Storage giants NetApp (NASDAQ:NTAP) and EMC (NYSE:EMC) are making efforts to shift away from the tag of pure “storage companies”. In its Q2 earnings call last year, NetApp management pointed out that they are more of a “data management” vendor and not just a storage hardware company. [1] This statement signaled the company’s intention to evolve from being predominantly a hardware manufacturer to an end-to-end storage solution provider. A similar trend was highlighted when NetApp announced its agreement with VMware (NYSE:VMW) to integrate its Clustered ONTAP Drive with VMware’s vCloud suite last year. [2]

1. NetApp To Offer Integrated Storage Array And
Virtualization Software
March 3rd, 2014 by Trefis Team
Quick Take
NetApp launches a new range of enterprise storage arrays, the FAS8000 series.
FAS stands for Fabric Attached Storage, offers scalability to storage environments.
The FAS8000 can be deployed in data centers as well as on hybrid cloud platforms.
New virtualization software FlexArray also introduced; replaces existing V-series.
FlexArray enables storage systems to virtualize third-party enterprise arrays as well.
Storage giants NetApp[1] (NASDAQ:NTAP) and EMC[2] (NYSE:EMC) are making efforts to
shift away from the tag of pure “storage companies”. In its Q2 earnings call last year,
NetApp management pointed out that they are more of a “data management” vendor
and not just a storage hardware company. [1] This statement signaled the company’s
intention to evolve from being predominantly a hardware manufacturer to an end-toend storage solution provider. A similar trend was highlighted when NetApp
announced its agreement with VMware[3] (NYSE:VMW) to integrate its Clustered
ONTAP Drive with VMware’s vCloud suite last year. [2]
The traditional data center storage setus have lost their currency due to the increasing
adoption of cloud-based storage. With software-defined data centers (SDDC) gaining
traction across the industry, it is imperative for storage companies to align their
products with newer storage trends. In response to the changing industry dynamics,
NetApp recently launched its new enterprise storage array series, the FAS8000, which
can be deployed in traditional data centers as well as across newer hybrid cloud
platforms. Furthermore, the company introduced its new virtualization software,
FlexArray, which enables NetApp’s enterprise array to virtualize and manage thirdparty arrays. The company described the software as applicable across “unbound cloud”
environments, which means that it can manage data on both private and public cloud
platforms. [3] The integrated product offerings by the company define the new-age
storage that customers have been looking forward to.

2. See Full Analysis For NetApp Here[4]
The Role Of Software In Storage Solutions
With IT infrastructure demands increasingly being fulfilled via the cloud or “-as-aService” platforms, storage solutions are also being provided on demand, in a similar
manner. The software-defined data center eliminates the need to purchase, maintain
and upgrade dedicated hardware as storage requirements are fulfilled on demand, i.e.,
“off premise”, either on company-owned infrastructure (the so-called Private Cloud) or
on service provider infrastructure (the so-called Public Cloud, provided by Amazon Web
Services and a host of others). It lowers the investment and service burden of
infrastructure in multiple ways. First, the immediate cost of buying and configuring
expensive storage hardware is cut down if one uses a pay-per-use storage. Second, it
helps over the longer term by eliminating the need to support the infrastructure and
incrementally augment it as the volume of data grows. Data growth can organically by
satisfied sourcing greater drive and array capacity on an as-needed basis. Moreover, the
mix of on-premise and -as-a-Service storage grows, it can be managed as unified
environment via the software-defined storage layer.
NetApp’s New Virtualization Software And Enterprise Arrays
NetApp introduced its new range of enterprise arrays under the brand FAS8000 (and
discontinued FAS6200 and FAS3200) where FAS stands for fabric-attached storage.
This range of products support Network Attached Storage (NAS), Storage Area Network
(SAN), Fiber Channel and Ethernet all on the same platform, giving it versatility for
access. The new arrays replace the old FAS6200 (enterprise-level) and FAS3200 (midlevel) arrays. However, the company intends to continue selling its entry level FAS2200
arrays for now, implying its targeted market segment to be mid-level enterprises to
large enterprises. As a result, FAS8000 is available in three storage capacities ranging
from 1.92 petabytes (1 petabyte = 1 million gigabytes) to 4.8 petabytes. [4]
The company’s new virtualization software, FlexArray, enables users to virtualize other
storage systems such as EMC, Hitachi or NetApp’s E-series, on the FAS8000 arrays. An
integration of this sort is likely to push sales of the company’s product among firsttime buyers as well as among clients looking to upgrade their existing systems. Clients
upgrading their storage systems need not discard their current storage drives, since
they can be accessed by NetApp’s FAS8000. This sort of flexibility makes the FAS8000FlexArray coupling a viable option. [5]

3. Going forward, the company intends to capitalize on the shift towards software-based
solutions due to high profitability of software products over pure hardware. IDC
estimates the software-defined data center market to grow at a CAGR of 70% to $5.4
billion by 2018. [6] Although this market segment doesn’t directly mirror NetApp’s
product sales, the dependence of SDDCs on storage/data management companies gives
NetApp an edge with the integrated offering. We estimate NetApp’s software division
to become more valuable as the industry shifts towards software-defined storage.
The company is very confident of the product’s success as evidenced by the
introduction of its payback guarantee program. According to company estimates, clients
using the FAS8000 products with the FlexArray software could save enough to recover
the cost of the product (including support) within nine months. Failing this, the
customers are entitled to a full payback. [7] Our $43 price estimate[5] for NetApp is
around 8% above the current market price.
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Notes:
1. http://www.trefis.com/company?hm=NTAP.trefis
2. http://www.trefis.com/company?hm=EMC.trefis
3. http://www.trefis.com/company?hm=VMW.trefis
4. http://www.trefis.com/company?hm=NTAP.trefis
5. http://www.trefis.com/company?hm=NTAP.trefis
6. http://www.trefis.com/
7. https://www.trefis.com/subscribe/email?sitelicense=institutional&from=analysis