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Nutanix cloud strategy aims at AWS, VMware

Nutanix is trying to pivot from a hyper-converged infrastructure leader to an enterprise cloud vendor, with VMware and Amazon Web Services as its role models.

After setting the early pace for the sprint to hyper-convergence, Nutanix has entered the longer race to help build...

Amazon Web Services-like clouds inside enterprise data centers.

Nutanix CEO Dheeraj Pandey told 2,500 attendees at Nutanix .NEXT last month the company's goal is to build another VMware or Amazon. Nutanix has already moved into VMware's virtualization turf with its own hypervisor, while VMware has moved into hyper-convergence with its VSAN software that competes with Nutanix. That has turned the formerly close partners into rivals.

Nutanix is still working with Amazon more than against it. It allows customers to move data off to Amazon Web Services (AWS) for backup or archiving. The Nutanix cloud strategy is to copy AWS features, such as self-service, application mobility and support for containers, to provide a familiar cloudlike user experience. Eventually, it will try to persuade customers to keep more data on the Nutanix cloud and move less to the public cloud.

"We would like to become an Amazon-like experience for the enterprise," said Sunil Potti, Nutanix's chief product and development officer. "To truly become an enterprise platform, why stop at virtualization?"

To pull off the change, Nutanix needs to broaden its use case well beyond the early hyper-convergence staples of virtual desktop infrastructure and remote offices. Now, it is going after critical enterprise applications.

Nutanix's new technology strategy involves making the virtualization layer invisible to users. Early Nutanix systems revolved around VMware hypervisors. Now, Nutanix seeks to enable seamless management and application mobility between VMware ESXi, Microsoft Hyper-V and the Nutanix Acropolis hypervisor.

To pull off the change, Nutanix needs to broaden its use case well beyond the early hyper-convergence staples of virtual desktop infrastructure and remote offices.

The other piece of the Nutanix cloud puzzle is to drive simplified management through Nutanix Prism, including self-service capabilities that make the public cloud appealing.

Nutanix has started down this path. This year, it has added Acropolis File Services (AFS) and Acropolis Block Services that allow customers to store data from physical servers onto Nutanix appliances. Nutanix's next release will support containers, and its short-term roadmap also includes one-click advanced monitoring and analytics, network visualization between physical and virtual networks, and nondisruptive site failover for Acropolis.

Pandey said Nutanix is working on adding "the next billion-dollar feature, like [VMware's] VMotion." That is, "to take applications running on bare metal to Nutanix in one click -- not just the servers, but data and applications." That would allow customers to move an application such as Microsoft SQL onto Nutanix without taking it offline.

Customers at .NEXT were onboard with the changes.

Vijay Luthra, global head of infrastructure engineering at Northern Trust Corp., based in Chicago, said his company's infrastructure is 100% built on hyper-convergence, and he is now looking for an "Amazon effect." During a CIO panel, Luthra said his goal is to "reduce costs and do things faster and more reliably. If you don't position yourself to replicate that in the data center, your career will be over."

In an interview earlier this year, Luthra said Northern Trust is looking to build next-generation private cloud applications that are cloud-native, container-oriented, and need scale-out characteristics and high throughput.

"Nutanix gives you cloud agility and ease of management, and also gives you performance," said Matt Day, IT manager of Langs Building Supplies in Australia. "There's no latency and a good user experience. Another reason we love Nutanix is, we're not tied to hypervisors. We can change between hypervisors."

John Mason, CIO of Bottomline Technologies Inc., based in Portsmouth, N.H., said Nutanix has always raised its level to meet any challenges.

"We were an early Nutanix customer, and we've been challenging their features and functions for some time," Mason said. "We always wanted more."

Lower price on the wish list

While Nutanix customers want more, they want to pay less. That means even happy Nutanix customers are unhappy about how much its hyper-converged appliances cost. Day, who uses a 12-node Nutanix cluster for all of his storage at Langs Building Supplies, considers himself a Nutanix fan. He praised the vendor's support, said he loves the simple management and he's impressed he can meet personally with CEO Pandey to discuss any issues with the product. But, he has one big complaint.

"Their pricing is ridiculous, let's be honest," Day said.

Day's main complaint is Nutanix charges hefty fees for support he rarely has to use. He would like to see more features in the base starter software version, rather than in the more expensive Pro and Ultimate editions.

You're spending hundreds of thousands of dollars in support, and there are features that I used to have that I don't have anymore because I have to pay for them.
Matt DayIT manager, Langs Building Supplies

"I think customers have a right to expect the portion of the support costs they're paying goes to R&D [research and development]," he said. "You're spending hundreds of thousands of dollars in support, and there are features that I used to have that I don't have anymore because I have to pay for them. I'm paying for you to develop products like AFS, but they're not in the [base] product. All new features are going into Ultimate or standalone SKUs, and that's not a nice thing for customers."

Day is not alone. Nutanix generally receives positive reviews on the Spiceworks IT community site, except for when it comes to price. "I've heard nothing but good things about Nutanix," one would-be customer posted. "Then, I got a quote." Another review referred to costs as Nutanix's Achilles' heel.

Nutanix intends to hold firm on price. "We have a premium product. I don't think we should apologize for that," said David Sangster, Nutanix vice president of operations. "We offer features such as simplicity, ease of use, one-click upgrades. We think we deserve a premium for that."

Can Nutanix execute the pivot?

The move from pure hyper-converged to enterprise cloud makes Nutanix worth watching carefully over the next year or so. It won't be easy to pull off. Nutanix is hardly the only storage vendor looking to provide AWS-type features on premises. And while it moves into Amazon's game, it also has a great deal of competitors coming after its hyper-converged business. EMC, Dell -- both a Nutanix partner and competitor -- Hewlett Packard Enterprise, Cisco and VMware have moved full speed into hyper-convergence. Startups SimpliVity, Scale Computing, Pivot3, Gridstore and Maxta are also looking to take share from Nutanix, often competing on price.

"Nutanix has a target on its back now," Eric Slack, senior analyst at Evaluator Group Inc., based in Boulder, Colo., said of Nutanix. "All the big companies are coming into the market. The big companies know they can't just keep pushing big iron, and they're getting into hyper-convergence."

Arun Taneja, consulting analyst of the Taneja Group Inc., in Hopkinton, Mass., said hyper-convergence laid the groundwork for what he calls Nutanix's grandiose vision of the next-generation data center.

"If you define hyper-convergence in terms of compute, storage and virtualization brought together, that was a stepping stone toward creating a full scale-out infrastructure," Taneja said. "If Nutanix had not taken that step, it wouldn't be where it is today."

Customer affinity

Nutanix won high marks from customers at .NEXT for providing easy-to-manage cloudlike storage. It also managed to turn a potential disaster into a positive. A hardware issue caused a recent version of Nutanix software to lock up, yet several customers at the conference praised Nutanix for the way it handled the situation.

"We went live right at the point when there were issues," said James Eason CIO-IT at Eastern Radiologists Inc., based in Greenville, N.C., who became a Nutanix customer in April. "We didn't experience lock-up, but guys doing the build work said 'What's going on here?' because it wasn't as fast as expected. But Nutanix came in and got it fixed. They didn't say, 'Geez, we don't know what it is.' They kept attacking it, working on it."

Nutanix cloud is key to going public

After pulling in $312 million of venture funding, Nutanix plans to fuel future growth by becoming a public company. It filed for its initial public offering (IPO) in December, only to find it delayed by market conditions that are unfriendly to IPOs. Nutanix has twice filed extensions for its IPO, and secured a $75 million loan from banker Goldman Sachs while waiting. In its filing with the Securities and Exchange Commission, Nutanix claimed, "We provide a leading, next-generation enterprise cloud platform that converges traditional silos of server, virtualization and storage into one integrated solution and can also connect to public cloud services."

Nutanix has grown revenue impressively over its past two quarters, while racking up significant losses. Its $140.7 million in revenue for the first quarter of this year more than doubled from the same period in 2015. But it is still shows no signs of reaching profitability. Nutanix has lost $392 million since its start, including $46.8 million for the first quarter this year -- its highest loss in a single quarter to go with its record revenue. It will cost a lot of money to become the next VMware or Amazon, while holding off large vendors in hyper-convergence, so Nutanix will have to keep spending heavily on sales and marketing and research and development.

CEO Pandey is aware of the challenge.

"There's still a little incompleteness and fragility that this could all go away if we lose the mentality that brought us here," he said.

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What benefits do you see in using hyper-converged appliances like Nutanix's as building blocks for a private or hybrid cloud?
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This kind of former partners turned competitors is becoming increasingly common. It’s interesting to see how these relationships unfold because they still need to maintain a degree of cooperation to help drive the evolution of their solutions.
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