SAN FRANCISCO: I’m in the City by the Bay attending PURE//ACCELERATE 2018, the third annual customer/partner event from Pure Storage, and it appears the enterprise flash storage vendor couldn’t have scripted the timing any better. In addition to its new partnership with NVIDIA — AI-Ready Infrastructure (AIRI), a ‘major move in serving the artificial intelligence (AI) and machine learning (ML) space’ — and its ongoing relationship with Cisco — i.e. as an Original Storage Manufacturer (OSM) — on Monday the company reported Q1 revenue of $255.9 million, up 40% YoY.
“Pure has delivered another strong quarter as we lead the industry in delivering new data-centric architectures that enable enterprises to succeed both today and tomorrow,” said Pure CEO Charles Giancarlo, in a prepared statement. “The combination of our innovative business model, first-to-market technology innovations, and focus on customer success drove continued momentum in Q1.”
In addition to record revenues, the company announced it had added 300 new customers during the quarter, bringing its installed base to amost 5,000 organizations. It forecast an even better Q2 — $296 million to $304 million — and approximately $1.345 billion for the year, up from 2017’s $1.023 billion, as well as a slightly higher net loss, $64.3 million compared to last year’s net loss of $57.2 million.
“We were ahead of the market in all-flash,” said Giancarlo in the earnings call. “We were ahead of the market with NVMe. And we’re ahead of the market with A.I. (artificial intelligence).”
At last year’s event — more than 3,000 customers, partners and staff (with another 2,000 online, for a total increase of 300% over 2016’s inaugural event) — the vendor was predicting at least three more years of 30%-plus revenue growth, surpassing the $2-billion annual revenue mark by 2020. It also stated that the total addressable market for its faster solid-state storage arrays is $35 billion, but according to Dave Vellante, chief analyst of Wikibon, Pure was involved in a knife fight, and a market ripe for consolidation. “If it can stay ahead of what I call the ‘storage cartel,’ it will emerge a winner.”
Shortly after last year’s event the company hired Giancarlo, formerly the Cisco CTO and then Avaya CEO, who took over as CEO in late August when Scott Dietzen was bumped up to chairman of the board. Late last year he told Zeus Kerravala, founder and principal analyst with ZK Research, that if “you had asked me at the beginning of 2017 if I would join a storage company, I would have said probably not. I was caught up in the conventional wisdom that the storage industry had reached its zenith, would soon be in decline and there was no room for differentiation. This meant the only way to compete would be through open-source or low-cost software on white box arrays.”
Fast-forward to November, and he’d become a storage believer, at least about flash. “My fundamental belief is that compute is a three-legged stool made up of processors, network and storage. If two of these accelerate, it creates an opportunity for the third.” Disk can’t cut it, so that creates an opportunity for flash, he said.
It’s still cheaper to store unstructured data on magnetic, but once flash drops another 50%, the advantage should switch, he said. “My prediction is that we will see a 50% decline in flash pricing in about three years and a 75% decline in six years. It could happen faster, as it’s also dependent on when magnetic storage stops declining.”
However, pricing is relative, he added. Flash doesn’t have to be “cheaper than magnetic disk for the full transition to happen — it just has to be cheap enough for folks to be able to justify the conversion in terms of saving power, space, cooling, and manpower, and for folks to understand the business upside in moving to flash. … That ROI equation already works for the vast majority of important business applications today, and we think the pivot for unstructured data applications will happen much faster than people anticipate.”
When asked why Pure as opposed to another storage vendor, he gave several reasons, including: customer feedback about how the product “is highly differentiated and customers love it”, the company’s Evergreen subscription pricing (once a customer subscribes, that monthly fee is all they pay moving forward, with any upgrade to the hardware array, software updates or new features included at no extra cost), and their focus on ease of use. “When we tell them that our product requires five to ten times fewer people per Terabyte, they often can’t believe it. Whatever new solution IT managers evaluate, top criteria should be complexity reduction.”
With both the value and volume of data soaring, selling storage solutions is a great business to be in, even as the average selling prices continue to plummet on an annual basis. While this year’s IT spending is expected to climb 6.2% to $3.7 trillion, datacenter budgets are expected to be almost halved from 2017, down from 6.3% to 3.7%, according to Gartner, who noted the ‘longer-term outlook continues to have challenges, particularly for the storage segment.’ However somebody’s datacenter storage is going to see strong growth: the cloud storage market size is expected to grow from $30.70 billion in 2017 to $88.91 billion by 2022, at a Compound Annual Growth Rate (CAGR) of 23.7% during the forecast period (2017–2022).
Enterprise storage factory revenue was up 13.7% to just under $13.6 billion in the fourth quarter of 2017, while capacity shipments were up 39.3%. Pure’s segment, the All Flash Array (AFA) market, did slightly better, 15.1%, on a much smaller base (just over $1.9 billion); the slightly larger Hybrid Flash Array (HFA) segment ($2.7 billion) was up 7.4% year-over-year, according to IDC.
In addition to Pure (13% of the Q3 AFA market) other key flash vendors are Dell EMC (31%), NetApp (17%), Hewlett Packard Enterprise (14%), and IBM (7%). IDC’s Q4 numbers showed a 15.1% YoY increase and a slightly different market share: Dell – 29.2%, NetApp – 18%, HPE – 13.3%, Pure Storage – 12.9% and IBM still in last place, but with a more respectable 11.9.
“The all-flash array (AFA) market has undergone significant maturation over the past two years and the most differentiation between vendors was noted in their future-looking strategies, how they track and manage the customer experience and how they handle technology refresh cycles,” said Eric Burgener, Research Director, IDC. “Vendors like Pure Storage are raising the bar in all of these areas to increase overall customer satisfaction.”
Enterprise Strategy Group Analyst Scott Sinclair recently added that Pure is in pretty good position, at least when it comes to AI and ML. According to ESG research, ‘the most commonly identified barrier experienced with AI and machine learning projects is the cost of the infrastructure required’, and what Pure and NVIDIA are offering is a ‘turnkey infrastructure optimized for AI and machine learning workloads.’
He noted that while the expected result is more efficient and simpler infrastructure, there is the potential for a much bigger benefit: saving organizations time, money and resources. ‘At the end of the day, Pure Storage is making a bet that companies want their data experts to focus on their core competency, the data and the algorithms, and to leave the hardware tuning to someone else. And from where I am standing, it looks like a smart bet.’
This year’s Pure conference has drawn more than 4,000 attendees, as well as ‘thousands’ of online attendees, according to the company. The news and its implications, which will be covered in closer detail next week, include:
-a new data center architecture on which a wide range of other new enhancements will be based, which Pure Storage is calling a Data-Centric Architecture (DCA) umbrella;
-multiple announcements centered on AI; and,
-innovations to make its storage systems more dense, faster, and cost effective for customers
DISCLAIMER: Pure Storage looked after airfare and hotel, and while I do not own any shares in the company, I do in a number of others mentioned in this article.