NetApp Insight 2012 roundup

Nov 16, 2012

NetApp announces pricing changes and new clustering technology

NetApp (NASDAQ:NTAP) has outlined it strategy for 2013 including the introduction of shallow discounting in the midrange, a commitment to its OEM business and the arrival of a credible clustered product.

Senior executives briefed the press at this week’s NetApp Insight 2012 event in Dublin, where the firm invited more than 1500 channel partners to engage with the vendor.

NetApp kicked off the three day event with the results of a survey of 1400 “decision makers” across Europe, where two thirds acknowledge that how data is stored affects its high-level decision making. The focus around agility segued into a re-cap the launch of NetApp’s new FAS midrange storage systems FAS3220 and FAS3250, and the updated E-series units announced earlier in November.

However, more interesting for the channel was the clarification that the new midrange products are moving to “value pricing”. As NetApp’s John Rollason, director, product, solutions & alliances marketing for EMEA clarified, the old practice of up to 60 percent discounting between list and street price was causing “sticker” shock. The vendor is now aiming to reduce that disparity across the board after success of a similar policy with the entry level 2000 Series last year.

NetApp senior VP and general manager EMEA, Manfred Reitner (pictured), admitted that “not all partners were happy with the [value pricing] situation”, but explained the distortion was ultimately not helpful to vendor, partner or customer. The high sticker pricing was allowing rivals to claim that NetApp was expensive when in reality everybody received massive discounts – a smoke and mirrors game that made it harder to truly compare technologies.

The firm also recently launched a new NetApp E Series that has been updated with new SANtricity storage management software include the addition of SSD cache for improved performance. The range is a result of the equation of the LSI’s Engenio business in 2011, and other than the exit of Sun as an OEM customer, “the rest are still on board,” said Rollason.

However, the development of NetApp-branded products and features on the E-Series has been modest. Reitner said this has been an intentional strategy to protect its business and not upset OEM customers. The firm has also signed “two major deals” with OEMs according to Rich Clifton, NetApp’s senior VP and general manager of the Technology Enablement and Solutions, but the vendor is yet to confirm the details.

The firm also highlighted the arrival of its latest clustering technology within its OnTAP operating systems. Jay Kidd, senior VP of product operations at NetApp positioned the news as the first clustering product to address true enterprise applications, dismissing more prevalent rivals as only suited to media, entertainment and HPC. However Kidd admitted that the company only had 1000 nodes with clustering active within customer sites.

Reitner also forecast a stable future, stating the vendor’s distribution strategy was sound and – in a nod to rivals like HP and EMC – stressed it would never offer services “that compete with the channel”. He also predicted a tough financial climate for partners, but urged them to consider and accelerate the creation of value added services, echoing the sentiment of “agility” as the basis of any sale.

On Wednesday, the firm announced its revenues for the first six months of fiscal year 2013 totalled $2.986bn compared to revenues of $2.965bn for the first six months of the prior fiscal year. Although sales were on par, the firm posted lower profitability with GAAP income for the first six months of fiscal year 2013 totalling $173m compared to GAAP net income of $305mfor the first six months of the prior fiscal year.

Channel Pro comment

Although NetApp postponed Insight last year, probably as part of a belt tightening, the 2012 event offered a broad look at the company that at $6bn in revenues is close to become the #1 storage vendor.

Although still globally some way off its rival EMC, in certain territories it is now leader especially if you add in OEM deals. The arrival of its clustering will help that cause although its statement that its version is the first for enterprise is a tad optimistic. At least on paper it now has a product and realistic pricing strategy that will get it on the scale-out shortlist alongside Isilon, BlueArc and the rest.

The sentiment from the partners this correspondent spoke to was generally positive. The pricing changes did not seem a bone of contention although one did say it made it harder to negotiate as existing customers always “expect a 50 percent discount”, but in the long run it might actually make it easier to win new business.

Although tight lipped about its new OEM deals, an educated guess might be around a vertical play for example within CCTV or M&E storage – in a move similar to its current OEM deal with SGI.

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