SimpliVity CEO Kempel On Huawei Deal, Courting HPE And How Solution Providers Can Manage The Transition To Hyper-Convergence

Leading The Charge

SimpliVity CEO Doron Kempel is continuing the charge to make his company's hyper-convergence software work with any hardware vendor's server, inking a deal with Huawei and continuing to court Hewlett Packard Enterprise.

At the same time, Kempel finds himself doing battle with hyper-convergence offerings from legacy hardware vendors and trying to put space between itself and other hyper-convergence startups like Nutanix.

SimpliVity Tuesday said it had struck a deal to offer its all-flash OmniStack hyper-convergence technology on Huawei's FusionServer line in a play for market share in Huawei's primary markets, including growing economies in China, India and South America. The move is in response to demand from customers, as well as partners, Kempel said. "Truth be told, we've also been requested by very large systems integrators and value-added resellers to get this done," Kempel said. "We just see great upside from that."

Still, Kempel said the transition to selling hyper-convergence can be challenging for solution providers who need to take business from competing solution providers in order to gain traction in the market.

"You've been selling a lot of products that you've been making money on and now the customers understand that there's a better way of doing that," Kempel said. "If you're a large VAR, you might be doing half-a-billion or a billion dollars in business a year and now the customers pay less."

What follows is an edited excerpt of Kempel's conversation with CRN.

Where has SimpliVity had the most sales traction lately, whether it's in particular verticals or in certain geographies?

I would say the significance is in data centers. That's one of the reasons that the systems we're going to qualify on Huawei are all-flash. The size of the deals is continuing to grow. The deals we won with Huawei in the last quarter are two of our five largest deals in the last quarter. We're talking about deals that are multimillion dollars and are all software. Hyper-convergence is happening. It's happening faster than people thought. And unlike others who think that hyper-convergence is for small companies, or just for VDI or remote offices, we see it taking place in some of the largest companies in the world. Very large customers that may have started with SimpliVity buying 10 systems or 12 systems now are making decisions to go all-out on SimpliVity and completely transform all their use cases and data centers to hyper-convergence.

What does it mean to 'go all-out on SimpliVity?'

One of the 50 largest companies in the world built three data centers, collapsing six down to three all on SimpliVity, no third-party storage of any type. No primary storage, no backup applications, no deduplication appliances. It's all on SimpliVity. The business is growing and moving in that particular direction. At the same time, we're seeing large customers also choosing SimpliVity for VDI. We won some very large deals, including a very large financial services company in New York that was already using one of our competitors, choosing SimpliVity because they did a bake-off and realized we were running much faster. It's driving further upmarket, larger accounts and across all use cases.

What proportion of your business is full data center consolidation?

I'd say 70 percent of our business is complete data center consolidation from midsize companies now all the way upmarket to global 50 companies.

How has the partner ecosystem responded as growth accelerates?

They like the meet-in-the-channel model because from their perspective they can choose whatever server they want. They can retire quota relative to the server vendor. They keep the server vendor happy. That gives us great flexibility. We can go into a deal with Lenovo, we've had tremendous growth with Lenovo, or we can go with Cisco, or with Dell or also now with Huawei. That allows the customer to find the server platform they like at the right price point with our software. So, VARs have increased their focus. We're seeing them bring more opportunities to us, and that's happening globally. And very importantly, some of the partners are among the largest in the world. For example, T-Systems is one of our partners. We have deals with T-Systems that are very important. T-Systems probably does over $10 billion a year, and sells Cisco, Huawei and sells other server vendors, also sells Lenovo. It gives us a lot of flexibility and I think the market is moving toward us.

How do you balance working with large vendors that also have their own hyper-convergence solutions?

What you'll notice is that there have been announcements by very large vendors about their hyper-convergence. We're not really seeing them succeed in the market. Otherwise, you wouldn't be getting so much traction from us, and I think Nutanix is doing well, from what I see.

Where are SimpliVity and Nutanix getting traction where legacy vendors are not?

We win 80 percent of deals against all competitors. In some cases it's 85 percent, sometimes it's 75 percent. There is no third party that we don't win against in at least 75 percent of all cases. It happens across all use cases. There really is no significance in terms of where we win in terms of other players. Most of our deals are data center consolidation where our promise is that we deliver on one hand cloud-like economics on whatever server you choose, and you get enterprise capability. We want to make sure these are customers that care about protection, about performance, care about global management and mobility of their data. If the customer meets those criteria, we typically win because of the capabilities of our product.

How has competition between SimpliVity and Nutanix changed?

That also applies to Nutanix. When we meet them, that is the situation, and we are now also winning against them in very large VDI deals. We continue winning against them in ROBO and in all data center applications or implementations where customers care about enterprise capability. When it comes to performance, data protection and data efficiency, I believe we're the only hyper-convergence vendor who tells you as an end user, you don't need to buy third-party backup. Fifty percent of our customers have turned off any third-party backup or archive application. Think about that. Zero. Everything is running on our technology. All the rest are using some third-party technology. Sometimes it's archive, because if you're in a market that requires compliance, then by regulatory requirement you need to use somebody else's technology to archive the data. If a customer cares about data protection, these are sophisticated customers. The only hyper-converged vendor that can offer all of that is SimpliVity.

Do you have any plans to work with HPE? It's the No. 1 server vendor in the world.

We have been courting HPE for quite some time, and my belief is that this will happen at some point in time, but it depends on them. We're happy to qualify them, as well, but right now we don't run on HPE.

The rumor is still out there that SimpliVity is an acquisition target for HPE.

That's been a rumor since 2014. Why weren't we acquired by them in 2014? Clearly, they are rumors.

What's the biggest challenge for channel partners as hyper-convergence continues to grow in importance?

They need to choose the right hyper-convergence player, and from their perspective, they need to manage this transition. If you go back to the global 50 companies I told you about, they went from six data centers fully equipped with the world's best blade servers, SAN switches, storage, filers, deduplication devices for backup. They went from all of that to just running on x86 from Cisco and SimpliVity software. So if you're a VAR, instead of selling 10 different products, you're selling SimpliVity with some server under VMware and 10 GigE connectivity. That's a transition you need to manage because on one hand you've been selling a lot of products that you've been making money on, and now the customers understand that there's a better way of doing that. If you're a large VAR, you might be doing half-a-billion or a billion dollars in business a year and now the customers pay less. You're going to make less money. You need to use this technology to go after the VARs that don't carry SimpliVity. The same thing happened with VMware 15 years ago.

So VARs that are on board with hyper-convergence need to be taking business from VARs that are hesitant or unprepared?

There's confusion early on, and some hesitation, but once people realize it's the right way to do business, whoever didn't offer that technology lost their position as a trusted adviser.

You can see this shift happening in the revenue and shipments numbers for servers. They've been down. How long do solution providers have to get their act together?

And it's the same thing for storage. We are at an inflection point. This is only going to accelerate. What we're going to see is larger, and larger adoption of hyper-convergence. We have partners who are all-out pushing it. Some of our best partners in the Americas are Insight, PC Connection is a great partner, FusionStorm, Presidio. We see a lot of partners leading with this technology and some of them have not necessarily been selling storage all these years, and some of them have been, but they just understand that this is what's going to happen. It's the reality.

And now they've got to sell both hyper-convergence and traditional systems.

Of course. It's not going to happen in one day, but it's happening very fast. Very large customers don't start with hyper-convergence as a big bang. They say, 'OK, this is the way things are going to work, let me choose the first two or three use cases.' They deploy them, and over time, it starts to bleed over into other use cases and it evolves in that fashion.

What kinds of investments do solution providers have to make in order to successfully make a push into hyper-convergence? Is it personnel? Is it training?

Very little training, because at the end of the day, you manage this technology from vCenter. We integrate into vCenter, we're in beta with Hyper-V, so you're going to be able to manage it from either your Microsoft management pane or from your VMware management pane. We have customers who manage the environment from UCS Director. You can plug into whatever you're comfortable with. If you're a channel partner, you don't really need to train people because if you understand server virtualization, then you understand SimpliVity. We don't force our own management pane. If you're a VAR and you sell VMware, you just sell us as part of that package and whatever server you're comfortable with. Getting familiarized with our technology is no big mystery. The channel just has to decide how diplomatically, after years of selling storage systems or blade servers, how do you now offer a new technology and that's something they're finding their way of doing.

SimpliVity's goal has been to make its software available on any server. Where does the partnership with Huawei help you?

SimpliVity is growing very fast. Much more software business, as you know we're in transition from selling appliances to selling with whatever servers the end users choose, and that increased approximately 40 percent quarter over quarter. There's a massive shift to that. SimpliVity invested significantly globally, and approximately 50 percent of our business comes from outside the United States. So it comes as no surprise that in many cases we've been asked by customers to run on Huawei servers. Huawei doesn't need me to give them compliments, but they are a very resourceful, entrepreneurial organization. It's very easy to do business with them, and we've already transacted with them. They've very strong in the BRICS contries – Brazil, Russia, India, China and South Africa – The parties, Huawei and us, reached each other on behalf of, or on the request of, our customers. It was very clear why this was very synergistic, and we agreed to integrate our software on their servers on behalf of end users and on behalf of VARs.

Do you see any traction for this partnership in North America?

Yes. I was surprised, but there is interest for it in North America. That has not been an area of focus for them, although they're very strong in telcos. One of the things they want to do is take us into those verticals. It's a good server. It's very competitively priced, and I'm sure that North America customers would benefit from that. The relationship emerged in EMEA and BRICS countries, but it's going to have global applicability.