Nutanix Rajiv Ramaswami On His First Year As CEO

Nutanix. Rajiv Ramaswami, President, and CEO NUTANIX

Nutanix was founded in 2009 and shipped its first product in 2011. Moor Insights and Strategy has been researching the company since around 2016, writing several technical analyses and articles

The company believed that a layer of intelligent software on top of relatively inexpensive commodity servers could provide the same operational resiliency and data redundancy as more expensive high availability servers. Initially, Nutanix saw the opportunity in traditional storage arrays, developing software to combine local storage across several servers resulting in a solution that looked like a conventional pool of shared storage. The result was the same availability and similar performance to traditional storage arrays, but without the complexity of storage arrays or storage area networks. 

Combining the Nutanix AOS Distributed Storage virtual servers established the hyper-converged infrastructure (HCI) market - a fabric of servers and storage integrated, easy to use, and less expensive. 

It has not always been smooth sailing for Nutanix, from shipping an appliance as a complete hardware and software stack to discontinuing appliances in favor of software sales on standard OEM configurations. And to now switching from perpetual software licensing to software subscriptions.

A year ago, Rajiv Ramaswami was appointed President and CEO of Nutanix. I had the chance to speak with Ramaswami to review his first year and hear his vision for the future of Nutanix. 

The second innings for Nutanix

Rajiv characterized 2021 as an “eventful year" and the beginning of a second innings for Nutanix. For Rajiv, I'm pretty sure the analogy is cricket rather than baseball! Nutanix was a pioneer in the HCI space with a great platform, well-liked by customers in the first innings. The second innings will be a period of growth and profitability built around four key priorities to become the de facto hybrid multi-cloud company.

Priority 1: Become a software subscription company

As I mentioned, Nutanix has transitioned from selling appliances to selling software to now well on the way to total subscriptions. There is a growing customer desire to subscribe to more services and move away from perpetual licensing models. Adobe and Autodesk are examples of companies showing that the shift has changed the customer relationship to be less transactional, more service-oriented, and more profitable with predictable quarterly revenues.

Nutanix, as an evolving subscription company, has yet to be fully recognized by investors as it trades at a much lower valuation than similar peers.  

Priority 2: Simplify the product portfolio

As a former product guy, I can relate to why this priority was high on Rajiv's list. Rajiv noted, "we had over 20 individual products…. and that's very hard for sellers to sell and customers to buy and deploy”. Confusing product portfolios are nothing new. Many software companies, large and small, fall into this trap.

This past year, Rajiv has made progress in aligning individual products into solutions packages. The goal is to stop selling point products. For example, Nutanix will no longer sell networking as a standalone product. Networking will be part of the cloud infrastructure stack. Similarly, when it comes to management, operations, and automation, it will be sold as a package rather than trying to sell every piece separately.

Priority 3: Expand partner relationships

There is much competition in the hybrid cloud world. You can't swing a cat without hitting somebody who's trying to provide a solution, from infrastructure companies like HPE to software giants like VMware. Partnering in this space requires a high level of finesse. Rajiv is reportedly an avid bridge player, a skill that may have come in handy this year.  

This year Rajiv has expanded partner relationships with several companies, including HPECitrix, and Red Hat

Priority 4: Continue top-line growth

Nutanix is growing annual contract value (ACV) billing - the metric that shows how much a customer contract is worth by averaging and normalizing its value over one year – by 33% this past quarter, the highest growth rate in over two and a half years.

Revenues for the first quarter fiscal 2022 were $379 million, a 20%

increase year over year. And the goal is to achieve sustainable free cash flow by the end of calendar 2022 and operating income positive with two quarters after that. 

Nutanix beat and raised estimates every quarter for the last four quarters, and clearly, that needs to continue. Rajiv also noted that an essential element of continued growth is to “continue to build our talent base becoming more diverse across everything, across locations, across gender, and different perspectives."

To be the hybrid multi-cloud company

Nutanix wants to be a hybrid multi-cloud platform company. 

The company started by making infrastructure invisible. And for the first ten years, Nutanix did just that, breaking the silos across compute, storage, and the network with HCI.

That vision has now morphed to “making clouds invisible." Rajiv noted, " We see the same opportunity in the cloud. And that's a natural extension of what we already do. We're essentially building a hybrid multi-cloud platform while providing flexibility and choice at every layer of the stack."

The focus is on maintaining simplicity and delivering data across multiple cloud providers. There is still much growth in the core HCI market, but workloads have now expanded, and now Nutanix can run any virtualized workload such as ERP, database, security, and modern cloud-native workloads. The direction now is to extend the platform into the public cloud, onto multiple public clouds as a continuum, and then very selectively focus on a set of services above the infrastructure layer. 

Today, the big bet for Nutanix is around database as a service (DaaS). The idea is a service that enables customers to set up, operate and scale databases without the need for setting up physical hardware, installing software, or configuring for performance. All of the administrative tasks and maintenance are taken care of by the service provider so that all the user or application owner needs to do is use and access the database.

Wrapping up

It is the first time I have spoken with Rajiv, which is surprising since our careersfollowed similar trajectories across dot com startups, systems, and chip companies. I found him to be very pragmatic and focused on very realistic goals. After only a year under Rajiv's leadership, Nutanix has scaled its product portfolio, partnerships, and customers, and its path to profitability is on track for the second half of 2022.

Rajiv has no illusions about being a “smaller web player in the land of giants," and success can only come from clarity on focus rather than trying to “boil the ocean." A large part of "focus" is knowing what you will not do, so I posed that question to Rajiv. Rajiv responded by giving two examples. Nutanix had an ambitious program to become a full-stack provider with Kubernetes. Nutanix Karbon is an enterprise-grade Kubernetes Certified distribution that integrates seamlessly with the entire Nutanix cloud-native stack. Nutanix provides a Kubernetes distribution but now chooses to partner for all other aspects such as management, backup, and observability.

A second example is the successful Xi Leap Disaster Recovery Service. Nutanix was on a quest to build many data centers worldwide to support the service. Although customers love the service, Nutanix cannot operate data centers at scale. The decision was made to limit the number of data centers and use a public cloud. 

In the final minutes of the call, I had a chance to get to know Rajiv beyond the Twitter description of “avid reader, tennis and bridge fan." I discovered a passion for education, particularly a charity he is personally involved with that had built over fifty schools in rural villages and towns in India - the hard work of actually building schools, getting them into operation with support from local governments. The charity is called One School at a Time which is all volunteer-driven, and Rajiv’s a passion outside of work.

I look forward to discussing Rajiv’s report card in 2022.

Note: Moor Insights & Strategy writers and editors may have contributed to this article. 

Patrick Moorhead

Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.