Storage vendor NetApp is entering a new era. First off, the company recently announced a cloud computing-centric strategy that it hopes will establish it as the supplier of choice to the ever- decreasing number of service providers that deliver computing over the web.

It’s a market opportunity the company estimates could reach up to $42 billion by 2012, and has led the firm to build many ‘cloud-friendly’ features into its Data ONTAP 8 family of storage solutions. These include enhanced data mobility, management and service automation, dynamic scalability and an emphasis on secure multi-tenancy.

Also ringing the changes has been the recent promotion of COO Tom Georgens to CEO. Georgens replaces Daniel Warmenhoven, who has led the company for 15 years and is now chairman.

But the new era is one marked with uncertainty. While NetApp showed strong margins in its most recent quarter, revenue fell 4% to $838 million. The company declined to issue an earnings forecast due to “reduced visibility”.

“The crystal ball is a little murky right now, not just for us but the industry,” acknowledged NetApps’s senior director of data centre solutions, Jeff O’Neal. Nor is the company dwelling on its recent loss of deduplication vendor Data Domain to archrival EMC, in the most dramatic bidding war seen in the IT sector this year. NetApp was eventually forced to cede to EMC’s cash offer of $2.1 billion despite its own bid having the support of Data Domain’s board.

“We had done the calculation of what it was worth to NetApp, [the bidding] got to that level and we walked away so we were fine with it,” says O’Neal. “Knowing when to walk away is part of business, right? There is a price beyond which something is no longer of value to you.”

NetApp already includes deduplication as a feature built into Data ONTAP; the interest in Data Domain “was more of a market thing,” according to O’Neal. “Data Domain came up with a particular market niche we weren’t directly addressing and they hit it very well.” The loss is likely to remain a sore point, however.

Virtualisation is paramount to the data centre strategies of many of the high-value storage aggregators NetApp is hoping to supply in the future as part of its cloud strategy, and dedupe shines in circumstances involving high degrees of repetition: Data Domain boasts that 60x reduction was not uncommon in virtualised environments. NetApp nevertheless sees potential in its expanding OEM channel, even if this eventually means selling to fewer customers. O’Neal describes a visit to a large global hotel chain that cemented that realisation.

“The CIO said he didn’t have any infrastructure. His CRM ran on Oracle on-demand and he used Navitaire’s booking system. This was a global chain without any internal IT infrastructure running entirely on the cloud.” Fortunately for NetApp, the story had a happy ending: “The good news was that Navitaire and Oracle are NetApp customers, so in fact the customer was running on NetApp, but just one step removed,” O’Neal says.

He acknowledges that being a good partner to service providers is challenging, and that their demands are different to those of a direct customer. “We will be asked to do some things differently, like cost sharing, more standardisation of offerings, things like that,” he says.

But it’s not just suppliers such as NetApp that have to adapt to the cloud era, O’Neal adds: data centre managers and the businesses they support are also facing a cultural shift.

“I ran across a customer who kept signs in his data centre so that when different groups within the company came to inspect their server he could hang a up a sign that said ‘this is the HR server’, even though it was virtualised and who knew which server was carrying the load,” O’Neal says, by way of example. “It helped people through that transition; there really is a human element to this.”