The Observation Deck

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Month: January 2009

I recently came into a copy of Dave Hitz‘s new book How to Castrate a Bull. A full review is to come, but I couldn’t wait to serve up one delicious bit of irony. Among the book’s many unintentionally fascinating artifacts is NetApp’s original business plan, dated January 16, 1992. In that plan, NetApp’s proposed differentiators are high availability, easy administration, high performance and low price — differentiators that are eerily mirrored by Fishworks’ proposed differentiators nearly fourteen years later. But the irony goes non-linear when Hitz discusses the “Competition” in that original business plan:

Sun Microsystems is the main supplier of NFS file servers. Sun sells over 2/3 of all NFS file servers. Our initial product will be positioned to cost significantly less than Sun’s lower-end server, with performance comparable to their high-end servers.

It is unlikely that Sun will be able to produce a server that performs as well, or costs as little, for several reasons:

  • Sun’s server hardware is inherently more expensive because it has lower production volumes than our components […]
  • The culture among software engineers at Sun places little value on performance.
  • The structure of Sun — with SunSoft doing NFS and UNIX, and SMCC [Sun Microsystems Computer Corporation] doing hardware — makes it difficult for Sun to produce products that provide creative software-hardware system solutions.
  • Sun’s distribution costs will likely remain high due to the level of technical support required to install and manage a Sun server.

While I had known that NetApp targeted Sun in its early days, I had no idea how explicit that attack had been. Now, it must be said that Hitz was right about Sun on all counts — and that NetApp thoroughly disrupted Sun with its products, ultimately coming to dominate the NAS market itself. But it is stunning the degree to which NetApp’s own business plan — nearly verbatim — is being used against it, not least by the very company that NetApp originally disrupted. (See Slide 5 of the Fishworks elevator pitch — and use your imagination.) Indeed, like NetApp in the 1990s, the Sun Storage 7000 Series is not disruptive by accident, and as I elaborate on in this presentation, we are very deliberately positioning the product to best harness the economic winds blowing so strongly in its favor.

NetApp’s success with their original business plan and our nascent success with Fishworks point to the most important lesson that the history of technology has to teach: economics always wins — a product or a technology or a company ultimately cannot prop up unsustainable economics. Perhaps unlike Hitz, however, I had to learn that lesson the hard way: in the post-bubble meltdown that brought Sun within an inch of its life. But then again, perhaps Hitz has yet to have his final lesson on the subject…

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