SiliconANGLE sometimes feels a little like Charlie Sheen – “the truth seeker”. Today was one of those days. The Wall Street Journal put out a story that was totally clueless about the technology infrastructure market. Specifically the writer Peter Gallagher of VentureOne’s group. We have to establish the correct angle on Facebook and Fusion-io.
Today, the writer Gallagher wrote what what I call a “big swing and miss” article. He absolutely “missed the ball” – he whiffed. He ran a commentary article that casts a shadow over the upcoming IPO of Fusion-io and suggesting that somehow Facebook is not a relevant infrastructure. He argues that Fusion-io’s business opportunity and IPO is tied to that of Facebook, it may cause an overvaluation of their stock and potential future growth and that won’t work out well for investors’ pocketbooks in the long term. He is completely WRONG.
Let me clarify.
All the top industry insiders are watching two major bellwether indicators that map the future growth of IT infrastructure industry – Cloud Scale (low latency storage/compute/networks) and Big Data (Hadoop). SiliconANGLE follows these two areas in depth.
Specifically we follow Facebook extensively both from a technical angle and business angle – we are close to both companies and know the truth. Facebook in fact is an IT indicator for future growth in the IT sector. For the folks not following this closely let me explain: Facebook runs one of the most comprehensive and innovative clouds in the world.
Facebook Infrastructure Is a MegaTrend
Facebook is building the model for what most if not all Private and Hybrid clouds will look like. Fusion-io supplies key technology to Facebook. Said another way, Fusion-io’s opportunity is not about how much tech they sell to Facebook, but instead how much tech they sell to infrastructures that will look like Facebook – hello this will be most if not all private and hybrid clouds. Facebook is building a future platform while operating at scale. This is the objective of *all* top infrastructures that will migrate to hybrid and private clouds over the next 5 years. This megatrend is one of the fastest growing markets in the IT enterprise space.
Industry exec for 30 years at Intel and leading product exec at EMC Pat Gelsinger lays this cloud trend that I’m talking about above as follows: (see video)
Let me translate what Pat Gelsinger is saying. What he is saying is that all future IT enterprise infrastructure will look similar to a Facebook like infrastructure – private and hybrid cloud.
The megatrend of consumer scale infrastructure like Facebook will lead the way on the journey to the cloud and the trend called “consumerization of IT”.
Wall Street Journal Journalist Misses the Mark on Facebook Hence Fusion-io
The writer pens the following:
Facebook’s growth and staggering valuation are sure to have a halo effect on the valuation Fusion-io receives in its IPO. There is press speculation that the offering could be priced at 10x to 20x trailing sales — implying Facebook-like growth.
The growth might not come, however. Facebook has installed Fusion-io’s flash-based solid-state drives in two data centers. But the second deployment is due to end this month, causing revenue from Facebook to decline significantly in the June quarter.
Questions about growth are not confined to the near term. There’s a risk that Fusion-io’s technology, while a good fit for Facebook’s IT environment, may be confined to a niche. Facebook’s strategy is not an IT market indicator. For example, after concluding that a realized environment scales more efficiently than virtualization, Facebook is planning to deploy microservers from Intel Corp. in 2012. But even Intel itself expects microservers to grow to only 10% of the server market.
Gallagher argues that because Fusion-io’s cache technology is only 10% to 15% of the primary memory market and that may not be changing anytime soon. A fact he illustrates with the commentary on Intel’s foray into the video-chip market for servers—as Fusion-io’s cache systems plug into graphic chip slots. As Intel threatens to commoditize graphics-chip maker nVidia, it may do the same to Fusion-io.
Aside from their upcoming IPO, Fusion-io has been in the news over the past few months for their ambitious practices of reaching into the data-warehouse and cloud-storage and -computing industry. In October they expanded their offices into the UK. Facebook may be their primary customer, making 10% of their total sales, but the global financial company Credit Suisse has also boasted implementing the company’s ioMemory to boost their data access performance by more than five-times.
As recently as early March, Fusion-io broke computing records and set new milestones alongside Supermicro by exceeding the million IOPS barrier, the outcome part of an OEM partnership between the two companies.
My ANGLE on Fusion-io’s Market Opportunity is Being Driven By the Facebook Megatrend
Fusion-io’s total available market is bigger than most people think because flash can play, architecturally in four (4) key markets: 1) at the memory level as a cheaper and persistent version of RAM; 2) as cache in an array; 3) as SSD in an array or as 4) an appliance.
The WSJ talks about competition such as a startup called Violin – a company that plays only in one the four market mentioned above an appliance (#4).
To suggest that Violin is a competitor to Fusion-io is a stretch and bad research on the Wall Street Journal. For years the storage hierarchy has been basically the same: memory, cache, disk. Now with persistent flash, it changes everything. The key is software and Fusion-io has the lead.
Fusion-io’s secret sauce is software and specifically software that eliminates all the traditional disk overhead. It’s not just solid state storage (which by itself is big and the new standard) but the software technology component for Fusion is game-changing which is why it’s so valuable. Fusion-io is part of the Facebook megatrend because they power the component flash and software that is a key part of the Facebook (aka cloud) “new operating system” for the lack of a better description. Plus from a cost to scale perspective Fusion-io is ultimately cheaper than an appliance. This alone gives them a long lead on others such as R&D companies like Violin who are desperately trying to rush their products to market.
Comparing Violin to Fusion-io is like comparing the tablet clones trying to take on Apple iPad. Now almost two years later since Apple announced the iPad the competition continues to struggle to catch up. Now matter how fast Violin rushes something to market it will be very difficult for them to catchup with Fusion-io.
Facebook IS the future of data center platforms. Positioning Facebook as a niche is idiotic. Sure today few data centers are at the scale of Facebook, but think about the future –Facebook’s level of scale is what big enterprises will be running at.
Facebook is pointing the way.
[Editor’s Note: Kit Dotson contributed to this story. –mrh]
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