Does Helping Customers Use Less Disk Hurt NetApp's Business?

We got an interesting question in the Q&A session at our Analyst Day conference a couple of weeks ago:

NetApp focuses so much on technologies to save disk space—like Thin Provisioning and Clones—could that hurt your business by reducing the amount of disk that customers need to buy?

I don't think so. Here are three reasons.

First, we have an opportunity to gain share. NetApp has less than 10% market share for SAN, NAS and iSCSI, so if we can help customers save money by using less disk, then we have a great opportunity to grow. (We've roughly tripled our revenue in three years, so it seems to be working.)

Second, storage purchases are elastic. When storage gets cheaper, customers just seem to buy more. Remember, disk prices have been dropping by 40% per year forever, yet the storage industry keeps growing.

Third, we charge for the software that helps people use less storage. I would much rather make money by selling software that helps customers rather than by marking up commodity disk drives. (To put it another way, would you rather be Michael Dell or Bill Gates?)

These are the reasons that we gave on stage at the analysts meeting, but there is also a deeper, more philosophical reason. I strongly believe that innovating to help customers is always the right thing for our business. If there is a clever way to help customers, someone is going to do it, and I want it to be NetApp. One of the reasons that we've been taking share from EMC and HP is that we have been very creative about how to help customers. If we hold back, it will make us vulnerable to the next generation of emerging competitors.

Summary: If you don't eat your own lunch, somebody else will.

Comments

[Dave Hitz]

There was an interesting comment on this entry at the Gear6 blog.

http://thoughtput.typepad.com/thoughtput/2007/04/driving_down_dr.html

They observe that lots of companies are doing 'Greenvertising', which they define as advertizing that focuses on environmental concerns, but they said my blog entry was based more on "strong business sense".

That was a conscious decision on my part. I personally am very concerned about environmental issues, but I also understand that -- whatever we might wish as individuals -- most businesses are very pragmatic and focus on near-term profit.

As a result, I focused on the business issues of using less disk rather than the environmental ones. It's a wonderful bonus that in this case the two sets of issues align!