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Taneja Blog / Data Center Systems

What NetApp’s Acquisition of SolidFire Means

Last month NetApp acquired SolidFire for $870M. It is by far the biggest acquisition in NetApp’s history. NetApp has never been known as a major acquirer of technology, instead relying on its own, internally developed technology, centered around the FAS product line. So why this acquisition and why now? Does this represent a fundamental change in NetApp’s modus operandi or is it simply a “bigger” acquisition? At Taneja Group we believe this acquisition signals a major change inside NetApp and we believe it is an excellent move in the right direction. It signifies a philosophical change in thinking and a shift in power inside NetApp, away from those that have maintained a stranglehold over engineering for the past thirty plus years. 

Not to take away from what the incredible results the previous technical team achieved over the years. NetApp single handedly created the NAS category and while SunMicrosystems may have invented NFS (they did), NetApp enabled NFS to become ubiquitous. In spite of the fact that EMC eventually took the marketshare lead over NetApp in this category, nevertheless, NetApp has co-ruled the world of NAS for decades. But its excessive reliance on FAS technology, even in the face of tectonic changes in the areas of virtualization, cloud and especially in scale-out   architectures, and its stubborn resistance to accepting any technology that was not built inside NetApp, brought the company to the brink of obsolescence. The signs have been abundant for several years but it appeared that no one was paying attention at the top. Until it was too late and the numbers started plunging. We won’t dwell on this as the numbers speak for themselves and the reader can readily look up the clearcut decline in product revenues over several quarters (with no end is sight, BTW). 

So does the SolidFire acquisition change anything? Maybe yes, maybe no. Given there is a new Sheriff at NetApp and this is the first externally visible move by him, we think it is a great sign that someone is ready to make fundamental changes inside the company. To rid the culture of NIH, to bring in fresh blood and give them responsibility and authority, and do whatever is necessary to bring the company into the 21st Century. There is way too much good inside this company to let it become a Unisys or a DEC of the industry. But it will take guts to do it. It will require busting some heads and pushing the old guard out. It will require thinking that goes beyond NAS (yes, in spite of many other products in the company's product line, including SAN, the power has always stayed with those that espoused files). The time has come to change all that. There is no reason to believe NAS is passé but the world of storage is moved well beyond NAS. 

We see the SolidFire acquisition as the first solid sign that change is coming at NetApp. The fact that David Wright will have responsibility for all flash-based products is a telltale. What remains to be seen is how well he is accepted by the existing teams. If it is a repeat of the Spinnaker era (which was an unmitigated disaster) then all bets are off. If Wright is allowed to run roughshod over all-flash version of FAS and EF-series, as and when necessary, and give equal billing to the SolidFire product line then there is hope. If SolidFire product is forced to look and smell like FAS then nothing would have changed. We know it is hard but NetApp needs to learn something from EMC. Be pragmatic. Acquire what you don’t have (or which you failed to develop in time, or which you didn’t see coming). But if you acquire a technology then give it air; don’t suppress it. If anything, give it more air than it may command on its own, in order to compensate for the internal pushback it is bound to get. For illustration, look at the Data Domain or the Isilon acquisitions by EMC. NetApp needs to do the same with SolidFire. 

All indications seem to be pointing towards a new NetApp. We are encouraged by these signs. To be sure, there is much to be done at NetApp. Filling in the product line with a “solid” (pun intended) all-flash array is absolutely essential to the company’s short term survival. All one has to do is to look at what is holding up the revenue bases for EMC (Xtrem IO), IBM (FlashSystem), HP (all-flash StoreServ). These products are the bedrock for these competitors. This is why missing a genuine all-flash array was so detrimental to NetApp’s revenue health. Now the company can worry about object, cloud, mobile, hyperconvergence, and many other areas that need attention. But the good news is all their traditional competitors (EMC, Dell, IBM) have the same set of challenges, to different degrees.

Our kudos to the new NetApp’s management team. It often takes a frontal punch to wake up. NetApp got one. In the end what matters is how one deals with it. We see hopeful signs for a comeback, starting right now. The next 12 months will be very telling and we will not be only ones watching.


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