I have been thinking about this for a long time.  Don’t get me wrong, I like the folks at NTAP but it seems like the ‘infrastructure’ players of today are not the same players that will be in the game tomorrow.  If you look at the infrastructure players today (enterprise), you have: IBM, Hewlett Packard, EMC, NetApp, Cisco, Oracle, Microsoft, Brocade, Symantec, and Dell.

All of these players are hardware and software players. These may have been the infrastructure players of yesterday but today (or in 2009 when the ‘cloud’ became the next fad) the list started to evolve.  Added to the list are (at a minimum): Amazon and Google.

Now lets take a look at the market cap of each of these players.  A company’s market cap is a good place start in order to identify which of these companies will have money to invest in tomorrow.  I am not saying that ‘cloud’ is the IT of tomorrow, but if it is the direction of tomorrow, then one thing is certain, the folks in that list that have more of the necessary ‘cloud’ pieces (or the money to invest in building out a portfolio of integrated cloud components) will be the most successful competitors.

To identify how this affects NetApp, let’s look at what the necessary cloud pieces are.  The most successful cloud competitors will either own or have very strategic partnerships with the following technologies: Servers, Storage, Networking, Software, Security.

NetApp has multiple issues today. 

First, they own only one of the necessary components, storage.  Second, they have a history of not being able to integrate any technology they acquire.  Additionally, they don’t have any of the necessary partnerships with the networking, software or security vendors that are strong enough or strategic enough to create a competitive cloud play.  Finally, they don’t have the kind of bankroll it will take to compete with the likes of IBM, HP, Amazon, GOOG, Microsoft, Oracle or EMC to develop the proper relationships.  These companies all own or have strategic relationships with each of the technologies in the stack that are necessary to be successful in the datacenter of tomorrow.

However, if cloud takes as long to catch on as iSCSI, NTAP is still in trouble and they are falling further behind.  At some point the commodity hardware business can only drive you to lower margins, and smaller customers.  NTAP’s sweet spot today is with mid-sized engineering type companies.  (Yes they do have enterprise accounts, but this is changing, slowly, because these enterprise companies see similar issues with NTAP.)

NTAP’s biggest issue in 2010 is the fact that they don’t own any software (and no, homogeneous, embedded snapshot software doesn’t count as software).  By not owning any software, they don’t own any real technology that allows them to drive more storage to their platforms which means they are beholden to the application vendors.  This is a fundamental difference between NTAP and an IBM, Oracle or EMC.  IBM owns a host of software, Oracle has its database and EMC has a myriad of data protection software that all drive data to its storage platforms.

Customers are looking for consolidation.  Yes, they want best of breed, but soon this won’t be technologies but best of breed integrators.  It makes IT’s life much easier to purchase solutions from one vendor where they can.  And if you think about it, this IS what the cloud is.  IT is buying a service, an integrated service – a platform, that they can build their business on.  It’s not to say that infrastructure isn’t necessary.  There will always be infrastructure that will be necessary in some businesses but let’s face, Daniel Carr said it best, Does IT Matter?  Those servers in the data center don’t make you money, the applications that you developed that run on them do (But I digress…).

So what then for NTAP?

  If they want to stay alive they have to get acquired, it’s that simple.  Who are the likely suitors?  The usual suspects, we have all heard them before and reasons why it would or wouldn’t work.  HP would be the most likely candidate.  They OEM their high end and low end storage products and their mid-range has fallen into the crapper.  The EVA, once one of the best storage technologies on the planet is nowhere to be found these days.  Additionally, if HP wants to get into the cloud space they will need some solid and reliable storage, at a cost which they can control.  Who else?

How about Dell?  It would be a big shot to EMC but so was the Equalogic deal.  However if Dell really wants to compete in this space then they will need a serious storage solution.  At the high end they have EMC but that deal has more hair on it than an Italian dudes back.  Also they won’t use the expensive stuff that they still have to buy in their cloud offering.  Equalogic won’t scale for the cloud.  NTAP could be a good fit.

Cisco and EMC seem to have made their bed supplying each other with storage, networking and servers.  IBM has everything but the plumbing and for that they seem to be working with Brocade.  As far as storage goes, it seems that they are happy with their relationships with LSI and DDN.

Either way, I could pontificate about more possibilities but reality states, NTAP must get acquired to stay alive in the long run.