The hyper-converged infrastructure market grew up in 2016.
At the start of 2016, hyper-converged infrastructure (HCI) products were mainly sold by startups, such as Nutanix and SimpliVity; larger vendors were just testing the waters. During the year, Nutanix became a public company, following the largest -- although often delayed -- technology initial public offering of 2016. Virtualization giant VMware made its vSAN HCI software ready for the enterprise. Server vendors Dell EMC, Cisco and Lenovo all set out a well-defined HCI strategy, and Hewlett Packard Enterprise at least acknowledged the need for a strong hyper-converged platform.
Meanwhile, the remaining startups continued to tweak their products to remain viable.
Here is a look at the top HCI developments of 2016, and where the hyper-converged players stand entering 2017.
Nutanix remains at the center of the HCI market, as it tries to use the technology as a springboard to become an enterprise cloud provider in competition with Amazon Web Services.
Nutanix waited nine months to complete its IPO, but Wall Street gave it a rousing reception when it did. Nutanix grew revenues an impressive 125% to $166.8 million in its first quarter as a public company, but losses continued to mount to the tune of $162.2 million. We can expect more of the same rapid sales growth and continued losses in 2017, as the HCI market expands and becomes more competitive.
Nutanix's relationship with server vendors bears close watching in 2017. It both partners and competes with Dell EMC, and its OEM relationship with Lenovo is gathering momentum. Nutanix is also going after Cisco Unified Computing System (UCS) customers through a partnership with Cisco resellers.
Look for Nutanix to continue to add automation, networking and security to its HCI appliances. We can also expect it to implement technology it picked up in the 2016 acquisitions of flash and RAM caching software startup PernixData and DevOps automation vendor Calm.io.
Dell EMC aims to sell a lot of hyper-converged products built on PowerEdge servers in 2017. The big question is whether its main product is the VMware vSAN-driven VxRail that EMC owned before the merger, or the XC Series that incorporates Nutanix software through an OEM deal Dell signed in 2014 and extended in 2016.
EMC executives painted a bull's eye on Nutanix in the months leading up to the Dell merger, setting a 2017 goal of surpassing it as the No. 1 HCI vendor. After the merger, Dell EMC said it would offer customers the option of buying VxRail or XC Series. In 2017, we'll find out which product Dell EMC customers prefer.
Along with its parent company EMC, VMware became part of Dell Technologies in 2016. Its HCI software application also underwent changes in the year. It is now called vSAN, rather than Virtual SAN, or VSAN -- but more importantly, VMware made two major vSAN releases in 2016. It added data deduplication, erasure coding, quality of service and other features in vSAN 6.2 that its hyper-converged rivals already had in their products.
In vSAN 6.5, VMware added features for remote offices and licensing options for all-flash nodes. Look for encryption in 2017. VMware also scrapped its EVO:RAIL OEM program that never got off the ground with hardware partners. With the changes, VMware reported a sharp increase in vSAN adoption. It counted 5,500 licensed vSAN customers by the end of September 2016, which put it ahead of Nutanix in customers, but not revenue.
Cisco brought out its first branded hyper-converged product in 2016. Cisco HyperFlex combines its UCS servers with file-system software from OEM partner Springpath. The networking giant has other hyper-converged ties, too. Cisco still sells UCS bundles with vSAN and SimpliVity software, and Nutanix has a deal with Cisco partners to put its software on UCS. Cisco is also a strategic investor in hyper-converged software startup Stratoscale.
Lenovo plays in hyper-convergence through partnerships -- most notably, its OEM deal with Nutanix that powers the Lenovo ThinkAgile HX appliances. Lenovo and Nutanix expect 2017 to be a launching-pad year for the product. For Nutanix, Lenovo could serve as an insurance policy if the Dell EMC relationship goes bad. Lenovo distributors also package hyper-converged software from SimpliVity, Pivot3 and StorMagic on Lenovo hardware.
Hewlett Packard Enterprise
HPE CEO Meg Whitman laid down a challenge to Nutanix in early 2016, but none of her company's five hyper-converged products have gained much traction. HPE supports VMware and Microsoft Hyper-V software in its ConvergedSystem product family, but its lack of success has raised speculation that HPE will acquire a hyper-converged vendor. HPE-SimpliVity rumors have surfaced off and on for several years. If HPE is to pull the trigger on a hyper-converged acquisition, it should happen in 2017.
The coming year will be make-or-break time for SimpliVity. The vendor started shipping its OmniCube platform about a year after Nutanix came out, and it has never caught up from a revenue standpoint. Now that Nutanix is flush with its IPO money and the larger server vendors in the game, SimpliVity faces major challenges in 2017.
CEO Doron Kempel said SimpliVity is looking for its own IPO in 2017, but it will have to convince Wall Street it has the goods to meet those challenges by continuing to double its revenue year over year. SimpliVity also makes a tempting acquisition target for a large vendor looking to become a major player in hyper-convergence; if not HPE, then maybe NetApp or IBM.
SimpliVity isn't the only private hyper-converged vendor seeking to follow Nutanix public or become an acquisition target. Pivot3 will try and build on an active 2016, which included an acquisition of NexGen Storage. Pivot3 is still integrating NexGen's quality of service into Pivot3 vSTAC hyper-converged appliances and making inroads with SMB and remote office customers. Scale Computing sees a path to profitability by dominating the SMB hyper-converged space, and software-only vendors Stratoscale, Atlantis Computing and Maxxta might be good partners for server-only vendors.
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