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Nutanix has been a poster child for hyper-converged infrastructure, where blade servers and storage are replaced by Nutanix hardware nodes.
Its first-quarter 2019 results show a shift in business towards a subscription-based model, with subscription revenue having grown by 104% year on year. The company expects to continue this shift towards subscription business, says CEO Dheeraj Pandey, driving a cloud-like, pay-as-you-grow business model.
As well as subscription pricing, the company recently introduced its own cloud service, Xi, which it says provides a more unified fabric across different cloud environments.
In a transcript of the earnings call for the company’s first-quarter 2019 results posted on the Seeking Alpha financial blogging site, Pandey was asked about how the company views the potential for multicloud management. “We put a layer of software that virtualised servers and storage equipment and we want to do the same across multiple cloud stacks themselves,” came his response.
What’s interesting is that while Nutanix is regarded as a leader in the hyper-convergence market, according to Gartner’s Magic Quadrant, Pandey de-emphasises the hardware side of the business. Instead, the company wants to be seen as the IT firm that makes it easy for its customers to deploy workloads anywhere – whether on-premise or in the public cloud.
“We never manufactured hardware, we simply took off-the-shelf servers,” he says. “Off-the-shelf servers can also be bought from Dell and HP.”
Instead, the company is emphasising its AOS and Prism platform and AHV virtualisation technology.
For Pandey, this shift in focus is because the server market has become commoditised. “What happened with commodity servers is that the move from Unix to x86 servers was strategic, which meant CIOs needed to refer to Gartner’s server Magic Quadrant, but by 2010 this Magic Quadrant had faded away,” he says.
According to Pandey, the same thing is happening in the virtualisation market. “Ten years ago, it was strategic. Now it is a means to an end rather than an end in itself,” he says.
In effect, virtualisation technology has become a commodity. VMware enabled administrators to drag and drop running works easily onto hardware. Pandey says Nutanix is not only doing this for compute, but also for storage, networks and security.
When asked how Nutanix is positioned from an IT strategy perspective, Pandey says: “The discussion starts with what a cloud means. Is it about simply renting or operational efficiencies? Or is it the virtues of a cloud-like pay-as-you-grow pricing, fractional consumption, continuous innovation and time to market? These are the virtues of a cloud,” he adds.
Nutanix positions itself as a company that can enable IT organisations to achieve these goals of the cloud, but in a way that allows them to run workloads on-premise or in the cloud, based on financial or regulatory constraints.
“There are compliance and regulation constraints, but also physical constraints, where many CIOs run distributed operations all around the world with highly complex networking,” he says.
“The cloud can surprise you – it has unpleasant ways of billing. Rather than being seen as a destination, the cloud should be seen as a way of life”
Dheeraj Pandey, Nutanix
But hidden cloud costs is the area Pandey wants to focus on. This is possibly the big opportunity for Nutanix. Rather than being seen as a way for CIOs to offload costly datacentre workloads, Pandey warns that the cloud can be costly too.
“The cloud can surprise you – it has unpleasant ways of billing,” he says. “Rather than being seen as a destination, the cloud should be seen as a way of life.”
In essence, the Nutanix story is about bringing the benefits of the cloud on-premise, to offer enterprise IT hybrid cloud computing.
According to analyst firm Gartner, 70% of IT infrastructure teams will be unable to support the business by 2025. Gartner also warns that only a quarter of IT infrastructure leaders will have teams with the right skills and working practices to support the requirements for IT operations needed within the next two to three years.
For Pandey, software and machine learning offers IT a way to offload mundane day-to-day IT administration tasks, having generalists run cloud operations rather than lots of specialists.
Rather than requiring a huge amount of technical know-how to deploy new storage and servers, Pandey says Nutanix offers the concept of “one-click infrastructure”. It aims to provide a way for IT departments to manage on-premise storage and servers in the same way that infrastructure as a service (IaaS) simplifies the provision of these IT resources.
According to Pandey, the one-click approach requires fewer low-level technical skills, which means the techies who previously managed networks, storage and servers can learn new skills that can add value to the business more directly.
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If this is the high-level pitch, Pandey regards legacy IT – in this case the three-tier IT architecture with separate storage and server equipment – as the company’s biggest competitor and opportunity.
“Large customers want to trust you,” he says.
Companies often start with a proof of concept, then they may deploy a few workloads. For Pandey, these represent the “crawl” and “walk” stages of a customer journey. Over time, he hopes the customer will adopt more and more of the services Nutanix has to offer, entering the “run” phase.
“We are on a crawl, walk journey with our customers. We would rather start small and slowly increase trust,” he says.