Vendor Ratings, VDR Pushan Rinnen, Robert E. Passmore, Carolyn DiCenzo, Nick Allen, Mike Chuba

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1 Vendor Ratings, Pushan Rinnen, Robert E. Passmore, Carolyn DiCenzo, Nick Allen, Mike Chuba Research Note 19 January 2004 Vendor Rating: Network Appliance Network Appliance remains a leader in the network-attached storage market and offers storage area networks, disk-based backup and recovery, and information life cycle management. Network Appliance Overall Rating: What You Need to Know: Network Appliance continues to enjoy its popularity in the network-attached storage (NAS) space and has successfully eliminated past application barriers to NAS by gaining support for virtually every database and many of the applications running on databases. Its midrange Fibre Channel (FC)-based storage is a welcome addition for NAS customers that need storage area networks (SANs), but Network Appliance has not yet shown that it can (or wants to) compete head-to-head in the general FC SAN market. Its NearStore product and accompanying software provide an elegant, sophisticated disk-based backup and disaster recovery for Network Appliance environments and is increasing its applicability to other vendors storage environments. Network Appliance has announced a series of partnerships in the information life cycle management space, which has put NearStore in competition with EMC s Centera for the early lead in that emerging market. Finally, Network Appliance s proposed marriage of Spinnaker and Network Appliance software will have little or no impact on customers during the next 24 months, but users should show appropriate caution when that software does enter the market. Analyst Comments: As Network Appliance develops a broader storage portfolio, it will take on competitors in its areas of strength and stretch its single platform development model. Merging Spinnaker code for clustering is Network Appliance s most risky venture. Detailed Rating: Initiative Corporate Viability Strategy Financial Marketing Organization Market Offerings Product/Service Network-Attached Storage Midrange SAN Storage NearStore Rating Strong Strong Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 Recovery Software Storage Resource Management Software Technology/Methodology Pricing Structure Customer Service/Support Sales/Distribution Support/Account Management Caution Caution Corporate Viability: Strategy Network Appliance is striving to extend beyond its strong network-attached storage (NAS) turf to become an important enterprise disk storage player. Its traditional customer base has been workgroup and departmental users in a distributed computing environment. During the past few years, it has achieved reasonable success in marketing its filers to support database applications and initiated limited presence in enterprise data center environments. Recently it has added Fibre Channel (FC) and Small Computer Systems Interface over IP (iscsi) block protocols with integrated management. It is acquiring a scalable file system for continued technology innovation. However, partly because of its past focus on the ease of management of its NAS appliances, its software marketing, as well as services and support, has been relatively weak. While Network Appliance NAS products lead the industry in market share, its FC storage area network (SAN) technology is facing fierce competition from other established competitors, and iscsi technology is still in the early-adoption phase. As a pure disk storage vendor, Network Appliance faces challenges from broad-portfolio companies. Financials Network Appliance enjoys a strong balance sheet. It has remained profitable during the past few years, when the economic and technology recession crippled many companies. Although its revenue declined in fiscal 2002 from its $1 billion peak in fiscal 2001, the introduction of its NearStore and fabric-attached storage (FAS) product lines helped increase revenue in fiscal Revenue has increased quarter over quarter for the past eight quarters, and the outlook for the company continues to look strong. Network Appliance reported $722 million in cash and short-term investments in the second fiscal quarter of Marketing Network Appliance has strong brand recognition and customer loyalty in the NAS arena. However, in the large enterprise environment, which has been its recent target with its FC SAN and NAS unified storage offerings, it is not well-recognized. To its credit, Network Appliance has forged strong marketing relationships with Oracle and more recently with VERITAS and Cisco Systems, which are helping Network Appliance gain more traction in the enterprise world. Network Appliance has shown effective marketing skills toward users, but product marketing outside the circle of customers and prospects is relatively weak. Product launches and Web site updates are often out of sync. Although its software products are marketed separately from its hardware products, prospective customers may find Network Appliance s technological nuances difficult to understand. Network Appliance is the only major storage player that promotes unified storage which can lead to more user confusion as competitive comparisons are hard to come by. The company hasn t taken proactive measures such as providing general user guidelines for different networking architecture to address such confusion. Organization 19 January

3 Network Appliance has grown from a startup 12 years ago to a midsize company with nearly 2,500 employees covering the major geographical areas. It has a strong and stable management team and has been able to retain key technology talent. Its organizational model has been typical of a smaller company, with classic engineering, sales and marketing, and services departments. Although this model has been working well for a company with a cluster of closely related core technologies, it may face additional challenges when it enters a phase with broader products. Market Offerings: Product and Services Network Appliance has evolved from a company with essentially a single product to one with a portfolio that includes its traditional filers and a special purpose advanced technology attachment (ATA)-based filer and competitive midrange array that is targeted at the SAN market. Its storage systems come with the Data ONTAP OS, which has the Write Anywhere File Layout (WAFL) file system and snapshot capabilities. Network Appliance is offering a software portfolio that can add specialized recovery and management capabilities. The company offers clustered versions of its filers and FAS systems, with two filer heads sharing storage in an active-active cluster. In late 2002, the company added the ability to create stretch clusters with the second head up to 30 kilometers apart. Network-Attached Storage Being the market leader in the NAS space, Network Appliance has been highly regarded in the industry. Its filers have become the benchmark to compete with. Network Appliance NAS appliances are the foundation for the company s success story and continue to gain market share. Its unique OS, with a journaled file system, has a built-in snapshot function and well-integrated redundant array of independent disks (RAID) support. Its newly announced RAID-DP protects data from any two-disk failure. Its NAS technology has gained success in supporting database applications. Its appliances have been known for their ease of management, resulting in few administrators and low cost of ownership. Its filer solutions for distributed disk-based backup and disaster recovery are among the most sophisticated in the industry. Network Appliance announced its NAS/iSCSI gateway products recently, with certified support for IBM storage arrays, adding to the HDS-supported products. Its acquisition of Spinnaker will allow Network Appliance to scale the two-node cluster limitation. However, merging two file systems with a common code base will take time and involve considerable risks. Midrange Enterprise Disk Storage Arrays Network Appliance is transitioning its traditional NAS filer product line to its FAS unified storage products, which provide simultaneous file-and-block data access through the addition of FC and iscsi protocols. As an integrated companion to NAS, Network Appliance s FAS products offer FC customers flexibility and ease of management. When selling stand-alone FC SAN storage arrays, however, Network Appliance has had little success, which was typically confined to customers that had already deployed FC SAN infrastructure. This may be because of limited initial support for Solaris and Windows, which has expanded to include Linux, HP-UX and AIX. But performance scalability is limited to the middle of the pack, competitively, and Network Appliance hasn t sold FC SANs for long. For iscsi, Network Appliance has been offering this protocol free to jump-start the market, but half of the users that have downloaded the Network Appliance target initiator are still in the evaluation stage. NearStore Network Appliance is one of the first vendors to recognize the economic propositions of ATA disk drives, releasing its NearStore line in NearStore has become the fastest growing product line in Network 19 January

4 Appliance history. Although NearStore runs the same OS that powers Network Appliance s other systems, the device has been positioned as a recovery or archiving target. Network Appliance offers SnapVault, remote snapshot software as a backup solution to allow for the recovery of filer data from disk rather than tape. It can be used to stage backup to tape, reducing the impact of the backup activity on the filer. NearStore can be used as a replication target for third-party Windows and Unix systems. SnapLock, the software that provides tamper-proof volumes for archives of business records, has become accepted in the market, and Network Appliance is looking to leverage NearStore with SnapLock in the fast-growing compliance-archiving market. NearStore has found most of its acceptance as a recovery target for Network Appliance s installed base. Penetrating the archiving market outside of its installed base will be met with heavy competition from EMC Centera. Recovery Software Network Appliance encourages the use of the snapshot capability that comes with its storage systems to provide for recovery beyond RAID. In addition, the company offers a set of recovery options. The SnapManager family provides application-specific recovery for Exchange, Lotus Domino and SQL Server. SnapMirror adds asynchronous and synchronous replication. SyncMirror provides synchronous replication for added protection beyond RAID in a local setting or metropolitan area (the latter with MetroCluster). SnapVault allows for remote snapshots with incremental capabilities (which Network Appliance positions as a backup solution). And SnapRestore provides tools for recovering from snapshots. Network Appliance has a complete set of recovery solutions but has been late to understand the importance of promoting the contribution that software makes to its revenue. Its approach to software, even in financial reporting, reflects a lack of understanding of the market. The good news for its customers is that it is an engineering company that has delivered the necessary functions. Storage Resource Management Software Network Appliance has been late to understand and support the need for integrated storage resource management tools. The company provides an element management tool called FilerView with its filer systems. It offers system resource management (SRM) tools for managing multiple Network Appliance systems in a single view (DataFabric Manager) and links to system management tools. DataFabric Manager has good file-level views and controls such as quotas, provided the files are on Network Appliance devices, but newer market thrusts such as database structures Network Appliance has been in this market for four years physical and logical views of disks, or backup views (although it covers Network Appliance snapshots effectively) are not supported. Network Appliance finally released an application programming interface (API) and a related partner program in the first quarter of 2003 and began to promote filer requirements with industry standards committees. But those requirements have yet to be adopted, leaving competitors arrays with more mature APIs, Version 1 standards support and a larger set of independent software vendor solutions for management. Network Appliance claims partnerships with IBM Tivoli, VERITAS, and Computer Associates, but those SRM tools limit Network Appliance integration to mining the filer itself and launching Network Appliance tools. The API for DataFabric Manager is, in general, not exploited. The result is that users with heterogeneous vendors products have no tools with integrated views across the environment that include Network Appliance storage. Network Appliance claims to be working on some of these issues but has no publicly stated strategy encompassing the broader issues of SRM. Technology Network Appliance has been the technology leader in the NAS space. Its WAFL file system with snapshot has established its performance leadership position for a long time. Indeed, its software functionality has 19 January

5 been roughly one year ahead of its competitors. However, its performance scalability is limited by a twonode cluster, and customers with large-scale deployments often spend considerable effort in migrating files between clusters to balance loads. With the pending acquisition of Spinnaker, Network Appliance will obtain a global name space and multinode clustered file system the management scheme for orchestrating a large number of nodes. However, the task of merging two file systems and clustering technologies is not a quick, easy job. Pricing Network Appliance s pricing model was one with little separation of hardware and software. In recent years, Network Appliance started pricing software solutions separately. However, its software pricing is in transition, with filer-based software pricing following a tiered appliance model, and NearStore software pricing following a capacity-based model. Pricing for commodity disk, value-added filer heads and some basic software are typically bundled, making it difficult for customers to figure out how much they are paying for each piece when doing comparison shopping for SAN storage. The result has been a confused general storage market, making it difficult for channel partners to sell its product line. Customer Service/Support: Sales/Distribution Network Appliance has expanded its distribution channels in recent years, and revenue generated through direct sales has gone from 80 percent to 50 percent worldwide. With its direct salesforce focusing on large accounts, the company is relying more on its channel partners to penetrate small and midsize accounts. Its major resellers include Avnet and Arrow in North America, Fujitsu in Japan, Fujitsu- Siemens in Europe and other resellers in Asia/Pacific. A diversified channel strategy plays favorably toward the company s goal of increased market penetration. Network Appliance started a co-branding relationship with HDS in 2003 to sell Network Appliance NAS gateways through HDS. This relationship has had very limited success. Network Appliance s salesforce faces the challenge of promoting its SAN storage, which is more complex than its traditional NAS. Customer Service/Support Network Appliance has increased its service and support organization tremendously during the past few years. The organization includes more than 300 people in 200 sites in more than 80 countries. It has six technical support centers around the globe, providing customers with 24x7 live support. Network Appliance has a self-service Web portal and is working on proactive remote diagnosis and data collection for support engineers. Although the self-service and automated tools serve many of Network Appliance s traditional customers well, they are not adequate when the company is approaching large enterprise accounts, which demand a different level of service. Network Appliance has realized the challenges and recently reorganized the services management team, which is led by the former worldwide sales senior executive. Management is making changes, including a transition from a transaction-based service model to a relation-based one, as well as more investment in professional services. But whether Network Appliance can successfully support the demands of large numbers of high-end data centers remains to be seen. Related Research and Ratings: Network Appliance Will Buy Spinnaker to Speed Scalability Unified Storage Connects Storage Fragments for ONI Network-Attached Storage Market Share, Third Quarter 2003 (Executive Summary) 19 January

6 Storage for File and Block Services Is Converging Database Support: A Look at NAS Design Software Enhances NAS Functionality Magic Quadrant for Midrange Enterprise Disk Arrays, 1H03 Network Appliance Offers NAS and SAN on One Platform Rating Definition: Strong Caution Strong Negative Solid provider of strategic products, services or solutions. Customers: Continue investments. Potential customers: Consider this vendor a strong strategic choice. Demonstrates strength in specific areas, but is largely opportunistic. Customers: Continue incremental investments. Potential customers: Put this vendor on a short list of tactical alternatives. Shows potential in specific areas; however, initiative or vendor has not fully evolved or matured. Customers: Watch for a change in status and consider scenarios for short- and long-term impact. Potential customers: Plan for and be aware of issues and opportunities related to the evolution and maturity of this initiative or vendor. Faces challenges in one or more areas. Customers: Understand challenges in relevant areas; assess short and long term benefit/risk to determine if contingency plans are needed. Potential customers: Note the vendor s challenges as part of due diligence. Difficulty responding to problems in multiple areas. Customers: Exit immediately. Potential customers: Consider this vendor only if there are no alternatives. Acronym Key ATA FAS FC advanced technology attachment fabric-attached storage Fibre Channel 19 January

7 iscsi NAS RAID SAN SCSI SRM SCSI over IP network-attached storage redundant array of independent disks storage area network small computer systems interface system resource management Core Topic Storage ~ Hardware and Systems Network Appliance Headquarters: Sunnyvale, California Web Location: 19 January