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BW Businessworld

‘Storage Is The Fastest Growing Segment’

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Netapp is the world's second largest storage and data management solutions firm with $5.1 billion in revenues. Today, storage is one of the fastest- growing and profitable segments in information technology, with the amount of data being generated both by enterprises and consumers exploding. In India, too, storage has been on a high. The market rose 20 per cent in 2010-11 to Rs 1,978 crore. BW's Venkatesha Babu met NetApp's chief Tom Georgens to talk about the dynamics and future of the storage industry. Excerpts:

Increasingly, large system integrators such as IBM, HP and Dell are pushing their own storage solutions. Where does that leave stand-alone players like NetApp?
Storage is the fastest-growing hardware segment in the data centre. The amount of data generated continues to explode. Whether it is machine generated such as RFID (radio-frequency identification) or from cellphones, cameras and satellites, demand for storage is going up. Whether it is Dell, IBM or HP, they are trying to up their value proposi-tion by combining all these elements. But very few companies buy storage from server firms.

Server companies have been losing market share in storage, and the independent companies such as EMC and us are gaining. Clearly, there is intellectual appeal to the argument of a single player bringing everything to the table. But that doesn't change market reality. It is a question of integration versus innovation. Customers realise what they are gaining by integration. They are giving up on the best of the breed. That is a tradeoff most of them don't want. Our job is to be so compelling that they unbundle their purchases. Also, we partner with other companies such as VMware, Cisco, Oracle and Microsoft, and we go to the customer jointly, saying we can offer a solution that is as integrated, tested and compelling as what an IBM, HP or Dell can offer.











FAST FACTS
NetApp
Established: 1992
Headquarters: Sunnyvale, California
Business: Storage and data management solutions and software
Revenues: $5.1 billion
Net profit: $673 million
Employees: About 11,000 2,000 in India) over 150 offices worldwide

But many large, integrated players are buying up standalone storage firms. NetApp is routinely mentioned as one such candidate for the likes of an Oracle or an HP.
We are a listed entity. Somebody will have to write a really large cheque if they are that keen on having us. Anyway, that is for the board to decide. Because of that (apprehe-nsion of a likely acquisition), we have never had a discussion with a customer related to that. Assuming even that happens, they would have to perpetuate our products. My message to the team is that we could either be a poorly managed company, which nobody wants to buy, or we do such a good job that we become very attractive and expensive to buy. Even for the companies you mentioned, if they have to do it, it would be a very significant transaction.

Is that why you have been bulking up, having made three key buys last year, a poison pill strategy to prevent a hostile take-over? What are the areas you want to buy?
The acquisitions are to further our growth and as part of a long-term plan to drive valuations. Definitely not to make ourselves less attractive. The (poison pill) arrangements are considered shareholder- unfriendly and difficult to implement. In most (such) cases, courts are likely to strike them down. I would rather focus on execution and ensuring that we deliver on our promise. I do not want to drive up the price of potential (acquisitions) by naming them. But broadly, we would be interested in manageability tools, indexing, archiving and search.

The new buzzword in the storage indu-stry is Big Data. Tell us a bit about it.
That means a lot of things. We look at it in three elements: analytics, bandwidth and content — the ABC of the storage industry, which is increasingly driving growth. In analytics, the question is how do I assemble data from disparate sources, bring them in one place, use parallel computing to gain business intelligence, which is actionable. It is very data intensive. I consider the work we do around big bandwidth, high-performance computing and video as another element of Big Data.

The content could be medical records, YouTube videos, insurance claims or trading records at a financial services firm. Every company has massive archival capabilities around the data they handle. Since there is no single solution, I worry about Big Data a lot. The attributes and nature of solutions around the three vectors are different. We expect to be a technology leader in all of them.

India's storage market is growing fast. But it is still on a small base. How do you see this evolving and how important are NetApp India operations to the global play?
The market is still small compared to some of the developed ones, but this is an opportunity to shape a population of billion people. Since there are no legacy investments, the opportunity to introduce new interesting technologies is that much more.

India is our second-biggest location. We have 2,000 employees out here. Last year, we did more (over 100) invention disclosures (patent filings) from the Bangalore facility than we did from any of our facilities across the globe. Our relationship with Indian multinationals such as Infosys, Wipro, HCL and Cognizant matter both globally, and increasingly in the Indian market, too. We are not doing support or irrelevant projects here. The success of NetApp globally hinges on the work being done from here. On most of our products we sell across the world, there would be some work, some interface done by our India operations. Both from our R&D perspective and as a market, India is very important to us.

(This story was published in Businessworld Issue Dated 07-11-2011)