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Updated on Dec. 10, 2020
Nutanix named Rajiv Ramaswami as its CEO, bringing in an executive from its main competitor following a three-month search to replace founder Dheeraj Pandey.
Ramaswami's appointment Wednesday follows the surprise retirement of Pandey. The new Nutanix CEO had been at VMware since 2016, serving as COO of products and cloud services in his most recent job. In that role, Ramaswami co-managed VMware's business units that developed products, cloud services and cloud operations. He helped VMware move to a subscription and hybrid model, which is the direction Nutanix is moving.
VMware is Nutanix's biggest competitor in the hyper-converged infrastructure (HCI) and hybrid cloud market.
Ramaswami said he hopes to take Nutanix to the "next phase of its journey," which is moving from a hyper-converged leader to a hybrid cloud leader. Like his predecessor, he talks of HCI evolving from hyper-converged infrastructure to hybrid cloud infrastructure. He pointed out that while VMware is a larger company and goes beyond HCI, the two have a common strategy involving the cloud.
"When you think of HCI, hyper-convergence is the past, and hybrid cloud is the future," he said Thursday in an interview. "That's the journey Nutanix is on, and the market opportunity is big. It can create the next phase of growth. We're focused on helping customers with their journey to the cloud, and that's the same path VMware is on."
Naveen Chhabra, a Forrester Research senior analyst of infrastructure and operations, said Ramaswami's hiring makes sense because of the common strategy Nutanix shares with VMware.
"Look at the Nutanix product portfolio, and how they are evolving into different spaces and a different business model," Chhabra said. "It's very much along the lines of VMware. That makes someone who has already done that at VMware a strong candidate."
With its vSAN software, VMware followed Nutanix into HCI, while it copied VMware's approach of developing a software stack that can run on any x86 hardware. Nutanix also developed its AHV hypervisor to compete with VMware's vSphere ESXi, and is moving into a subscription licensing model.
Ramaswami will also serve as Nutanix president and sit on its board of directors. Before joining VMware, Ramaswami held senior executive positions at Broadcom, Cisco and Nortel, and began his IT career at IBM.
On Aug. 27, Pandey said he would step down when Nutanix found a replacement, citing a desire to spend more time with his family in the wake of the COVID-19 crisis. He had been Nutanix's CEO since its inception in 2009. His retirement came at the same time that Bain Capital invested $750 million in Nutanix and received two board seats. Pandey helped the search for his successor.
New Nutanix CEO could face financial challenges
Under Pandey's leadership, Nutanix helped define HCI, which combines storage, compute and virtualization in one system. HCI has grown into a multibillion-dollar market, dominated by Nutanix and its main rivals, Dell EMC and Dell-owned VMware.
Nutanix became a public company in 2016, and it grew revenue to $1.3 billion through its last fiscal year, marking its third straight year of more than $1 billion in revenue. However, the company continues to lose money. It lost $297 million, $621 million and $873 million over its last three fiscal years, and another $265 million in the first quarter of its current fiscal year that ended Oct. 31. Over its history, Nutanix has lost more than $2.75 billion.
Rajiv RamaswamiCEO, Nutanix
Ramaswami would not go into specifics for driving profitability but did not suggest Nutanix needs to cut its growth initiatives.
"It's about balancing out the growth with a drive toward long-term profitability," he said. "It's that blend. We talked about moving to a subscription model from perpetual model. We're well along the journey. We will be disciplined about spending, and over time that will drive operating leverage."
Evaluator Group senior analyst Eric Slack said he can see why Ramaswami would leave VMware to take the Nutanix CEO job, but he may face difficult financial decisions.
"Nutanix would be an interesting project for a CEO," he said. "There are a lot of raw materials to start with. They have an owner [Bain] with money, and Nutanix has lots of technology that works. But what are you going to say 'No' to? I assume they're going to pare the company down, so what stays and what goes?"
Forrester's Chhabra said he expects Ramaswami to focus on Nutanix's core HCI platform and a handful of other products and cut back on investments in other parts of its portfolio that may not sell as well.
"Nutanix has brilliant engineers who developed a very good portfolio," he said.
"Not all the products it developed are in same level as core HCI platform. One of the things I would like to see Rajiv take a stab at is to say, 'OK, these five products are important products in two years. The rest we will not necessarily discontinue, but cut investment in.' Nutanix needs that mindset."
During Nutanix's quarterly earnings call in late November, Pandey said several products outside the core HCI platform are gaining momentum, including Files storage, Flow microsegmentation, and DevOps tools Calm for applications and Era for databases. Slack also pointed to Nutanix Karbon Kubernetes orchestration tool as a key counter to VMware's Project Tanzu Kubernetes initiative.
Ramaswami identified Nutanix Clusters as a key piece of the Nutanix hybrid cloud strategy. Clusters enable the Nutanix HCI stack to run in AWS and Microsoft Azure.
"Nutanix Clusters can help our customers bridge into the public cloud and do so in a way that is more convenient and easier to use than going to a native public cloud," he said. "We can build on our foundation and extend that into the hybrid cloud through things like Nutanix clusters."
HCI 'now a necessity'
Slack said the HCI market is clearly established and will continue to grow because it is easier to manage than the traditional server-SAN model. "HCI used to be convenience, now it's a necessity," he said. "When we ask people, 'Where would you not use [HCI]?', they say 'Nowhere.'"
He said Evaluator Group's HCI survey of IT teams shows VMware vSAN the leading HCI product in adoption and under consideration, with Nutanix second followed by Cisco HyperFlex, Dell EMC VxRail and HPE SimpliVity.
"Nutanix has great mindshare," Slack said. "A lot of people like them."
The Forrester Wave for HCI issued last July lists Nutanix as the leader based on its "innovation, R&D investment, sales momentum, partnerships, and acquisition of new customers from all segments and geographies," according to Chhabra's report.
Pandey stayed on as CEO until Nutanix found a replacement but is expected to also give up his role as chairman next week. In an interview during Nutanix's virtual .Next user conference in September, Pandey said the board wanted someone who embraced a subscription model that public cloud providers use as its new CEO. He also said he would have gone to a subscription model earlier if he could do one thing different during his 11 years running Nutanix.
He said his replacement should be "someone with a good understanding of the business model and subscriptions and is extremely people-oriented."
During the November earnings call, Pandey said the company's "ambitious transition to a cloudlike subscription business model is bearing fruit. Well, there's more to do."