Nutanix: The Hyper-Converged Pioneer Nutanix CEO Dheeraj Pandey says tech giants like Hewlett-Packard Enterprise and Cisco lack "conviction" in hyper-convergence regardless of acquisitions both have made in the market. "Whatever we were talking about in 2012, is what HPE is talking about in 2018, 'We can get servers and attach some storage to it and hopefully this will be a good solution for the midmarket or the SMB.' But the problem with HPE is lack of conviction," said Pandey, in an interview with CRN. The San Jose, Calif.-based hyper-converged infrastructure pioneer recently reported first fiscal quarter 2018 sales of $275 million, up 46 percent year over year, while deferred revenues increased nearly 50 percent to $409 million. Pandey said over the coming quarters, Nutanix will adopt a software-centric strategy to expand its total addressable market. Pandey talks to CRN about its software transformation, competition with the likes of Cisco and HPE, and if Nutanix will remain an independent company.
What is your view of the new HPE with SimpliVity?
At the end of the day, we don't even look at HPE-SimpliVity as a competitor because you need the entire operating system. You need the whole stack. You need software-defined storage, but you also need the hypervisor, software-defined networking, software-defined security, you need operations management, systems management, automation – all these pieces have to come together to build an operating system. People don’t just want to buy a hyper-converged box, they're saying, 'Either I go to the cloud or if I stay on-premise, it better be as good as cloud.' So you need to have a holistic operating system story. Software-defined storage is a part of it, but it's only a small part of it.
Are you seeing any market share gain or loss since HPE launched its first joint hyper-converged product this year?
Whatever we were talking about in 2012, is what HPE is talking about in 2018 saying, 'We can get servers and attach some storage to it and hopefully this will be a good solution for the midmarket or the SMB.' Because they want to sell 3PAR and Synergy and all that stuff at the high end of the pyramid, then they want to sell Nimble in the middle of the pyramid, and sell SimpliVity at the base of the pyramid for SMB's. It doesn't work like that. You cannot hedge your way into architecture. You cannot hedge your way into transformation. You have to go all-in, which is what the largest companies like Oracle and Microsoft and Adobe had to do to transform themselves.
So the SimpliVity acquisition doesn't affect Nutanix?
SimpliVity is a little tuck-in that will now be a swim lane in HPE's portfolio. While it's good to charm the analyst, the media, the pundits, at some level if your sellers don’t have the conviction, that there's only one path forward in the re-architecture for the enterprise -- you will basically always be a 'me-too' product.
What are your thoughts on Cisco HyperFlex and their acquisition of SpringPath this year?
It's the exact same argument [for Cisco]. You go back to, you can't have swim lanes where you're saying, 'I'm going to work with Pure [Storage] at the high-end. I'm going to work with someone in the middle segment of the market, and by the way, I'll have HyperFlex just as a way to distribute software.' It doesn't work like that. You can't hedge bet. You can't have a FlexPod and a Pure stack and then something else. You need conviction on what does it mean to transform your customer's business. You can't create ten ways. You can't sit on the sidelines when this massive disruption is happening in cloud computing.
How do you view Cisco as a hyper-converged competitor?
They don’t have an operating system. You need to have an entire stack to go and say, 'Am I better than VMware's vSAN? Am I even getting close enough to the AWS and Azure experience?' Because that is the fork in the road for customers, 'Do I buy VMware and do things on-prem? Or do I look at Amazon or Azure?' So hyper-convergence by itself was a good story in 2012, but today, that idea of software-defined storage running on commodity servers is five years too late by itself.
Can Cisco stay in the hardware business?
It all depends on what the next few years have in store. Look, they all wanted to be in the enterprise mobile computing business five years ago when Apple was seeping into the enterprise with BYOD. They had tablets, HP acquired Palm, and Cisco had a Cius tablet with Android and things like that – they all had aspirations. At some point when they started to see AWS get into the enterprise a few years ago, they all had cloud vision, but it wasn't done right. So large companies do things just because they feel like they have a better account control than some of these insurgent and new startups or outsiders like Amazon, like Nutanix.
A big focus for @DellEMC in 2018 is their own hyper-converged #VxRail offering. Where does your relationship look like with Dell next year?
They are also trying to figure out their own swim lanes because they have the #VMAX product and the #VNX product, the #Compellent product, VxRail product. We just happen to be one more swim lane in that sense. The thing is that, if they can sort that out, the partnership will get sorted out automatically. They are expecting the market forces to basically create a pull for the different swim lanes saying, 'There'll be people who like to buy #VxBlock, people who like to buy a VNX midrange product, people who like to buy VxRail, and people who love #XC because they love @Nutanix .'
Why is Nutanix adopting a software-centric strategy?
One of the good things about Nutnaix is how we continue to expand our TAM. … When we went and gave our software to OEM partners -- first Dell, then Lenovo, then finally IBM -- we said, 'Let them go and build different reference designs based on our software, and let that thing compete with the marketplace with our own NX appliance.' Then about 12 to 18 months ago, we started doing these ELA's which is like software consumed at scale. With some of the very large customers we had, we said, 'Let's have them completely decouple hardware consumption with software.' They were saying, 'Software appreciates, hardware depreciates. I want to get our business going with you where I can buy all the software and get all the discounting up front, and then I can go buy hardware overtime.' It was all about access. How do we make access to Nutnaix technology frictionless?
So what is Nutanix's new software-centric vision?
This decision to now go all software is basically the next step in that same direction around frictionless access. We announced Xi [Cloud Services] which is about, 'You can now control Nutanix with cloud services as well. You're not going to take sides between on-premise and off-premise, with owning and renting. So if you want to continue to own Nutanix, you can now download it from a website and install it on a server that we didn't ship to you, kick the tires on it, and then come back if you really want to consume this thing.' So it's about increasing the access to our technology in the most friction-free manner.
Does this software strategy expand your total addressable market (TAM)?
It absolutely expands our TAM. It takes a lot of these analyst forecast that say, 'Oh [hyper-converged] is actually a $2 billion industry. Now it's a $4 billion industry. Now it's $8 billion' – it's up to companies like us who are category creators to expand the TAM. TAM is what the leading category creator business says it is.
How will Nutanix partners make this transition?
They'll either go and implement a private cloud for the end customer, or they can be managed services providers where they take our software, buy the hardware, take some risk along the way, but be that cloud provider. When they go and take the software and implement the private cloud to the customer, they are now using the professional services to put together a solution rather than just resell boxes.
The other thing is it is a recurring business because if they go and sell software upfront, customers will want to consume that software, but they want to buy hardware over time. Every time they want to go and consume that software, they will be a level of professional services involved and that is where the channel keeps coming back.
There's been many hyper-converged acquisitions in 2017. Will Nutanix will remain independent?
A lot of this it is the DNA of a company. What does independence really mean? It means staying power to go and optimize for the long-time as opposed to just optimizing for the short term. Staying power is based on long-term greed. So, do you have long-term greed or short-term greed? It's tied to two other things: ambition, which fuels long-term greed; and attention to detail, which is, 'Can you do this without burning too much cash? And can you do this with an awesome customer experience where customers love you and nothing else matters?'
So if we were to have some long-term greed, which is fueled by the ambition of the company – and the ambition has to tie back to product strategy, the adjacency of our market and the fact that we continue to expand the total addressable market – that is long-term greed. Tie that with attention to detail, I think you have a recipe for staying power. That's all we look at.
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