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Have Enterprise Storage Players Had Their Market Pulled from Under Their Feet?

Two of the enterprise storage “superpowers”, Pure Storage and NetApp, have both reported worse than expected revenue results this month.  Financial journalist Gary Alexander at seekingalpha.com has gone as far as calling NetApp a storage dinosaur, but while I won't argue with his assessment of the financials, I do feel his his underlying understandinging of NetApp’s technical offering is flawed .

I would agree that the financial future for both NetApp and Pure look worrying. In the case of Pure, you have to scratch your head and wonder how and if they will ever be able to make a profit.

However, from a technology buyers’ point of view, this really doesn’t matter. Neither company is going out of business, and neither companies’ products are going to disappear. With this in mind, whether they hit earnings expectations or whether they grow by X% less than expected is inconsequential to the solution that you purchase.

That’s why when financial writers such as Gary refer to NetApp as a “Dinosaur”; they are doing a disservice to the fundamental core of what NetApp’s raison d'être should be. Number one is building great technology that customers desire. If they can do that, revenue and earnings will follow. If indeed they are a storage dinosaur then they won’t meet the most important priority of building great technology.

However, NetApp is not a dinosaur; in fact, their data fabric strategy is pioneering for a storage company and places them right at the front of building storage architecture for digital transformation. It comes with a dose of hype, but it also has real deliverables and far from playing slave to their old generation technology. They grasped where an enterprise storage player needs to reside in the era of multi-cloud and have been fast in building cutting edge technology to take them there. Does that sound like a storage dinosaur to you?

Here is the problem, and it's one that I contend will affect the entire storage industry. To avoid dinosaur status, storage players need to embrace multi-cloud strategies, but in doing so, they cannibalise their own revenue pie. In the old days, when a player like NetApp, EMC or even Pure own a large account, they “owned” that account. Purchase orders for more capacity rained to that chosen vendor as data volumes exploded.

A multi-cloud storage strategy ultimately means the storage vendor has to share those GBs with cloud storage, which even if they manage, they may not provide the underlying hardware. For the end users of storage, they don’t care what the underlying storage hardware is at the cloud provider; they only care about simplified ubiquitous management and that performance levels are met. The net effect is that by building an open cloud storage strategy, the storage vendors can no longer pin down and secure 100% of their customer’s storage capacity needs. At the same time, if they don’t offer a multi-cloud approach, they will lose footprint altogether.

With this in mind, that’s why hyperconverged players like Nutanix have also started stealing part of the storage pie. A dinosaur wouldn’t be able to react to that, but it’s NetApp and not the new kid on the block Pure, that were able to launch their own HCI offering to get a foothold in that market.

So in short, I don’t disagree with the idea that the financial outlook for these companies looks highly challenging. However, I do take issue with the assessment of these companies’ technological standing. The market is changing, and my assessment is that even though companies like NetApp are building great technology in response, its effects their ability to grow revenues.

Now, from a technology buyers’ perspective, it doesn’t matter. If the solution is sound, the companies’ share price is irrelevant. Ignore the soundbites of the financial analysts and focus on whether the solution is sound and delivers what you need. NetApp (or Pure) technology and solutions will be around for the life of your investment in them, of that there is no doubt.

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