VMware CEO: Nutanix HCI Has ‘Reached The End Of Their Strategy’

‘We respect Nutanix as a competitor, they helped create the category, but now I’d say we have a better product, a better strategy and a much better vision of where that’s going,’ says VMware CEO Pat Geslinger in an interview with CRN.

VMware CEO Pat Gelsinger is questioning where hyper-converged infrastructure rival Nutanix can go from here.

“I think Nutanix has sort of reached the end of their strategy. Where do they go from here?” said Gelsinger in an interview with CRN. “With their offerings, [Nutanix’s] ability to scale further from where they are is a challenge. I think our scale and capacity is almost unlimited [in] where we’re going from where we already are. ... We’ve been building on our position with VxRail with vSAN. We respect Nutanix as a competitor, they helped create the category, but now I’d say we have a better product, a better strategy and a much better vision of where that’s going.”

Gelsinger’s comments to CRN come one day after IDC released first-quarter 2019 hyper-converged infrastructure market-share results that showed Dell Technologies, which develops and sells HCI with VMware, gaining significant market share over Nutanix.

[Related: VMware’s Pat Gelsinger On ‘All-In’ Container Bet And HPE ‘Commitment’]

In a statement to CRN regarding Gelsinger’s comments, Nutanix CEO Dheeraj Pandey said he’s “extremely confident” in his company’s strategy.

“[Our strategy] is what drove the creation of the HCI market and has inspired ‘good enough’ competitive responses. Crucially, though, these companies are missing the significant shift we’re taking toward building a software and subscription business,” said Pandey. “Two years from now, we’ll be very glad we made these hard transitions sooner, while others lean in to their legacy and face the pain of having waited. I understand Pat’s competitive spirit and attempt to kick us in the midst of this transition, but this is a long-term journey that won’t be defined by a quarterly market-share report. With the best product, a defined strategy and an enthusiastic customer base, we are playing the long game. I like our chances.”

According to first-quarter 2019 data from IDC, Dell generated $587 million in hyper-converged revenue, up 64 percent year over year. Dell Technologies captured 32.3 percent global market share, up from 28.8 percent in first-quarter 2018. Nutanix placed second in worldwide market share with HCI sales of $256 million, up 2 percent year over year. Due to Nutanix’s relative weak sales growth—the hyper-converged market overall grew 47 percent year over year—the company’s market share dropped significantly from 20.2 percent share in first-quarter 2018 to 14 percent in first-quarter 2019.

Geslinger said VMware and Dell have been working on their joint HCI strategy for years, which has culminated in worldwide market-share dominance. VMware’s CEO said his company’s strategy around cloud-connected data centers at scale, developer-friendly technology, VMware Cloud Foundation on VxRail strategy, and Dell Technologies’ sales force makes for a powerful story.

“You take what’s one of the best-known sales forces in the industry—Dell EMC—that’s an aggressive, capable sales force. If you give them a mediocre product, they do well. If you give them a great product, they just kill it,” said Gelsinger. “That’s the phase that we’re in. Our engineering combined with Dell’s scale and hardware, that combination is really gaining momentum.”

In terms of worldwide hyper-converged systems based on the owner of HCI software, VMware was the market leader with 41.1 percent share in the first quarter of 2019, up from 36.3 percent year over year, according to IDC. Nutanix placed second at 28.9 percent share, down from 32.2 percent market share in first-quarter 2018.

One CTO from a solution provider that sells both Dell Technologies and Nutanix, including Dell and Nutanix’s joint XC Series, said the competition between the two is heating up this year.

“Our Dell reps used to push Dell-Nutanix more than they do now. Now they want to us sell more Dell-VMware,” said the CTO, who did not wish to be identified. “We are still going to sell Nutanix for sure because we love their product, but Dell is definitely running a little ahead of [Nutanix] right now in the market. … It’s going to be interesting to see [what] Nutanix sales will look like over the next three or four quarters.”

San Jose, Calif.-based Nutanix recently reported flat third fiscal quarter revenue year over year of $287 million, which sent Nutanix stock plummeting. Pandey told CRN at the time that the weak quarter was mainly due to the company’s transition from hardware to a software-only, subscription-based company.

“We decided to go through the transformation because when we come out of this on the other side, we’ll be a company that can call itself a true cloud operating system software company where you can have both on-premise and off-premise in subscription,” said Pandey, adding that he wasn’t worried about his company’s future. “Our transition to subscription is ahead of schedule. Our field execution is improving with lead generation and pipeline build and improving sales hiring.”