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?