NetApp - Dave's Blog

Always Bet AGAINST Your Employees

Recently a group of NetApp managers tried to motivate their employees by betting that the team could meet a particular project milestone. If the team missed the date, the managers promised to dye their hair bright colors. (Silly hair bets have a long history at NetApp.)

Unfortunately, the team missed the date, and as a result, the managers not only had to deal with bad news, but they had brightly colored hair to advertise it. When people would ask, “What happened to your hair,” the managers had to say, “I bet my team that they would hit their schedule, but they missed.”

Even if there are perfectly good reasons for the miss, the listener might still conclude: You not only look like a clown, but you manage a whole team of clowns.

Much better to bet that your team will fail. When I first started running engineering (back in 1999), product reliability was an issue, so I bet my employees that they could not improve quality by a factor of 10. If they did, I would dye my hair any color that they wanted.

Imagine how this played out. The team succeeded (as measured by a man who cared so deeply about quality that I knew he would never cheat), and I ended up with hair that was bright magenta, blue, and red. To get hair these colors you can't put it on top of brown; you have to start by bleaching to white. So I looked like a freak, but at least, when people asked me about it, I had a good answer: “Let me tell you about my awesome team. I should never have bet against them.”

The conclusion: You look like a clown, but at least you manage a good team.

So I say, always bet against your employees. Of course, it helps if they understand it’s a bet you want to lose.

Why NetApp Is Winning

NetApp recently released financial results, and according to one analyst, “It was a supersonic quarter.” Never mind the financial details – I think the more interesting question is: What’s going on? Why is NetApp Winning? (Those who like details can check here. The quick summary is that our revenue was flat from a year ago, up 9% from the previous quarter. Profitability has also recovered.)

Two interesting trends are combining to boost our growth. (1) Many companies have an aging IT infrastructure and can no longer postpone capital purchases. (2) Server virtualization forces companies to consider new IT architectures, and that plays well to NetApp’s strengths.

When the dot-com crash hit, back in 2000/2001, many companies had recently updated their IT infrastructure as part of Y2K remediation projects. Internet companies and their suppliers had been growing so quickly that most of their equipment was new, and many of them went out of business so the market was flooded with “almost new” gear. It was a tough recovery for IT vendors. This time is different. This downturn began gradually, perhaps in 2007, so people have already been postponing capital purchases for quite some time. Partly this is intuition, based on talking with customers, but one metric we can track is one-year service renewals. In good times, people upgrade their equipment when their initial service contract expires. In bad times, they want to defer capital spending, so they simply extend the service contract by a year. In the past year, we have seen many one-year extensions, and we believe this reflects lots of pent up demand.

So the first key trend is that IT infrastructure is aging, and eventually companies will need to buy.

The second key trend is that server virtualization is forcing people to consider radically different architectures. I’ve had many customers tell me that their initial goal was to install VMware, but they discovered that in order to get the full benefit, they first needed to re-architect their storage infrastructure. NetApp was an early leader in storage for virtualized environments, so in many cases people have switched to our storage even when they were completely satisfied with their previous vendor. It’s not that the old vendor did anything wrong; it’s just that their products didn’t work so well with server virtualization. Virtual servers can be created quickly, so you need storage technologies like thin provisioning and cloning that let you provision storage equally fast. Virtual servers proliferate, so storage efficiency techniques like data deduplication become all the more important. The whole point is to save money, so good automation is critical. NetApp’s strengths perfectly match the requirements of server virtualization.

It’s hard to sure what’s happening. It could simply be that IT spend is picking up, and a rising tide floats all boats. If this is true, then you should expect similarly strong quarters from our competitors. On the other hand, it could be that NetApp’s strength in virtualized environments is allowing us to get much more than our fair share. It’ll take a few more quarters of results to be sure, but this is what we think is going on.

The Petabyte Era is Dead

Sometimes numbers have a symbolic value beyond any real meaning they contain. Like when your odometer rolls over to a hundred thousand miles. Of course, it’s all arbitrary, since a mile is just a certain number of Roman soldier footsteps, but even so, in a funny way, it feels like a major achievement.

At NetApp, we just had one of those magic moments: in the past 52 weeks we have shipped an exabyte of storage. That’s a thousand petabytes. Or 1,000,000,000,000,000,000 bytes. Look at all of those zeros! It has no real meaning, but I still love it.

The petabyte era is dead. Long live the exabyte era!