IBM And NetApp Forge Storage Alliance

IBM and Network Appliance have made no secret that EMC is the company they each consider enemy No. 1. The two companies have entered into a wide-ranging alliance whereby IBM will OEM the entire NetApp line of SAN and networked-attached storage solutions.

For its part, NetApp will certify IBM's Tivoli Storage Manager, offering it as a preferred data backup-and-recovery solution. In so doing, NetApp will continue to offer Veritas solutions as "a" preferred backup-and-recovery solution as well, according to NetApp CEO Dan Warmenhoven.

NetApp, perhaps the fastest growing supplier of storage hardware and the leading supplier of NAS hardware and software, also has played a major role in supporting iSCSI, a rapidly growing model of interconnecting storage arrays and SANs. According to IDC, NetApp's share of the worldwide disk system market grew nearly 27 percent, though it still has a relatively small share of just 3.5 percent.

Nevertheless, NetApp's revenue is expected to hit $1.6 billion, up 36 percent year-over-year, according to a forecast by investment research firm Baird.

Under terms of the agreement announced by the companies today, IBM will offer NetApp's entire portfolio as IBM-branded solutions. Those products include NetApp's NearStore and the NetApp V-Series Systems. IBM will gradually phase out its own NAS offering, the NAS 50G.

"We think NetApp offers truly the industry's best solutions in this space -- that's why we've chosen to go this route," said Andy Monshaw, general manager of IBM's storage business, speaking on a conference call Wednesday morning.

As part of the alliance, NetApp will integrate Tivoli Storage Manager into its solutions, offering it as a preferred backup-and-recovery product. Likewise, NetApp will certify IBM's tape offerings. Both companies said this partnership strengthens their offerings as tiered storage solution vendors. They would not comment on whether a merger was considered or is in the offing.

But in an interview with VARBusiness, NetApp's Warmenhoven indicated he prefers remaining independent.

"My P/E is a little tough to digest," he said. NetApp's market cap is more than $10 billion, and its shares were up 4.5 percent in today's trading, closing at $28.45 per share.

Monshaw and Warmenhoven said on Wednesday's call that they believe there is little overlap in their respective solution-provider bases. Certainly it gives NetApp a much broader reach through IBM's partner base, Warmenhoven said.

"There is significant space for us to get synergies here," he said.

Kevin Schoonover, director of engineering at Arrow Electronics, said he doesn't anticipate the two companies' channels stepping on each other.

"Since NetApp has gone through distribution, they have done an excellent job at keeping a very clean channel," Schoonover said.

Nonetheless, one NetApp partner raised concerns that IBM may use its market clout to undercut Net App partners on the pricing front, a practice that the partner, who spoke on condition of anonymity, said already takes place with its direct sales force.

"Regardless of what all this channel-friendly [BS] is, it's not an abnormal occurrence," the partner said.

But Hayes Drumwright, president of Trace3, an Irvine, Calif.-based solution provider and NetApp partner, said he is not concerned about IBM swooping deals away from his company.

"[NetApp has] good protections in place," Drumwright said. "Especially in larger accounts, this will give us more credibility in enterprise accounts."