You’ve just been given a very recent, real-world example of what can happen when you not only outsource your IT infrastructure, but your very business MODEL, to the cloud. Perhaps there are some things better left to internal resources. 

Parse.com – R.I.P. 2016 (technically 2017)