This month marks the seventh anniversary of our founding (as well as the one year anniversary of our IPO), making this a natural time to take stock. At our first anniversary, I recall our then team of fifteen celebrating around two small tables at a restaurant down the street, hugely excited about the road ahead.
Today I find myself even more enthusiastic about Pure Storage’s (NYSE: PSTG) future. We preserve the best of Pure from then:
But to that we add all that we have achieved over the past few years:
As a result, analysts expect Pure to be the first independent storage company to reach $1B in storage revenues since NetApp did so fifteen years ago, which would place us sixth on IDC’s storage global market share top ten (not of flash storage, but of all storage).
Maintaining such aggressive growth (nearly unprecedented in tech history) is no doubt an audacious goal for Pure, but here’s why we are uniquely well positioned to meet the data center storage needs of this rapidly changing industry:
Accelerating Software as a Service. I am convinced that SaaS is a bigger disrupter than public cloud (a.k.a. Infrastructure as a Service) because in the future, those that build applications will generally be responsible for running them. It is not just business applications, but consumer applications (Apple, Facebook, LinkedIn) that leverage the SaaS model. And every year more and more businesses are focusing on SaaS, such as GE with Predix (Internet of Things) and athenahealth (healthcare). At Pure, for example, we maintain a substantial data center to develop our products including Pure1 (our cloud platform for monitoring and managing FlashArray and FlashBlade). We make this investment, because we need to be the best in the world at building and managing storage—it’s our core competency. But we leverage more than 100 best of breed SaaS solutions (from Salesforce, Workday, ServiceNow, CallidusCloud, Anaplan, Paylocity, SnapLogic, Tenable, and so on) for all the “non core” applications that support our mission.
In the old days, business applications would be packaged and deployed at customer sites, making for a multi-year lag in innovation. With SaaS, application developers can deploy directly to the infrastructure, which in turn demands highly automated “lights out” operations (or DevOps). To date, the primary appeal of public cloud in my view has been bypassing the complexity of legacy infrastructure to realize the promise of DevOps. Next-generation vendors like Pure, however, are delivering that agility “on premises” (one of our customers recently described Pure as easier to use than the public cloud, plus “there’s no performance hit for taking a snapshot”).
Today, Pure has over 150 B2B SaaS customers, including 7 of IDC’s top 20. Pure is also a storage provider to many top consumer cloud companies. In fact, together SaaS, consumer cloud, IaaS, and Platform as a Service/PaaS represent more than 25% of Pure’s business. With repeat purchase rates of more than double that of the rest of our customer base, Pure is uniquely well positioned among storage vendors to capitalize on the industry shift to SaaS.
Complementing Public Cloud. Going forward, most applications will be delivered via SaaS, but data centers will be a mix of public cloud (IaaS/PaaS platforms like AWS and Azure) and private cloud. There is no question that Pure’s customers are already using or at least exploring the use of public cloud. Highly elastic applications where data center infrastructure has to both scale up and back down (Pokemon Go comes to mind) are far more cost effectively managed in the public cloud.
And yet, our typical SaaS customer continues to see data centers as competitive advantage: infrastructure specialized to the application’s needs cannot only offer greater performance, but do so for lower cost. One such customer has been benchmarking their homegrown infrastructure against public cloud for the past couple of years: “Not only is our platform faster and cheaper than the public cloud, but our advantage in both has been widening each year.” Dropbox is one of the most public illustrations of this trend to “in source” from the public cloud (Dropbox is not a Pure customer), but every quarter Pure helps an increasing number of SaaS workloads “graduate” from public to private cloud in order to provide greater service levels and save money.
In our view public and private cloud will co-exist for the long term. Public cloud can often offer more cost effective elasticity, experimentation, archival and disaster recovery. Private cloud will excel for more predictable, performance critical workloads (latency is higher in public cloud, and bandwidth is expensive), as well as when there are security concerns with using highly proprietary algorithms or data in the public cloud. Indeed, platforms like Pure’s must provide more seamless integration with the public cloud to ensure hybrid public/private deployments also afford the simplicity and agility that both the cloud and Pure are known for.
Only Smart Storage survives. Going forward, businesses must shed the complexity overhang of the services intensive mainframe and client/server eras. No doubt Pure’s success to date has been catalyzed by the shift from mechanical disk to flash memory, but we have been able to maintain our growth and win rates despite our legacy competitors leading with all-flash storage over the past couple of years. That is because Pure’s innovations (across both FlashArray and FlashBlade) have always been more about delivering the simplicity, automation, resiliency, and customer friendly business model essential for cloud IT, not just about flash. This is smart storage:
Pure’s business is thriving while most of our competitors’ businesses are shrinking. To follow Pure, the legacy vendors must:
It remains our contention that none of the 20+ year old storage designs will be able to make the leap in any one of these three dimensions, making our path to market leadership easier rather than harder.
Thanks as always. Our sincere gratitude to those that have joined Pure on our journey, as customers, partners and investors. You will continue to get the best effort of one of the most gifted and committed teams in tech.
Forward Looking Statements. This post contains forward-looking statements regarding industry and technology trends, our strategy, positioning and opportunity, and our products (including FlashArray and FlashBlade), business and operations, including our margins, growth prospects and operating model. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the caption “Risk Factors” and elsewhere in our filings and reports with the U.S. Securities and Exchange Commission, including, but not limited to, our Quarterly Report on Form 10-Q for the fiscal year ended July 31, 2016, which is available on our investor relations website at investor.purestorage.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended October 31, 2016. All information provided in this post is as of October 10, 2016, and we undertake no duty to update this information unless required by law.
Non-GAAP Financial Measures. This post contains certain non-GAAP financial measures about the company’s performance. For the most directly comparable GAAP financial measures and a reconciliation of these non-GAAP financial measures to GAAP measures, please see our earnings release issued on August 25, 2016, which includes tables captioned “Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures” and “Reconciliation from net cash used in operating activities to free cash flow.”