In my job, there are very few surprises. I am privileged to upcoming products, solutions, services and new technologies. After all, if I am doing my job properly, then I should have a good idea about what is coming up next. Add my own experience and initiative, and the result should be a good outlook of what is to come.
This is where my job as an industry analyst and a financial analyst differ completely. I’ve come to understand why there are two distinct jobs – an industry analyst looks purely at the technology, and while we take some financial considerations into account, generally, we are focused only on the technology. A financial analyst views the world in a completely opposite way – they look primarily at financial considerations and take technology considerations as one of many influences on their model.
Disclaimer: Neuralytix, nor the author, is authorized as investment advisers. This blog, or anything on this website, should not be considered investment advice. What you do with your money (or your clients’ money) is your responsibility.
So, when Nimble Storage recently announced their desire to go public, I have to say, I nearly fell on the floor with shock. I remember time, when technology companies went public after establishing some form of market leadership – whether in terms of technology leadership or revenue leadership. Consider IBM with the mainframe and the PC, EMC with storage, Dell with supply chain optimization, Oracle with its database, McAfee with its security software, Salesforce.com with its SaaS offering, etc.
What I have not understood about Nimble Storage is where it excels. During my tenure at IDC, I remember assigning one of my analysts to do a profile of Nimble Storage. I have a very simple criterion for profiles. An analyst must identify two to three unique differentiating features or functions before a profile will be published. After nine months, and multiple attempts, the analyst resigned to the fact that he/she could not even find one single differentiating feature.
Nimble Storage is what I would describe as a “me too” product. It offers a “jack of all trade” approach to storage. It is a typical hybrid storage system, with all the “must have” features and functions. To me, the solution has no market leadership other than being a cost leader (and based on its reported income, as loss leader).
In terms of its position in the market, it is one of over 100 other storage systems providers, all of whom claim similar or identical features and functions. Within the $33+ billion storage systems market, Nimble Storage’s $53.8 million in revenue represents roughly one-half of one percent of the overall market.
Putting this in some perspective, the total revenue for Nimble Storage in 2012 is equivalent to the revenue NetApp makes in two business days, or the revenue EMC earns in five hours on a single business day.
While the storage market has seen multiple IPOs in the last several years by storage companies, including:
- DataDomain (known best for its deduplication technology);
- Fusion IO (known best for its PCIe NAND flash solid state storage);
- 3Par (known best for its thin provisioning technology); and
- Violin Memory (known best for its flash storage systems).
Each of these companies are known for something. Two other companies likely to go public in the next year or so include Pure Storage (known for its full-featured all flash solid state storage) and Box (known for its storage-as-a-service offering).
I’m afraid, years later, I still fail to see the uniqueness of Nimble Storage other than its lower cost. While cost leadership is a viable approach to short-term market gains (in this case going from almost no market presence to a forgettable, insignificant and immaterial market share), I do not believe that this is a sustainable approach.
For Nimble Storage to survive as a viable concern, it must come out with some proprietary feature or function. Otherwise, it will always be the solution someone buys because they can’t afford something better. Simple cost leadership is an unsustainable proposition in this market.
So for a viable public company, I believe that there must be at least two of the following:
- Unique differentiation in the product;
- Multiple products, not just one product;
- Some sort of market dominance; and/or
- Material revenue (and preferably profitability).
I believe that Nimble Storage fails that test. All it would take to put Nimble Storage out of business is for Nimble Storage’s competitors (of which it includes, EMC, NetApp, IBM, HP, Dell, Oracle, HDS, Fujitsu, and at least 30 other more notable companies), to drop their prices by five or 10% to use their market leadership positions to “buy” the deal; and within a week, Nimble Storage would be out of business.
Nimble Storage says “me too!” http://t.co/pMhfv9b72K
Nimble Storage says “me too!” http://t.co/pMhfv9b72K
Nimble Storage says “me too!” | Neuralytix http://t.co/MRA67oT29D
Nimble Storage says “me too!” | Neuralytix http://t.co/MRA67oT29D
RT @Neuralytix: Nimble Storage says “me too!” | Neuralytix http://t.co/UnN6goS6Mn
RT @Neuralytix: Nimble Storage says “me too!” | Neuralytix http://t.co/UnN6goS6Mn
Nimble Storage says “me too!” | Neuralytix http://t.co/ZlAFwPT3w2
Nimble Storage says “me too!” | Neuralytix http://t.co/ZlAFwPT3w2
shot at @NimbleStorage by @benwoony ahead of IPO http://t.co/52GMeCq6gO
shot at @NimbleStorage by @benwoony ahead of IPO http://t.co/52GMeCq6gO
Ben, your insight is right on, with one exception. As a 20-year veteran of the storage industry, I too am surprised by Nimble’s success. I agree they essentially have no IP to speak of, yet they are growing fast. What they have done right is “storm the beaches” by hiring massive quantities of sales people. A friend of mine showed me an org chart of their sales team about 18 months ago. I was blown away at how many Reps and SEs they had for such small revenue (hence the large losses). The combination of large numbers of sales & channel sales and customers’ desire for a “good enough” and lower priced storage vendor that is an alternative to the “big boys” is really what is making them grow. Violin is simply too expensive and is a very poorly run company. Pure storage systems are also too expensive and most people simply don’t need all flash. Hybrid storage simply works “good enough” for mid market customers, which is where Nimble is getting 80-90% of its revenues.
Ben, your insight is right on, with one exception. As a 20-year veteran of the storage industry, I too am surprised by Nimble’s success. I agree they essentially have no IP to speak of, yet they are growing fast. What they have done right is “storm the beaches” by hiring massive quantities of sales people. A friend of mine showed me an org chart of their sales team about 18 months ago. I was blown away at how many Reps and SEs they had for such small revenue (hence the large losses). The combination of large numbers of sales & channel sales and customers’ desire for a “good enough” and lower priced storage vendor that is an alternative to the “big boys” is really what is making them grow. Violin is simply too expensive and is a very poorly run company. Pure storage systems are also too expensive and most people simply don’t need all flash. Hybrid storage simply works “good enough” for mid market customers, which is where Nimble is getting 80-90% of its revenues.
RT @benwoony: Nimble Storage says “me too!” | Neuralytix http://t.co/ZlAFwPT3w2
RT @benwoony: Nimble Storage says “me too!” | Neuralytix http://t.co/ZlAFwPT3w2
@georgehewitt Looks like someone else agree’s with our mutual assessment of #nimblestorage http://t.co/dA9l5HmVEF …. 🙂
@georgehewitt Looks like someone else agree’s with our mutual assessment of #nimblestorage http://t.co/dA9l5HmVEF …. 🙂
You have failed to see the uniqueness of nimble storage or where it excels simply because you know nothing about it! Nimble has built their product from the ground up, with all pros and cons of current building blocks in mind and as a result it is better on all fronts. The architecture is brilliant and because of this the storage arrays are faster, more reliable, smaller and cheaper. What you see is what you get without all the bullshit buggy bloat ware and licensing other vendors will get you to buy on top of the hardware. Their support puts other vendors to shame also! Consumers want the best and when they are offered something superior at a lower price why wouldn’t the buy it? That is why they are growing so rapidly and deservedly so…
You have failed to see the uniqueness of nimble storage or where it excels simply because you know nothing about it! Nimble has built their product from the ground up, with all pros and cons of current building blocks in mind and as a result it is better on all fronts. The architecture is brilliant and because of this the storage arrays are faster, more reliable, smaller and cheaper. What you see is what you get without all the bullshit buggy bloat ware and licensing other vendors will get you to buy on top of the hardware. Their support puts other vendors to shame also! Consumers want the best and when they are offered something superior at a lower price why wouldn’t the buy it? That is why they are growing so rapidly and deservedly so…
Mr. Tan, from the comments received via a variety of media, it seems that the challenges you observe is less about my ability appreciate, as opposed to Nimble’s own failure to communicate.
Your comments further emphasize the point in our blog — that Nimble was built “from the ground up” to be a cost/loss leader. You too have failed to articulate any specific technology differentiator other than “reliable, smaller and cheaper”.
All your competitors will equally claim their reliability. Given the relatively and diminimous sales Nimble has earned, and the severe loss that it is incurring, it seems that at least fiscally, Nimble’s value proposition is exactly as we have observed “me too” but cheaper.
Your comments are much appreciated. Furthermore, we are very appreciative of the fact that your comments completely reflect our observations.
Mr. Tan, from the comments received via a variety of media, it seems that the challenges you observe is less about my ability appreciate, as opposed to Nimble’s own failure to communicate.
Your comments further emphasize the point in our blog — that Nimble was built “from the ground up” to be a cost/loss leader. You too have failed to articulate any specific technology differentiator other than “reliable, smaller and cheaper”.
All your competitors will equally claim their reliability. Given the relatively and diminimous sales Nimble has earned, and the severe loss that it is incurring, it seems that at least fiscally, Nimble’s value proposition is exactly as we have observed “me too” but cheaper.
Your comments are much appreciated. Furthermore, we are very appreciative of the fact that your comments completely reflect our observations.
My point is Nimble Storage is unique. Depending on what your criteria is for uniqueness, I think we can agree to disagree. If you understand the technology behind Nimble you will understand how it is unique. Sure you can take the point of view and say its just another hybrid storage product with disk and flash, but if you look at how CASL works, you will understand why high IOPs does not equate to more spindals, bolt on flash or a pure flash tier. Better does not have to cost more. By the way I am not from Nimble Storage, I am just a Nimble Storage consumer.
some facts around Nimble and their unique offering to the market, Mr Tan, as an SE myself i would like to see your response to this factual information:
read the white paper CASL is a rip off of the NetApp ONTAP operating system but with out a unified platform (block only) and less features such as no block level deduplication, Application aware snapshots plus Nimble was founded by X NetApp and EMC employees hence the similarity in their OS. Nimble even in their “unique” space has huge floors arouns caching- cannot address boot login/storm issues as it is READ only caching, other vendors offer read and write caching, NetApp for example has deduplication aware caching so you dont need as much flash to accelerate IOPS. other vendors can easily beat the Nimble IO figures they produce, some can deliver 400,000 sustained IOPS from 24 flash drives. as for build/support, etc Nimble is not 5 9’s certified and does not have the sizable support team of the other leading vendors or the call home, etc features of the other vendors. it has got where it is today as 50 of the 350 employees are NetApp sales people and they know how to sell well with a relitivley cheap tier 1 storage product
My point is Nimble Storage is unique. Depending on what your criteria is for uniqueness, I think we can agree to disagree. If you understand the technology behind Nimble you will understand how it is unique. Sure you can take the point of view and say its just another hybrid storage product with disk and flash, but if you look at how CASL works, you will understand why high IOPs does not equate to more spindals, bolt on flash or a pure flash tier. Better does not have to cost more. By the way I am not from Nimble Storage, I am just a Nimble Storage consumer.
some facts around Nimble and their unique offering to the market, Mr Tan, as an SE myself i would like to see your response to this factual information:
read the white paper CASL is a rip off of the NetApp ONTAP operating system but with out a unified platform (block only) and less features such as no block level deduplication, Application aware snapshots plus Nimble was founded by X NetApp and EMC employees hence the similarity in their OS. Nimble even in their “unique” space has huge floors arouns caching- cannot address boot login/storm issues as it is READ only caching, other vendors offer read and write caching, NetApp for example has deduplication aware caching so you dont need as much flash to accelerate IOPS. other vendors can easily beat the Nimble IO figures they produce, some can deliver 400,000 sustained IOPS from 24 flash drives. as for build/support, etc Nimble is not 5 9’s certified and does not have the sizable support team of the other leading vendors or the call home, etc features of the other vendors. it has got where it is today as 50 of the 350 employees are NetApp sales people and they know how to sell well with a relitivley cheap tier 1 storage product
Very interesting article, thank you for your insight.
I am certainly not a storage expert but I was under the impression that their CASL file system was something they developed and was unique to them. Is this not entirely true? It appears that CASL provides much improved write performance and then flash / compression is what provides the enhanced read performance. I am very interested to hear your take on this as your article did not specifically address CASL.
Full disclosure we are a happy (mid-market) Nimble customer and currently in the market for another device, which is why this is so intriguing to me. Look forward to reading your view of CASL.
Very interesting article, thank you for your insight.
I am certainly not a storage expert but I was under the impression that their CASL file system was something they developed and was unique to them. Is this not entirely true? It appears that CASL provides much improved write performance and then flash / compression is what provides the enhanced read performance. I am very interested to hear your take on this as your article did not specifically address CASL.
Full disclosure we are a happy (mid-market) Nimble customer and currently in the market for another device, which is why this is so intriguing to me. Look forward to reading your view of CASL.
I look to analysts to interview customers and figure this stuff out if it’s not clear enough from the vendor. As far as I’m concerned, the Nimble site does a fine job of explaining their differentiation, but if you don’t agree, it seems like it’s incumbent on you to explain otherwise. Being mystified at the success of a vendor with the size and customer base of Nimble does not reflect well on this blog.
If cheap was good enough NexSAN or Coraid or Nexenta or whatever would have swapped places with EMC by now. You can’t discount your way to Nimble’s size and strength. And if you looked at their S1, their margins are no worse than the bigger vendors.
Try again.
I look to analysts to interview customers and figure this stuff out if it’s not clear enough from the vendor. As far as I’m concerned, the Nimble site does a fine job of explaining their differentiation, but if you don’t agree, it seems like it’s incumbent on you to explain otherwise. Being mystified at the success of a vendor with the size and customer base of Nimble does not reflect well on this blog.
If cheap was good enough NexSAN or Coraid or Nexenta or whatever would have swapped places with EMC by now. You can’t discount your way to Nimble’s size and strength. And if you looked at their S1, their margins are no worse than the bigger vendors.
Try again.
Hi Ben,
Good try. Sounded like EMC writing why Data Domain is no good when NetApp offered first.
Then EMC ate their own words buying data domain.
In an year’s time, you will say how good Nimble is for customers. I have sold it and it is an awesome product. Test it technically before writing. Run benchmarks on all the storage you know with Nimble and boldly publish the results.
Try again as analyst has every right to be genuine.
Hi Ben,
Good try. Sounded like EMC writing why Data Domain is no good when NetApp offered first.
Then EMC ate their own words buying data domain.
In an year’s time, you will say how good Nimble is for customers. I have sold it and it is an awesome product. Test it technically before writing. Run benchmarks on all the storage you know with Nimble and boldly publish the results.
Try again as analyst has every right to be genuine.