Today, over 35 years later, Daniel Warmenhoven has more than achieved his teenage dream. He is now the CEO of Network Appliance, a company that pioneered the concept of enterprise network storage solutions and is a leading provider in that market segment. When Warmenhoven took over Network Appliance 10 years ago, it was a small business running out of a rental building in Mountain View with just 45 employees. Today, it is one of the top technology companies in Sunnyvale, employing close to 3000 people globally and with more than a billion dollars in revenue.

But there is more to this 53-year-old CEO than his title and the business strategies he has brokered over the years. Last month, Network Appliance won an unlikely award from the city of Sunnyvale—an unlikely one for a technology company—the Outstanding Environmental Achievement award for its on-site environmentally friendly cogeneration system that produces its own electricity and uses the heat that comes out as waste to power the cooling system for its data storage center.

One of his longtime friends, Mike Wishhart, who is managing director of Goldman Sachs, describes Warmenhoven as a CEO with the left brain of a nerd and the right brain of a quarterback. "He can get along with the engineering team and can discuss things at a very technical level, and at the same time, he can manage a group of very bright executives with the aggressiveness of a quarterback," says Wishart. What Wishart probably failed to mention is the fact that some of Warmenhoven's gray cells are in fact a tad green. Network Appliance, under his leadership, has become the first high-tech company in the world to use the cogeneration system and walk the "green" high road.

Cogeneration system—first of its kind

Warmenhoven says the idea for putting up a power plant at the company site began to emerge during the rolling blackouts of 2002. While Network Appliance supplies infrastructure for storing network data to big companies like Yahoo, Oracle, Texas Instruments and Merrill Lynch, it also houses its own mission-critical data center. In layman terms, this is a huge room that is maintained at a very cool temperature, housing rows and rows of tall, grayish, refrigerator-like pieces of equipment, complete with blinking tiny green lights and wires to rival the length of the Nile. This equipment is the reservoir of all applications and emails used by the company and requires an uninterrupted power supply and a constant cooling system.

"There is a gap between the period when the power fails and your own backup power kicks in, and the question is how to fill in this gap. Traditionally, UPS systems require a lot of batteries, which are not environmentally friendly and require high maintenance. So when we began considering the idea of having our own power plant, and as we started looking at the alternatives, a fairly high level of consciousness kicked in. We realized the environmental implications of what we are doing because we are in an area that is not seismically stable," says Warmenhoven.

So what the company decided to do was create a state-of-the-art cogeneration system. Three combustion engines that sit in an open-air walled enclosure use natural gas to produce electricity, which is fed to a UPS system that uses "flywheel" technology instead of batteries. "This is a fairly new technology," says Warmenhoven. "When the power from PG&E stops, these wheels actually keep spinning and act as generators and feed electricity to our data center."

While the flywheel technology takes care of the uninterrupted power supply part, the heat that comes out as a by-product of the combustion process is used as energy to chill water. This is where the "co" part of cogeneration kicks in. The chilled water is then sent through huge pipes to cool air and maintain the temperature in the data center. The cooling system also uses silica gel as a refrigerant (an element that causes the cooling process) instead of the freon that has traditionally been used in refrigerators and air conditioners. Freon is a pollutant that is known to cause ozone-layer depletion.

The cogeneration power and cooling system became operational in January of this year and is estimated to have cost approximately $10 million. Now the company produces 75 percent of its own electricity and takes the rest from PG&E. "We have the potential to produce more and probably even feed PG&E. But contractually, we are not allowed to sell the power we produce. We generate just enough power to maintain our data center," says Dan Hoffman, director of facilities at Network Appliance. Hoffman also points out that since the power plant became operational, the utility cost for the company has come down by 30 percent.

Green strides

While the cogeneration plant is the most expensive environmentally conscious effort made by Network Appliance to date, it has been making small strides in this direction for a long time. "One of our goals is to achieve the ISO [International Organization for Standardization] target for environmental friendliness," says Warmenhoven. At Network Appliance, there is no waste of packaging and shipping material. The company believes in recycling. "We don't consume any packaging here. Subassemblies and vendors from various parts of the world manufacture most of our products. And the cartons they send are the cartons we send to our customers. We have a recycling process for returned equipment as well," says Warmenhoven.

Good neighbors

Patricia Vorreiter was the mayor of Sunnyvale when Network Appliance moved into the city. "Dan Warmenhoven is one of the few CEOs who exemplifies community spirit. He is a business leader who is committed to the issue of transportation congestion. He encourages his employees to carpool or use public transportation. "I remember, when I was the mayor, he would personally attend the city council meeting regarding this issue and offer suggestions to the city in this regard. He was a major player with the Moffett Park transportation agency," says Vorreiter.

But Warmenhoven shrugs off such compliments with a self-deprecating smile. "The light-rail system that runs in front of our office was one of the main reasons we bought this property. Our long-term goal at that time was to build more buildings and make it our primary headquarters. There are a lot of concerns about population density and traffic. And it was in our interest to see to it that if this area is going to flourish in the future, those challenges have to be corrected. So, it became a critical issue for the company," he says.

"Today, we have a number of employees coming here from San Francisco and a substantial number of them use Caltrain and the light rail. But then the number is not as high as I'd like it to be," he says.

Favorite boss

Mike Wishart, apart from being a close personal friend of Warmenhoven, is also the company's investment banker. Wishart has seen his friend in action as a business leader from very close quarters. "The one thing that's striking about Dan is the fact that he's a very humble man. He never takes personal credit for anything. To him, it's all about the team. That's why all his people stick with him. Because he is dependable and he's everybody's favorite boss," says Wishart.

This is not empty rhetoric from an old friend. In 2001, Warmenhoven was named one of Business Week's "top 25 managers of the year." Fortune magazine has also ranked the company as one of the top 100 best companies to work for.

But Warmenhoven, with his typical quirky sense of humor, dismisses all the attention. "I don't do much here. In fact, I have no job. I don't design and build products. I don't sell it. Sometimes I feel like an orchestra conductor. I have a terrific team of virtuoso players. All I have to do is keep the beat. And then everything else is pretty easy," he says, breaking into a laugh.

But on a more serious note, Warmenhoven admits that he does have a management style. "Optimum success is achieved when you have a bunch of self-motivated people and you support them. Get out of their way and you'll have great results."

Warmenhoven says that in all these years as a CEO, the toughest decision he had to make was when the company decided to lay off its employees. Network Appliance, like other tech firms in the Valley, suffered huge losses when the dot-com hoopla died. In 2001, the company laid off 8 percent of its total employee population. "To a certain degree, it breaks the trust relationship. You hire an employee with the expectation that they are going to be around for a long time. But to turn around and say, 'Sorry, we don't have a job for you anymore,' it's a very difficult decision. In most cases that person is the breadwinner for the family. Everything else by comparison is simple. You can make choices about investment and business strategies ... but fundamentally the hardest decisions are always concerning people," he says.

But these days Network Appliance is back on the rebound. The last fiscal year, the company registered $1 billion-plus in revenue. And this is primarily because of the decisive change in the company's marketing strategy. Around 2001 Network Appliance started losing its core customer base of Internet companies, which collapsed with the burst of the dot-com bubble. These companies represented nearly 70 percent of Network Appliance's revenue. Around this time the company decided to diversify its customer base to other sectors like energy—oil and gas exploration, financial services, federal government, automotive manufacturers, life sciences and the telecoms—a timely and smart business move that has helped revive the company.

Unlike other Silicon Valley high-tech firms, which usually offer special incentives to their sales teams, Warmenhoven has a unique way of extending these benefits to all his employees. "Every year we select 200 of our best performers from the sales team to go to an all-expense-paid vacation. But each of these guys can pick anybody from the company who helped them achieve that goal. It can be an engineer, a marketing person or at times even an attorney. This is one way to get everybody energized," he says. Warmenhoven says that this is the time he goes one on one with his employees in a game of golf.

The family man

There is an affable, down-to-earth quality about Dan Warmenhoven that's hard to miss. He's grounded, can poke fun at himself, laughs off his achievements and admits that it's all probably because of his middle-class upbringing. But he leads no middle-class lifestyle these days. He has his own jet, with two pilots and a ground crew, and his own vacation homes.

Warmenhoven and his wife, Charmaine, have been married for 31 years, and he still gets excited talking about how he met his wife. He was a sophomore at Princeton in 1969 when the 300-year-old all-male institution decided to go coed. "She was one of the 98 women who were admitted to Princeton for the very first time. And all the 3,000 guys were very excited. I was blown away by her self-confidence. It takes a lot to be one among 98 women to break into an all-male bastion," he says laughing. "After Princeton she got her master's from Columbia, and her specialization was in early childhood development," he adds with obvious pride.

These days, Warmenhoven and Charmaine are involved with several nonprofit agencies in the valley.

The couple's children are grown now. "I don't have kids anymore. I only have two young adults," he says. "Never thought it'd work out this way, but they are following in their parents' footsteps. My son is a software engineer at Brocade. He got a bachelor's degree in computer science—so he's a geek like his dad—and my daughter is at Boston College in the Lynch school of education and will probably get a master's degree in early childhood development like her mother."

So has the young boy with big dreams from Rochester achieved his career pinnacle? Warmenhoven laughs and then adds, "Of course I'd like to see Network Appliance become the No. 1 leader in the network storage market. But as far as personal goals are concerned: I still have a long list of places to go and things to see, and I'd like to be a 10 handicap instead of 13 in my golf," he says.