Network Appliance CEO Dan Warmenhoven puts data in its place.

Storing and managing huge amounts of data over a network should be as simple as going into the kitchen and fixing a snack, says Dan Warmenhoven, CEO of Sunnyvale, CA-based NetworkAppliance Inc. (NetApp). "The issues around data management were complex. But they needn't be," he asserts. "We built a data refrigerator. Open the door. Take something out. Close the door. It's a simple, dedicated, data appliance."

Warmenhoven's comparison of his product to a kitchen appliance is not as crazy as some may think. NetApp actually pioneered the concept of the network appliance as a new generation of dedicated, specialized products that perform a single function.

By separating out the storage and management components from the traditional computer server, NetApp was able to develop a separate, nonprogrammable server on which all of a network's data can be stored and managed. "You can consolidate all the storage under a management scheme," Warmenhoven explains.

In one respect, he admits, this is a throwback to the days when a mainframe served as the central data repository. In today's network-centric environment, however, where links to the Internet are essential, a network appliance is typically installed within a dedicated Gingabit Ethernet network. Because the data is shared between Windows and Unix systems, "It's a true multiprotocol data server," he notes.

It is also scalable, Warmenhoven says, adding that a single system now can support up to 12 terabytes (TB) of storage capacity. Yet, When individual units are linked together, the storage capacity can be infinite. Yahoo!, which is NetApp's largest customer in terms of installed bytes, uses 300 TB of storage solely for its mail system.

DANCING WITH HEAVYWEIGHTS

While NetApp is meeting the storage and data management needs of a growing number of Internet service providers and telcos--including Lycos, EarthLink, AT&T WorldNet and Deutsche Telekom--it continues to broaden its client base. Among its customers are: Cisco Systems, Chase Manhattan Bank, Deutsche Bank, Citicorp Securities, Chevron, Conoco, ExxonMobile, BMW, Continental Airlines, Siemens, Motorola and Texas Instruments.

NetApp's success in landing so many large accounts is largely due to the company's direct sales strategy, which exposes potential customers to new solutions, says Warmenhoven. Having a global presence also helps. NetApp now operates in 70 countries worldwide and has more than 1,500 employees in 50 of those countries. "We got around the globe serially," he says.

In the four years after its founding in April 1992, NetApp established a solid enough customer base in the U.S. to begin the first phase of its global expansion. Between 1996 and 1997, the company opened offices in Europe. In 1998, it entered the Far East market. Between 1999 and 2000, it began a push into LatinAmerica.

Ripples in the global economy have not shaved off much from NetApp's bottom line. For FY 2001 ended April 30, the company posted revenues of $1,006 billion, reflecting a 78% growth rate over FY 2000.

Still, the current dot-com bust did have an effect, he admits. "We had a flat quarter to finish on," Warmenhoven says. "A year ago, our business was 40% to the Internet, including traditional companies that had an e-commerce initiative." Now, that business has dropped to 25% of overall revenues.

Interestingly, NetApp's attractiveness to companies on the Internet actually helped it weather some major storms in the online retail market. Over Christmas 1999, the heaviest traffic was being recorded by e-toys. By Christmas 2000, Toys-R-Us was the dominate online player. Yet, he says, "We were the storage and caching solution for both."

PUNCH FOR PUNCH WITH THE COMPETITION

Although many companies are taking a second look at the role of the Internet in their day-to-day business, Warmenhoven remains both optimistic and realistic. "I don't see the Internet going away. A lot of new ideas as to how the Net could be used didn't pan out. And I really think there was an awful lot of hype to it."

He says, however, that the Internet will continue to evolve into a major connection point for business-to-business and business-to-customer transactions. This will take some time, he adds. "It's a transition, not a revolution.

To make up for the drop-off in Internet business, NetApp is shifting some of its focus. "Our strategy is to diversify," Warmenhoven explains. "Oil and gas companies make up 10% of our business. We need to open up more verticals."

So far, NetApp has not had much competition from data storage companies, but the competition it does have is formidable. "We actually compete with the server vendors like Sun Microsystems, Compaq, Hewlett-Packard and IBM, who control 75% of the storage market," Warmenhoven says. As competition among these companies heats up, he undoubtedly will have to face new challenges--but, these are the kinds of challenges that brought Warmenhoven to NetApp in the first place.