CRN Exclusive: NetApp CEO Kurian On Turning Corner On Growth, Competing With Dell EMC And Fending Off Pure Storage

The New NetApp

NetApp is on a roll. The company last week reported its second consecutive quarter of revenue and profit growth driven by its successful transition from legacy technologies such as its old 7-mode storage operating system to new strategic focuses on all-flash storage technology, its modern OnTap operating system, and its hybrid cloud strategy.

NetApp CEO George Kurian sat down with CRN to discuss his company's transformation, as well as look at what's coming with NetApp's upcoming technology plans and its September Insight conference.

Time ran out before Kurian could discuss NetApp's acquisition of two small vendors: Immersive Partner Solutions, a developer of software to validate multiple converged infrastructures through their lifecycles, and PlexiStor, a provider of software that turns off-the-shelf servers into high-performance converged infrastructure offerings with persistent memory technologies.

For more on how NetApp has turned the corner and on what to expect in the near future, turn the page.

NetApp's fiscal 2017 fourth quarter revenue grew about 7 percent over last year to nearly $14.5 billion, but full year 2017 revenue dipped a tiny bit over last year. Why was that?

We finished the year meeting all of the commitments that we set out at the start of the year. We have, as we have said all along, gone through a transition in our portfolio from the mature products to the strategic products. As we said at the outset of the year, the first half of the year would see [sales of] the mature products decline while the strategic products grew, and over the course of the year, the growth rates and the power of the strategic products would return the company to revenue growth. That was clearly visible in Q4, which was the second consecutive quarter of revenue growth.

How was that reflected in specific parts of the business?

We are seeing accelerating momentum in our turn-around. If you look at the numbers, in Q4, net revenues were up 7 percent year-over-year. Product revenues were up more than 12 percent year-over-year. Strategic products, which now in Q4 formed 70 percent of product revenue, is up 24 percent year-on-year and accelerating when you compare it to 22 percent year-over-year last quarter and 14 percent year-over-year a year ago. We are extremely pleased with the progress in our portfolio, and the turnaround is well underway.

When you say "strategic products," you're including which ones?

The mature products were, as we said all along, OEM, 7-mode, and the add-on storage. The strategic products include our all-flash arrays, SolidFire, the branded E-series products, OnCommand Insight, and our hybrid cloud portfolio.

And what can we expect from NetApp in terms of its hyper-converged infrastructure plans?

You'll see us continue to expand our innovation portfolio. … As we said [before], we are leveraging the SolidFire platform to build a second-generation hyper-converged infrastructure solution. We'll communicate more details about our expanding portfolio, including hyper-converged, in the first quarter.

Where does NetApp sit in the storage market now?

We are gaining share in a vast array of markets. We are outpacing startups and large competitors in the all-flash array market. As you saw, our all-flash array run rate is now $1.7 billion, up 140 percent year-over-year. I think that's [our] fifteenth consecutive quarter of triple-digit growth. We have, based on market share results, outpaced the competition in the converged infrastructure market. We are also the fastest-growing major player in the SAN Fibre Channel market where we have reinvested SAN with clustering and flash. We have the best portfolio for the next-generation data center, and we've got some fantastic announcements to come to celebrate our progress.

We are extremely pleased with the progress that we have made. I think that you'll see accelerating momentum and market share gains as well as the year-ahead [being] another chapter in the stellar turnaround at NetApp.

Scott Dietzen (pictured), CEO of Pure Storage, just told CRN that his company, of all the major storage vendors, does not have any legacy storage architecture and therefore has the best growth opportunities. What is your take on that?

Our customers and our track record and our results disprove it. We are outpacing Pure Storage, and Scott knows it.

How about competing against Dell EMC?

Dell EMC is a formidable competitor, with scale and a lot of resources. At the same time, I think they have yet to make the difficult product rationalization choices they need to make to [eliminate] customer confusion. The integration of [Dell and EMC] is still seen by many customers as needing a lot more explanation to be clear. And we are gaining market share at their expense. We said that this was an opportunity. We focused on it. And we're delivering the results. You can see that in programs like our competitive program which over the course of a year has accelerated take-outs from EMC due to the fact that, in Q4, we were taking out and replacing an EMC installation once every day through the quarter.

Dell EMC has traditionally been the number one vendor for all-flash storage and NetApp number two. Could you see a day where NetApp becomes number one?

We are going to focus on closing that gap, and at some point, when the gap closes, we have a chance to be number one. At the moment, we are focused on growing faster than they are in the most profitable parts of the storage market, and we have seen enormous progress. So, I would say thanks to our customers, our partners, our investors, and most of all our employees who have been a part of riding one of the best years in NetApp's history, 2017.

How is NetApp's adoption of NVMe coming along?

We have NVMe technology available in all our platforms today. It's used as a cache to allow customers low-latency access to the hottest data. We also have plans to provide NVMe solutions as part of broader offerings, either as part of an NVME-over-fabric solution, or you will see it as part of our converged infrastructure offerings as well.

How has the joint NetApp-Cisco FlexPod converged infrastructure business done this year?

FlexPod has had a very, very strong year. Today, more than 50 percent of our configured systems sold as stand-alone or through FlexPod are all-flash systems. That has also translated into extraordinary momentum for FlexPod. We just finished our best year yet. The partnership continues to be strong. You're going to see even more exciting innovations from us over the next few weeks. So stay tuned.

NetApp in September will hold its annual Insight conference. We know it's early, but what are you hoping to talk with partners about at Insight?

We're going to talk to partners about the new NetApp, the confident, successful NetApp that has returned to growth, that is leading most of the categories in the storage and data management industry. [We will talk] about the technology portfolio that we have, about new offerings and solutions that we will deliver with partners, and the important role that an open partner ecosystem enables for partners to build value-added services, solutions, and offerings on top of the technology they get from NetApp.

So we've got an exciting plan.

How often do you go out and visit with channel partners?

I'm out with a lot of customers and channel partners. I spend a lot of time on the road. In fact, we were just with one of our largest channel partners here in Sunnyvale this morning. We get out to meet a wide variety of partners and customers pretty much every week of the year.

What are the main concerns they talk to you about?

They're really excited about the new NetApp. They see the progress. As I have said, we would not have made progress if it hadn't been for the commitment and engagement of our partner channel. And so it's both a sense of excitement on their side and, honestly, a sense of gratitude on ours.

Has NetApp been able to take advantage of what you call the "new NetApp" to do more recruiting of channel partners?

We have seen the new NetApp attract partners and customers from around the world. And we are very encouraged by the progress. As I've said, I am extraordinarily pleased at how fiscal '17 has turned out. We set out bold claims at the start of the year, and we have met every single one of those commitments to customers, to partners, to investors, and to our employees. Stay tuned. 2018 is going to be an even better year.