SolidFire is an all-flash storage systems company. Based on reports by news outlets including StorageNewsletter, most of SolidFire’s customers are telcos. It had been trying to appeal to a broader, more general, market. Neuralytix believes that this strategy has not been overly successful due to the fact the all-flash market is already highly competitive; the entry capacity and price point for SolidFire is high; and there is just a smaller market for uber high guaranteed QoS I/O outside of the telco market.
Neuralytix expects SolidFire to be run as a separate business unit.
NetApp’s history with respects to integrating acquisitions has been poor, at best. Despite its intentions, NetApp has failed to integrate its acquisition of ByCast, its object storage offering, into DataONTAP. Instead, it is now a separate product that “integrates” with existing NetApp filers. Clustered ONTAP, resulting from the Spinnaker acquisition, took nearly 10 years to “integrate.” Other disappointments include the acquisition of LSI, in order to establish a stronger OEM business. Neuralytix has long held these opinions of NetApp (see “What now?” for NetApp and NetApp says “Me too!!”)
This is at least the third attempt by NetApp to make a mark in the all-flash market. It started with selling the all flash EF series of block based storage systems. Then had a burst of interest in its more competitive All-Flash FAS (AFF). Now, this is the third foray for NetApp into the all-flash business.
With EMC, Pure Storage and IBM commanding over 50% of the market, Neuralytix estimates that SolidFire has around 5% of the current market, and produces around $50M in revenue. Even assuming 100% growth rates (which are completely unreasonable), it would take NetApp five years to return the $870M they are spending on SolidFire. Additional investments would make this close to a $1B investment. Given NetApp is only producing slightly over $6 billion in revenue, this is asking a lot from a niche solution!
Additionally, if SolidFire is a stepping stone for NetApp to regain its presence in the telco market, we believe that this is not the right approach. NetApp has already made a mark in the telco space. Overall, Neuralytix believes that the telco market is a strong one for NetApp. But the all-flash guaranteed QoS market is a niche market, and may not parlay into quantifiable gains for NetApp because of the high priced, uber high I/O, and high capacity entry point for the product.
Is it a sign?
Over the last several years, NetApp has acquired companies to fill in gaps in its own portfolio. Once a vendor with a comprehensive organically developed and highly integrated portfolio of solutions. Now, NetApp is more of a curator of niche storage products.
While SolidFire has clearly demonstrated superiority in the telco market, Neuralytix is struggling to see the end-game in this acquisition.
We believe that long-term success for NetApp is not in acquiring fringe products to complement its core products; but the formation of a unique, NetApp-only, alliance with a formidable server vendor. Today’s market is not one that is won by “best-of-breed” products, but rather, the solutions (combining hardware, software, and services) that deliver predictable, repeatable and scalable business outcomes.