Fusion-io, Inc. (FIO)
Technology Update Conference
August 28, 2012, 10:30 AM ET
David Flynn – Chairman and CEO
Dennis Wolf – CFO
Gary Orenstein – SVP of Products
Jeff Birnbaum – CEO, 60East Technologies
Steve Kleiman – Chief Scientist, NetApp
Paul Perez – CTO, Datacenter Group, Cisco
Jeff Rothschild – VP, Infrastructure Engineering, Facebook
Nancy Fazioli – IR
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Good morning, everyone. On behalf of David, Dennis and the Fusion-io leadership team over there, I'd like to welcome you to our Technology Briefing. This is actually our second annual briefing to coincide with VMworld. We were crowded around a TV screen last year, so I'm happy to have graduated to a slightly larger screen. Thank you for joining us and thank you to those of you who are joining us on the webcast as well.
Just a quick note on our agenda. We're going to start off today David Flynn, our Chairman and CEO will present as well Gary Orenstein, SVP of Products and Dennis Wolf, our CFO. We're very grateful for a very distinguished panel joining us today, taking time out of their busy schedules to share some insights on our technology and approach and we'll conclude with some Q&A.
Important slide here. We will be making some forward-looking statements during today's presentation. We did file our 10-K yesterday and have our 10-Q and 10-Ks on our website. Please review them for important information. In addition, we will be making some non-GAAP in regard to financial information and please do also visit us on our website.
So with that, one last comment. We do have a gift bag for you as you leave. So don't forget we've uploaded some collateral material and all of that is available on our website. So if you miss it that will make it easy for you, so please grab those. With that, welcome and please roll the video.
Thank you for coming out this morning to visit with Fusion-io and team and for our distinguished panel, and thank you those that are joining us by the webcast. It's a real pleasure to see many familiar faces and a number of faces that I don't recognize in the audience. That's about the best job of making our differentiation nice and concise. What I would like to do is to take that and talk about what it means in terms of view of the industry.
Now recently a vendor in the legacy storage world has presented a pyramid something like this, which I think helps detail the different places where you might deploy flash, where we will see flash deployed, where we are already seeing flash deployed. At the base of the pyramid is storage arrays that have flash in them to enhance their performance. Then there's all-flash arrays. There's appliances made of servers that have flash in them and then there's the flash within a server itself. So these are -- when we talk about how big is the market for flash and where will it be deployed, this is kind of in the enterprise, these are your options.
Now, this is a good pyramid. One of the things that is stated is that the closer you get to the applications, the more performance you get. In that point, we totally agree but here's where we start to diverge. If you look at what the implication is for the pyramid, this is really talking about market size or market opportunity for the flash technology. And implied is that the market opportunity in the storage array is larger. And also implied as the corollary is that flash in the server is most expensive and it's the fact that it's more expensive which makes it "a niche market" presumably.
And this is where Fusion-io does not agree, because when you put flash in the server, well, first you have to realize for a traditional storage vendor when they provide more performance, they have to charge more, otherwise it turns the world upside down if the performance costs less than from the storage system. So if you look at how vendors are pricing their server-side flash, they are actually charging considerably more than the flash that they put in the storage array.
But that is their choice to do so, because they don't want to cannibalize their own market. Because if you look at it, the fact that you don't require storage networking when you put it in the server, you don't need a separate box to connect to and it's not a proprietary system that has those additional mark-ups. Look at how much of Seagate drive costs. When that Seagate drive is in the server, it's not nearly as expensive as when the Seagate drive is in a storage array. You're going to pay two times, three times, four times as much for that same drive. So the closed system architecture makes it more expensive. So this is really the structural pricing of the flash deployment options.
Now what happens though when you look at that is it changes the market size picture considerably. There are 10 million servers expected to shift in 2012. There are only 100,000 storage arrays from the largest storage vendor expected to ship in 2012. So when we look at the market size, 10 million servers versus 100,000 storage arrays. What you realize is that now this is much more congruent. Flash in the storage array is much more expensive and will be used much more sparingly than flash in the servers and there's a lot more opportunity for flash in the server.
What this does is it turns the entire thing on its head. Now you'll notice the difference between these two. Going back this is a storage centric point of view, storage at the foundation. This becomes an application centric point of view, a server centric point of view which Fusion-io holds as the more valid point of view because that's why data centers exists is to run these applications that crunch on data. Storage is there to service the application, not vice versa and flash in the server makes that possible.
So why one might ask if it's more expensive in the storage array and not as high a performance, then what reason does it have to be there? Well the answer is it's a capacity tier. It is an opportunity for disks and disks will be in the storage arrays and be the main part of the storage arrays. But when it comes to all flash systems, what we are going to see is that flash in the server itself where it's software defined, it no longer takes a special appliance, it can be an off-the-shelf server with flash memory devices in it that the software has act as a SAN. This is the product that we just announced ION. The ION Data Accelerator is a software stack that goes onto an off-the-shelf server and teaches it how to act as a SAN.
Now today it's rather feature [Spartan], it doesn't have a lot of the conveniences of a big storage -- proprietary storage system. The reason for that is that we have chosen to accentuate performance over those additional feature sets and only once we can introduce those features while maintaining the performance differentiation of flash, will they be introduced. But as those new features come online, if you're able to do more of the high-end data management services from within the flash tier which can be inside of your array of homogenous servers that is the primary mode for building out cloud architectures.
Now, the final part I want to leave you with goes back to the presentation we saw, that movie segment, and that is that by moving the primary data from a backend proprietary system into the frontend in flash in the server, it not only gives you an opportunity to build those storage management primitives at higher speeds and within a commodity infrastructure, but it allows you to introduce new interfaces, new methodologies for how applications will interact with persistent data. You're going to hear more about that today as we talk about the product line, but this goes to the notion that you saw in the (inaudible) segment that when you introduce a fundamentally new medium for storage that has powerful new ways to access it, it can and will change the design of applications.