Commentary
8/30/2010
08:55 PM
Bob Evans
Bob Evans
Commentary

Global CIO: NetApp In Ascendancy: An Exclusive CEO Interview

The CIO surge toward virtualization and NetApp's "50% guarantee" are driving the company's powerful growth, says CEO Tom Georgens.



One of the most chilling IT-related comments I can recall came out in a conversation yesterday with NetApp CEO Tom Georgens as he was relating some of the challenges his CIO customers are facing.

And the knee-knocker Georgens related should serve as a 2x4-across-the-face reminder to all CIOs and to all IT vendors that most of yesterday's tech strategies and approaches and products are woefully inadequate for today's high-velocity online global economy and will consign change-resistant companies to mediocrity and then irrelevance and then ruin.

Here's what Georgens said: "One CIO—and he's with one of this country's best-known and best-run companies—said that at his company, IT is regarded as the single biggest threat to the future of his firm.

"And he has one—and only one—chance to change that."

The change he's looking for is most certainly not more of the same: more complexity, more integration, more tinkering and tuning, more isolated silos of infrastructure supporting more isolated islands of applications requiring truckloads of new storage systems interconnected with to tens of thousands of fiercely independent (translation: a mess) end-user computing devices.

So Georgens is spurring NetApp into the breach with the audacious promise to CIOs that his company can meet their storage needs with 50% less physical storage infrastructure than competitors will require. The secret is NetApp's unshakable belief that the future of storage will be based on the central role of virtualization in the ongoing transformations of IT systems in general and data centers in particular.

Storage strategists might want to split hairs over that philosophical position, but lots and lots of CIOs seem convinced: NetApp just announced its third straight quarter with revenue increases of more than 30% and is now on an annual run rate of almost $5 billion.

Asked if he feels like the leader of a band of revolutionaries, Georgens laughs and says no, it's just a matter of applying the right tools for a brutally complex job.

"If you go into some of these big installations that competitors have, and we tell them that we can match or beat that performance with only half the physical number of boxes—well, in today's environment, people have to listen," Georgens said in a phone interview Monday.

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"At first we lay off some of the tech talk but in general make sure they get a sense that we've got all sorts of technology capabilities that yield very compelling cost of ownership for them.

"We struggle constantly with the issue of awareness, and in spite of our success and our growth, a lot of people still don't know who we are. And as we grow, more and more of the deals we're competing for involve companies that are much better-known than we are," he said.

"So when we go in and explain what we can do and how we can do it, a lot of time the customers say, 'Well, that's interesting, but I don't hear that from the other guys—if you can really do what you say you can do, why aren't the other guys doing similar things and talking about similar approaches?' "

But nine out of 10 of Wall Street's biggest firms have dropped such skepticism and bought into the NetApp approach, Georgens said. And as for the 10th:

"It's not like they've rejected us or anything," Georgens says, "but they're still making up their minds."

And at its heart, that NetApp approach is built on three fundamental promises that weave together to enable the guarantee of 50% less physical infrastructure: NetApp says that CIOs who move to the virtualized storage model will find that they can reduce cost, reduce complexity, and increase business flexibility.

"We're enabling them to achieve those objectives at a macro level," Georgens said, "because virtualization is fundamentally changing the way data centers are designed: instead of individual infrastructure around individual apps, they're building one single infrastructure that's independent of the apps. And now they want the same with storage because customers are seeing that virtualization is the way to dramatically improve the flexibility of the business as well as IT costs."

On top of that, when the global recession settled in two years, many CIOs were already managing brittle and outdated infrastructure so that in today's significantly more demanding business environment, those systems are barely able to hold up.

"In 2001, on the heels of the Y2K buildout, a lot of infrastructure was new—but now, the infrastructure is about as old as it's ever been so simply refreshing it isn't enough," he said. "Instead, CIOs know that today they have to rearchitect their data centers and that's tough because CIOs are under a lot of pressure to keep holding down the cost of IT but at the same time they've got this antiquated infrastructure they've got to replace—the evolution of the data center is a conversation we're hearing about everywhere we go.

"And I don't mean it just in the abstract—I have that same sort of business relationship with my own CIO because we're growing 30%, which is significant, and we're moving into new geographies and we're establishing new channel partnerships and we're driving new efficiencies in the organization and I'm insisting that we make our people more productive and all of that involves IT.

"So the list of demands on my CIO are mounting, and we can't afford to be in a situation where IT is the long pole in the tent—the ability for us to stand up robust new apps quickly is really really important."

That's particularly true as the competitive landscape in the storage sector continues to be reshaped via acquisitions, with a couple of the latest ones being IBM snatching up Storwize and Dell (or is it HP??) winning the bidding war for 3Par.

As those and other deals take place, Georgens said, the major challenge for NetApp will be the need to continue to distinguish itself as best-of-breed innovator and storage specialist, whereas broad-portfolio giants IBM and Hewlett-Packard tend to focus more on their extensive capabilities in integration.

"This is a big industry, and specialty companies can stake out some niches and exploit that, and I'm sure we'll see more of those," he said. "Whether those niche companies can reach a billion in revenue, that's another question.

"For business apps in big enterprises or for mission-critical business operations in the leading Web 2.0 companies, the big mature players are gonna keep dominant share. And then the very big full-line suppliers like HP and IBM are going to attempt to compete not on innovation so much as on integration, whereas for us and the same holds true for EMC, we'll have to compete on continuing to deliver best of breed storage solutions and innovation," Georgens said.

"It's incumbent on us to keep doing that. And, both EMC and us have to work on closing that integration gap where those other companies have more resources than we do, and we need to do that through partnerships and alliances, such as our partnership with VMware and Cisco around multitenancy."

Asked to describe what some really aggressive customers are doing with NetApp's products to create significant competitive advantage, Georgens laughed and then, while I'm not sure exactly what sound is made when a person intentionally bites down on his tongue, I think that's what I heard.

"We've got some customers doing some truly wild things and we're incredibly excited about that but we can't talk about it because they feel the competitive advantage they're gaining is so significant," he chuckled.

"But at the high level, whether customers are dealing with aging infrastructure, or it's the emergence of virtualization, or the emergence of new options on a service basis, all of these things are forcing CIOs to think differently about IT infrastructure. And more and more, they're turning to an architecture that's shared—that's virtualization—and that's what's fueling our growth."

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GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

To find out more about Bob Evans, please visit his page.

For more Global CIO perspectives, check out Global CIO,
or write to Bob at [email protected].

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