This was not the typical press briefing of the speaker at a podium with prepared remarks. Instead, Nutanix President and CEO Rajiv Ramaswami sat at a table with tech reporters in an open-ended back and forth at his company’s 2024 .NEXT event in Barcelona.
“We do a lot of things differently,” he said. “In some ways, many of them simpler. And we also have a lot more focus on the data side of the equation compared to VMware.”
Ramaswami went on to discuss what’s driving change in the market and fueling the increased attention that Nutanix is getting from customers, partners and industry analysts since Broadcom’s acquisition of VMware closed in November 2023. His comments were prescient: since this press briefing, Nutanix has moved up and to the right as a Leader in the 2024 Gartner Magic Quadrant for Distributed Hybrid Infrastructure. As the Gartner report shows, there is a growing need among customers for managing IT resources, applications and data across different IT infrastructures. Ramawami made clear that helping customers with these needs is a strategic focus area for Nutanix.
“We are investing and expanding our platform offerings,” he said. “We are investing in cloud native AOS for containers. I think as a company we are in a better place to evolve our customers to the next stage building and running modern applications on these platforms.”
In this Tech Barometer podcast segment, CEO Ramaswami discussed the implications of Broadcom's acquisition of VMware and how it presented an unexpected, and continuing, opportunity for Nutanix to help customers. The conversation touched on challenges and opportunities customers face transitioning from VMware to Nutanix.
“Our strategy is to grow, continue to drive innovation, and focus on building these long-term relationships with customers,” he said, contrasting Nutanix with Broadcom's strategy of acquiring and optimizing mature companies for profitability.
He talked about Nutanix's adaptability, shifting from hardware to software infrastructure, and its focus on becoming a platform for modern applications, which is increasingly essential for customers.
Edited transcript for readability:
Rajiv Ramaswami: We've been competing against VMware. Yeah, it's a good company. We competed some. We won some. We lost some. Obviously, you can't foresee what's going to happen. Could we have foreseen that Broadcom was going to acquire VMware? No, I don't think so. But now that it's happened, there is an unexpected opportunity. Our view is to continuously evolve as a company by investing in innovation and being where our customers need to be over time and not just stay still. And if you stay still at some point end up having to be optimized because there is no more growth left.
Jason Lopez: In this story, you're going to hear the voice of Nutanix CEO, Rajiv Ramaswami recorded in a conversation with journalists. This was not the typical press briefing of the speaker at a podium with prepared remarks, but rather he sat at a table with tech reporters in an open-ended back and forth. This is the Tech Barometer podcast. I'm Jason Lopez. The journalists led the discussion, which zoomed in on Nutanix's view of Broadcom’s acquisition of VMware.
Rajiv Ramaswami: They acquire companies that are fairly mature, that they have good market share, that have good products and fairly sticky ones, and then they do what they need to do to maximize the profitability of those companies over the next three years. And their model is one of continuous acquisition. Acquire, optimize, acquire, optimize, right? Because then that's the model. So you keep acquiring, you keep optimizing. So they've done well with that model so far. They've done very well for their shareholders.
Jason Lopez: Companies go through stages. Ramaswami pointed out such as an incubation period, then scaling, then maturity. He said VMware had arrived at that stage.
Rajiv Ramaswami: Their growth was slowing. They had kind of largely saturated their markets that they were playing in. vSphere had what, 80% plus share in the market? That's the stage. That's when you start thinking about optimization. You cannot grow anymore. So if you were to take us and you do the same squeezing what we got, 25,000 customers, we still have huge amount of opportunity to grow and gain share.
Jason Lopez: For comparison. Ramaswami explained that Nutanix wouldn't be a good target for an optimization strategy. It still has a high ceiling for growth, meaning it can essentially double its customer base.
Rajiv Ramaswami: That's what we are out to do. So we are still in the scale phase and we've told our investors, we are profitable, we are growing. So it's a different status.
Jason Lopez: One of the things Nutanix has been able to do and continues to do is to adapt to the market. The company started with a hardware focus and has shifted to software infrastructure,
Rajiv Ramaswami: But that's not where we want to be tomorrow. But if you look at the future, the future is around being a platform for modern applications. And that's why we bought D2iQ, for example. We are investing and expanding our platform offerings. We are investing in cloud native AOS for containers. I think as a company we are in a better place to evolve our customers to the next stage building and running modern applications on these platforms.
Jason Lopez: As the conversation continued, Ramaswami began talking about the realities of customers making the switch from VMware to Nutanix. The bottom line is the rise of VMware pricing.
Rajiv Ramaswami: The vast majority of VMware customers today are running on vSphere only, and those customers mostly are not perpetually (licensed). And so those customers are not being forced to buy just a subscription, but the full bundle. Customers have to buy the full VCF stack.
Jason Lopez: In addition to the issue of being locked into a subscription model with rising costs. There are other questions.
Rajiv Ramaswami: What's the level of innovation going to be? What's the level of support going to be like if the model is to double the ebitda, the profits within three years, which is what they've said publicly, what would happen there?
Jason Lopez: Another aspect of switching the VMware environment versus the Nutanix environment. An engineer who has worked with VMware tools for 20 years will have to relearn some new ways of doing things. But Ramaswami pointed out, Nutanix is built for adoption. Its processes are easier to learn.
Rajiv Ramaswami: It's not a huge learning curve, but it is not exactly the same. We do a lot of things differently. In some ways, many of them simpler, and we also have a lot more focus on the data side of the equation compared to VMware.
Jason Lopez: And finally, Ramaswami addressed the question of the VMware stack of the hypervisor connected to three-tier storage.
Rajiv Ramaswami: In the past when people chose Nutanix, they had to adopt hyperconverged (infrastructure or HCI). And a lot of VMware is not hyperconverged. They're hyperconverged, but the big chunk of their rest estate is really three-tier storage, right? Hypervisor connected, three-tier storage. And so that conversion, we were doing it at a certain pace in terms of converting that three-tier, right? HCI. That's how we grew as a company. That's what we did. And now we have an opportunity to go back in and also potentially just replace a hypervisor and get a faster entry. We have seen a huge amount of engagement increase in customers, so lots more customers concerned and upset and talking to us. Many of the customers actually signed multi-year deals with VMware before the acquisition closed. And so that gives them three to five years to do whatever they need to do. And so they're not in a rush to necessarily do anything at this point.
Yes, a lot of them are kicking the tires. They're testing our product, but to go from there to a sale and actual migration takes time. So they're not in a rush. The second factor is the hardware, right? At what point in time have they invested in hardware? When does it come for refresh? Because that's the time at which you can actually make the migration to hyper converge because it's an architectural choice. And the third point, I'll tell you, there is much more awareness of what would happen, but it depends on the country and where you're in. For example, I was in Japan recently, and a lot of Japanese customers were just hoping that everything would be fine because they believe in these long-term relationships and they believe and trust them. And now they've seen what's happening and now they're concerned. But it took them a year, and they did nothing. Right? And now they're starting to think about, okay, maybe I should have a plan B. So it takes time. Have we seen a big spike in our business? Immediate business as not yet? We've brought on investors that this is going to be a multi-year journey.
Jason Lopez: The core of Ramasswami's message is that Nutanix and VMware within Broadcom, though they compete in the same space, have different agendas. Nutanix is aimed at growth. Broadcom is aimed at billing an existing customer base.
Rajiv Ramaswami: That's their model. So they're actually going down a true and trusted strategy. Typically, private equity companies do this, but they're doing this in the public market and doing that very well, I should say, executing on their strategy. I just want to say that's not our strategy. I mean, our strategy is to grow, continue to drive innovation, and focus on building these long-term relationships with customers.
Jason Lopez: Rajiv Ramaswami is the CEO of Nutanix. This was recorded at the 2024 Next conference in Barcelona, Spain. This is the Tech Barometer podcast. I'm Jason Lopez. Thank you for listening. Tech Barometer is produced by The Forecast where you can find more podcasts, articles, and videos about the technology story and the people in tech. It's at the forecast by nutanix.com. That's The Forecast by Nutanix, all one word. Dot-com.
