There were two main announcements, a new relationship with Google Cloud Platform and a new flash device - the AFF A800. Also, in our interviews with NetApp, we learned about the future of Fibre Channel at the hyperscalers.
Google. Google Cloud Platform now integrates NetApp Cloud Volumes as a drop-down menu capability as part of the Google console. This allows enterprise customers, for instance, to use Cloud Volumes to manage their data on Google's cloud service while simultaneously managing their data on premise. This relationship with Google now rounds out the NetApp relationships with the main hyperscalers - it already has in place relationships with both Amazon (AWS) and Microsoft (Azure). NetApp Cloud Volumes on Google Cloud Platform is currently available as a "preview" capability (sign up at www.netapp.com/gcppreview) and is expected to go to commercial status by the end of 2018. Customers will pay Google for the use of NetApp Cloud Volumes.
AFF A800. New flash hardware available from NetApp, which besides having impressive density and low-latency capabilities supports NVMe-over-Fibre Channel. Of course, the product also supports 100 Gbps Ethernet. From a historical standpoint, it is interesting that NetApp, a company whose heritage was driven by storage over Ethernet, is touting Fibre Channel. But, that's what its customers are asking for in order to accelerate their on-premise workloads such as database (Oracle), ERP (SAP) and other mission-critical enterprise workloads. In our interviews with NetApp, we were told that Fibre Channel is growing faster than Ethernet - this makes sense given the company's foray in recent years to flash and low-latency workloads.
Fibre Channel at the hyperscalers? We asked about what is going on with the hyperscalers' architecture to adapt to AI/Deep Learning workloads. NetApp executives explained that AI workloads are different from traditional workloads; they are random, low latency workloads connecting to GPUs. This type of workload, we were told by NetApp, works very well when attached to Fibre Channel. From NetApp's perspective, if customers want to run AI workloads fastest, they would likely do so on-premise, using Fibre Channel. Yet, many customers run their workloads on hyperscalers, all of which use Internet Protocol and the underlying Ethernet infrastructure. We have always been skeptical that hyperscalers would adopt Fibre Channel. We believe the hyperscalers may work with vendors such as NetApp to develop additional software capabilities to address the changing workloads relating to AI/ML/GPU workloads in the future - on top of IP/Ethernet infrastructures.
At NetApp's analyst meeting today, CEO George Kurian sees opportunity in selling HCI (introduced F2Q18, 4-5 months ago), AFA, share-taking in SAN, and public cloud software and services. Every large customer NetApp talks to, according to Kurian, is using multiple cloud service providers and/or SaaS services and most are using the hybrid cloud, which means using workloads both on the customer premises and public cloud. According the company's marketing and sales executives, the company's sales and marketing strategy is focused on leveraging the company's entrance to the cloud services software market.
Substantial future announcements that were made by NetApp:
Summary of presentations
Joel Reich, EVP Products and Operations discussed trends in data center flash:
• NVMe over Fabrics
• Storage-class memory as cache
• Persistent memory in server
• Quad level cell NAND
Reich made some interesting comments:
Brad Anderson, SVP and GM, Cloud Infrastructure BU, said that NetApp’s “Converged” (selling NetApp storage with non-NetApp servers) FlexPod business is now at a $2B run rate and >4,000+PB shipped. The company recently initiated a Fujitsu partnership on March 26, 2018. Anderson also said that NetApp’s Hyperconverged product, which has only been selling for the past 4-5 months, hit its financial targets in the first full quarter of shipments. He also said that the HCI product is based upon on recently-acquired SolidFire technology and conceded that the company is hiring people with virtualization capabilities to further augment the product line. HCI customers that were discussed during this presentation were: ConsultelCloud (Austrialian SaaS company) and Imperva (security company).
Anthony Lye, SVP Cloud Data services BU, joined a year ago and is responsible for the company’s efforts to build software that runs on and with public cloud services. He describes this software as one that operates above the storage layer, to allow customers to manage their data, whether in cloud, SaaS applications or on premises. It offers backup, disaster recovery, and for securing data, and then binds those services and data in context of applications and business policy using the orchestration Engine. OnCommand is product name. The underlying technology NetApp uses is called ONTAP Data Management, which Mr Lye explained was separated from its engineered systems (hardware) and port it to public clouds five years ago. We remember when NetApp announced its plans to separate ONTAP as a software for the cloud at its analyst meeting a few years ago when Kurian took over as CEO.
Lye explained that “later this year,” NetApp will release cloud-based OnCommand performance management/monitoring tool to manage workloads in hybrid cloud environment.
Henri Richard, EVP Worldwide Field and Customer Operations said "Cloud is soon to be GA.” Richard explains this as its “Cloud Volume” product. Richard explained that what is new this year is the hyperscaler relationships, starts a demand creation engine for the sales organization.
Jean English, SVP Chief Marketing Officer said the company will focus on “cloud first” to reach new “global” buyers (e.g. multinational organizations), will lead with HCI and Cloud to enterprises.
Ron Pasek, EVP and CFO explains that FY18 is almost over and the company is beating FY18 plans (low-single digits growth), driven by flash. The CFO said that the new accounting rule, ASC 606 impact to guidance will be immaterial to the P&L , though will result in slightly higher product revenue recognition.
Additionally, Pasek said that a year ago, he said revenue growth will be “low-single digit growth” (FY18-20) and now he is saying “mid-single digit growth,” driven by Flash, HCI, cloud data services. Pasek said that in FY19 cloud data services will represents one point of growth. (As an aside, we calculate FY19 cloud data services revenue, using the “one point of growth” metric at $60M, based on the latest quarter of total revenues, F3Q18 which was $1.52B, multiplied by 4, then multiplied by 1%). So, cloud services revenue is expected to grow to FY19 of $60M and reach FY21 targets of $400-600M. The company declined to state its FY18 cloud data services revenue when asked by the audience, so we take it that it is small.