 live silicon angles continuous coverage of VMworld live at VMworld 2010 and we're covering it wall-to-wall blanket coverage and we have the CEO of NetApp Tom Georgins welcome to the live coverage I know you're super busy with Dave Vellante co-host so tell us about what's what's your feeling about the show and what do you think I mean the keynote was pretty hot and you guys fit perfectly into that we heard from Christine your CMO tell us about that well I think just the attendance at the show is remarkable I think it seems to be a lot of energy a lot of enthusiasm and it's pretty clear that virtualization is making a big impact on the data center and frankly it's making a big impact on our business as well. VMworld has been a great partner for us the evolution of virtualization both in terms of cost savings and ultimately as the evolution towards the private cloud and that's clearly where we've been winning in the market and it's a big part of our strategy and it's great to be a partner at VMworld. Storage storage has been very sexy for a few months now and all the M&A activity ousies and in the press. You buy that Tom? Storage is sexy? You want to take the bait on that? How about storage is hot? It's hot okay it's sizzling hot. As long as storage is profitable and growing I'll leave sexy for the marketing people. As we were reporting on silicon angles storage is the linchpin it's that it's that foundation and Christine mentioned it's not just tactical it's foundation and you're seeing that in the announcement that storage is a key component of overall cloud in the architecture. Talk about you know what your view is on that and what's next and the M&A is really bringing a lot of spotlight in the mainstream on this and so what's your what's your angle on that? Well I think the M&A angle is is less about the cloud it's more about portfolios of individual companies but I think the broader story around the cloud is that it fundamentally changes the economics the velocity the agility of the data center and I think one thing about NetApp is that we recognized early on is that virtualization is only about the servers that virtualization has huge implications for storage we move the tremendous amount of our resource about five years ago in that direction to basically optimize our product for the ultimate evolution of the data center I think that's why we've been very well positioned we have a story about how we can cut the cost of your infrastructure in half we have a story about how you can provision it in seconds we have story about how we can allow businesses to basically create competitive advantage for the choices of a storage infrastructure. So you may have just answered it but I want to go a little deeper how is it that you're able to grow so much faster than the industry let's let's say the industry is growing it you know single digits maybe high single digits maybe low depending on what quarter it is how is it that NetApp is able to grow at 30% and can that continue? Well I think the the question of 30% obviously has a big impact on what is the macro going to do and you know I tell our team business is good but the headlines are unrelentingly negative so our focus is actually believe it or not not on growing 30% our focus is on gaining share and our view is that we want to continue to gain a point a point and a half a share every year and a point and a half a share has no context it's the same where the market is up or the market is down so rather than picking a specific dollar target we're going to focus on share gain and frankly NetApp has actually gained more share in the last year who are gaining at a faster rate than at any time since before the bubble burst more than 10 years ago. Which is unbelievable I mean I see the IDC numbers too let's assume they're they're they're reasonable I think IDC does as well as anybody and so if you can keep gaining that share that's how you grow that's the philosophy so that's pretty fascinating but so that's how you're going to make it continue okay I get that but let's talk a little bit about another thing that we've talked about in the past together which is best of breed or integrated stacks I know where you sit but share with our audience can you sort of set that up and talk about NetApp strategy there? Well kind of the classic question is are we ultimately going to see the major full line suppliers the HPs or the IBMs basically assemble a complete stack of technologies that they can offer an end-to-end solution with professional services to the customer and we certainly heard a lot that that's evidently going to be the way the company is going to go particularly as IT budgets are compressed over time and while I certainly understand the intellectual allure of that argument probably I have two data points number one is if you look at over the last two years the actual market share of the server vendors and storage is actually declining and declining at a double-digit rate so if that is going to be the prevailing model it's going to require a change in trajectory that we're not seeing today and the other thing frankly I believe that what customers know that they gain with them in terms of integration they know that they're giving up and best of breed and know they're giving up in cost and I think that's incumbent upon NetApp to basically partner closely like the work we did with VMware and Cisco around secure multi-tenancy to basically lower the integration burden of the end user yet still have them have best of breed solutions and I think if we can approximate either through partnerships with systems integrators or direct industry collaboration with other players in the industry and basically deliver to end users a very very tightly integrated solution that's as integrated or nearly as integrated as HP or IBM yet is still best of breed and is still have compelling cost then I think we're going to continue to succeed in the market and I don't believe the integrated solution is actually going to prevail and it certainly not prevailing today yeah I was to say the near-term trend certainly bear out your premise and Dave Scott as you know is also very vocal about that you know you're seeing just an incredible action you know with three par any comments there what do you think that what does it mean to NetApp the whole three par HP Dell thing you know I think three par is about HP and Dell and you know for NetApp I don't think we have an opinion three par was a player in the market they'll remain a player in the market I think this is a more reflection of what Dell or HP believe is the strength of their current roadmap their current partnerships and what they see on the horizon of what they've got on the drawing boards coming forward and whatever it is that they see in their future they must believe that three par is a better option because they're paying a lot of money for it and you're interested in your comment was it's really not about cloud it's about filling in your gaps in the portfolio absolutely I don't think that this is part and parcel of some cloud strategy I think it's just a portfolio gap that they're trying to fill I think that they have a need there both of them and both competing for the same asset that's driving up a high price and well you've been it's been a long it's been a long road for three par but certainly the last week has been good for the shareholders you've been there right and I saw you guys recently made an announcement with I think it was sync sort you had some backup stuff and it didn't cost you two billion to to get that capability looked very data domain like is that was that a correct interpretation or well I think that goes back to our original point and that is depending on users to integrate on their own a whole bunch of point products is not a realistic value proposition so for us it's incumbent upon us to find best of brief providers in the industry that we can integrate with and we can ultimately create full solutions so sync sort is just one example there have been a good partner for us but there are many others we do interesting work with BMC we do interesting work with Microsoft we do interesting work with a lot of other players and the ultimate goal is to approximate the integration capability of HP and IBM yet still deliver best of breed which they can't do do you feel like you've got processes that allow you to be superb at partnering or even superior well is that a cultural thing oh I absolutely believe it's a cultural thing and you know we talk a lot about you know why is net up gaining so much share why is net up outgrowing the market and most of that dialogue focuses on technological innovation and product but I would contend that net up has probably the broadest go-to-market strategy of any of our competitors whether it be our direct focus our our our our distributors which did over a billion dollars with us in North America the relationships we're building with systems integrators we actually have OEMs with HP and IBM and obviously the service providers some of the highest profile and certainly the largest service providers in the world are net up customers so for us I think a big part of our strategy gone forward and a big part of our growth is the fact that I think we have the most diversified and most well balanced go to market strategy of any company in this industry Tom I want to talk about some of the mainstream media analysis of the whole three-par M&A storage is sizzling messaging they're talking about it as M&A as they have flush with cash the financial crisis and they have all stock piled cash also talking about the lack of innovation coming from the big players and so you know I think they're getting that wrong I mean I'm seeing innovation but the question well you know I think from an innovation perspective clearly innovation is why companies like us survive if net app isn't an industry leader and we don't have differentiation there's no reason for a company like us to exist everything we sell is available you know hopefully not as good from other people so clearly we need to have some relevant differentiation that matters you know as far as you know as far as three-par and the big vendors I think the big problem with the big vendors and why I think the fallacy of the big vendors like HP and IBM are going to consolidate all of this intellectual property in one place is the fact that it's impossible for them to make the investment levels to be competitive at every level of the stack at the exact same time nobody has that much R&D and you know look at over time the companies that have created value over time have not been the people that have got end-to-end stacks it's been the Microsoft's and the Intel's and the Oracle's and the Cisco's it's been the horizontal players so maybe the world is different now maybe the growth rate of the overall industry is different but I don't believe it's realistic that any company can invest and be best of breed at every layer of the stack and I think even if there's a desire to consolidate this industry it's just a matter of time before a bunch of horizontal experts re-emerge so talk a little bit about your relationship with VMware obviously very important do you feel like the deck is stacked for EMC and can you I know you're gonna say no but but talk a little bit about that and why that's the case and how you're able to become so relevant to the market and to customers well the model with VMware I think is really a simple one not simple from a technology perspective but the motivation is easy and that is they've got a vision of the industry in terms of virtualization it's very similar to our industry on storage and integrated together we were able to tell a story to customers that enabled the combined solution to do things that no other combination of products could do and create an economic environment for customers to make a choice that they would not have made with VMware alone or NetApp alone so it's no more complicated than this deal was formed in the field by creating solutions in front of customers and you know at the end of the day I think that's it particularly as we went through this downturn I think the economic message of server utilization enabled by virtualization and storage utilization enabled by NetApp combined was really compelling and even in the downturn we saw companies that had very little money to spend still investing in this because the payback was so significant and it was so near term as far as the broader context of EMC whether it's whether it's a tribute to EMC or tribute to VMware leadership the simple fact of the matter is they've been independent and I think now we've created such powerful customer solutions and I think VMware's market cap is a percentage of EMC's I think any intervention into into VMware's business by EMC would sub-optimize either customer outcomes or shareholder outcomes and I don't think that's anybody's best interest so right now we consider VMware a partner I obviously they partner with EMC but the EMC ownership is not something we spend any time thinking about right good so so put on your crystal ball a little bit I mean what do you see for the future of the industry you're talking about efficiency do you think the industry the story you've been in the storage industry a while right with storage tech LSI others do you see that the the conversation shifting from IT is just a cost cutting mechanism to add value to one of more deeper business integration is that possible or is that just a pipe dream no it has to be more than a pipe dream in fact in fact that is probably the most interesting conversation that we're having now is companies ourselves included are so dependent upon the systems that we run that every major transformation initiative that we have whether it be whether it be a pricing initiative whether it be integration with our partners integration with our suppliers everything that we do as a system component so if we're trying to drive velocity and we're trying to drive agility and we're trying to drive transformation in our company IT is basically integral to all of that and there isn't anywhere I go that I don't have a conversation with cut with CIO's where they talk about that they feel like they are the gating item of all major business transformation and that's true of NetApp as well so the ability of IT to be not only reliable I think that is interesting but it's no longer sufficient IT needs to be cost effective and it needs to be agile because an IT organization that is not agile that is the longest pole in the tent of all business transformation is going to ultimately impact the competitiveness of the overall firm and that's the dialogue that we have and I see there's all sorts of manifestations I'm seeing non-IT professionals now in charge of now CIO's of corporations and this agility language is becoming better than the vernacular to a degree that I've never seen it before and I'm pushing the same thing in my company we moved IT out of the CFO function and we moved it into the business transformation function because every major transformation in the company has a big IT component and I think that's fundamentally changed the priorities and the focus of IT and I see that everywhere we go and I think the component of NetApp here is how do we enable that CIO vision how do we make it cost effective how do we make their virtualization initiatives and their ultimate internal cloud march be successful and lower their risk and accelerate their time to deployment so they can achieve these compelling business outcomes so storage in and of itself is not interesting or sexy but I think the things that we enable absolutely are and I think what we are enabling is the fundamental competitiveness of the firms that we partner with and I think that story and more importantly delivering on that story is why we're growing in the competition isn't NetApp walking the walk within its own internal IT we that's great great proof point we've been looking for proof points all week Tom Georgian CEO of NetApp great story it is a great time to be at NetApp at the helm I know you're not complacent you doing a great job and really appreciate you coming on the Cube thank you very much Dave we'll be right back for SiliconANGLE's continuous coverage of the Cube at VMworld live 2010 Tom Georgian CEO of NetApp