Rarely does a senior executive of a dominant company step aside to lead his biggest competitor. Yet that's precisely what Rajiv Ramaswami, then VMware’s chief operating officer of products and cloud services, did late last year when he accepted the chief executive role at Nutanix.
I was fortunate to talk with Rajiv at Nutanix’s investor conference last week. I shared the observation that he must have had a lot of respect for his number one competitor to make this transition.
“Very much so,” he told me. “I always looked at Nutanix as a feisty competitor that had a lot of customer loyalty and good, solid products that do what they are supposed to do and that customers love.”
Customers do seem to love what Nutanix is selling. The company tells us that it has over 19,000 customers today, with minimal churn year-over-year. Nutanix is proud of its customer service, highlighting its Net Promotor score during every earnings call. Its seven-year average NPS score is 90. That's about three times the average for a company in Nutanix's category.
Nutanix’s strategy is shifting. Nutanix is less focused on increasing its customer count and more focused on delivering enhanced products and services to its existing customer base. These new offerings play directly into the broadening needs of enterprise IT.
Nutanix was instrumental in inventing the hyperconverged infrastructure market, but HCI can only solve a limited number of problems for IT administrators and architects. One of the things that Nutanix has taken to heart as it’s watched HCI evolve is that IT customers really like a simplified management experience. Nutanix is taking that learning and using it as the basis for expanding its presence among its existing customer base while also servicing new customers as they arrive.
Expanding beyond HCI
Nutanix highlighted during investor day that it is consolidating its offerings along three axes. It will continue to deliver its core HCI solution for hybrid-cloud infrastructure. Nutanix will also focus on delivering cloud-like management capabilities for its hybrid-cloud customers. The company will also provide a set of stand-alone offerings directly adjacent to its core and cloud-management products.
Rajiv described Nutanix’s strategy by saying that his goal is to “make clouds invisible, hide the underlying complexities.” Make it simple, he says, and allow customers to focus on outcomes. After all, the principal function of any IT organization is to deliver satisfactory outcomes to the business units that it services. That philosophy is hard to dispute.
Nutanix is supplementing its core HCI offerings with simplified cloud management capabilities. These supplemental offerings include application automation, AI-powered operations, governance, and self-service capabilities. All of this arrives with the same simple-to-drive philosophy that made Nutanix's HCI solution a category-defining product.
Layering above HCI and cloud management, Nutanix delivers a set of stand-alone capabilities that supplement and leverage its core technologies. These include adjacent offerings for unified storage, database automation, database-as-service and desktop-as-a-service. These offerings are beginning to find traction. Nutanix and Hewlett Packard Enterprise recently announced that HPE Greenlake will support Nutanix Era database-as-service software.
Here's how Rajiv described Nutanix's total solution stack during his investor day keynote:
“With this product portfolio, we can address any application, traditional applications, modern cloud dev applications, the emerging AI/ML workloads, these new edge workloads, pretty much any applications that companies run. And we can run any of those applications anywhere they want to, in these private clouds as well as in the public clouds of their choice, or if they want to partner with a managed service provider or a telco, we can enable that to happen as well. So this is the Nutanix hybrid multi-cloud platform.”
It’s one thing to deliver a product roadmap, but the ultimate success of any company is found in the value that it returns to its stakeholders. Nutanix’s most recent earnings, its fiscal Q3 2021, exceeded expectations. It was the third consecutive quarter in which the company surpassed all external guidance and beat the street.
Rajiv told us that, looking forward, Nutanix expects to be cash-flow positive within 18 months while growing the top-line at 25% by 2025. These are usually difficult predictions to make for a traditional enterprise infrastructure or software company. The vagaries of quarter-to-quarter business always seem to find a way to thwart even the best of plans.
Nutanix, with its mostly-subscription business, can model the future by correlating its pipeline against its subscription run-rates and customer retention. It may not be perfect, but it lends credibility.
Central to Nutanix's success is its strong partnerships. Nutanix seems to have taken a strong position among HPE's HCI offerings, where Nutanix sits beside HPE's dHCI and SimpliVity lines. The two companies continue to expand their relationship into HPE’s strategic Greenlake offerings. Nutanix has a solid relationship with Lenovo, where the two partner for both HCI and desktop-as-a-service. You can also find Nutanix offerings mingled with both Azure and AWS offerings in the public cloud space. The company seems to be everywhere.
Rajiv himself admitted, “We cannot win by ourselves—partnerships are very critical for us.”
The analyst’s view
HCI is one of those technologies that has stretched the limits of its very definition. While it once was an appliance-like approach to delivering a set of blended capabilities, it has become shorthand for the pushbutton deployment of simple-to-manage software-defined infrastructure.
While HCI continues to exist, there is tremendous value in taking the core concepts of HCI into adjacent problem spaces, such as hybrid-cloud management and various related offerings. This is precisely what Nutanix is doing and where the company is finding success.
Rajiv's former employer and most dominant competitor, VMware, is also thinking along similar lines. VMware's Cloud Foundation looks a lot like what Nutanix is delivering. Both of these companies are fighting to become the operating system for the enterprise hybrid-cloud infrastructure. Both are finding great success. They’ve managed, together, to create a near-duopoly in this space.
Rajiv Ramaswami is proving to be a strong leader for Nutanix. The company's strategy is clear and coherent and is already delivering solid returns on investment. Having two competitors, as strong and visionary as Nutanix and VMware, playing in the same space will ultimately be very good for IT buyers. We are going to see rapid innovation from each in simple-to-manage and simple-to-deploy software-defined infrastructure.
As for Nutanix, only time will tell if its execution can deliver on the discipline required of its strategy. Rajiv has only been in the driver's seat for less than two quarters – we need a longer period to judge his progress. The early indications are all strong. I am bullish that Nutanix will continue its success and deliver the aggressive business goals it has put out there.