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Protocol | Enterprise
Your guide to the future of enterprise computing, every Monday and Thursday.

Nutanix chief’s quest for independence

​Nutanix CEO Rajiv Ramaswami.

Welcome to Protocol | Enterprise, your comprehensive roundup of everything you need to know about the week in cloud and enterprise software. This Monday: Nutanix's future, Protocol's Braintrust weighs in on how to track DevOps success and IBM gets into process mining.

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The Big Story

What's ahead for Nutanix

Rajiv Ramaswami didn't take over Nutanix to sell it. But the challenge is now turning around the hybrid cloud company quick enough to appease investors like Bain Capital and Fidelity.

  • "I came here to build this company for the next generation," Ramaswami told Protocol. "My priority is not to go sell the company, my priority is to build."
  • Nutanix specializes in hyper-converged infrastructure, a foundation for the hybrid cloud. And that's what Ramaswami is betting the company's future on.
  • But back in 2019, research firm Trefis speculated that Google was interested in buying Nutanix. The companies didn't comment at the time.
  • Google was trying to build out its own cloud offering and needed a more robust hybrid product. Nutanix seemed like a perfect fit. Nothing panned out, but speculation that Nutanix could be an acquisition target remains.
  • "I have long believed this is an acquisition target," said Needham analyst Jack Andrews. "If they went in that direction there would be a number of interested suitors."

Ramaswami doesn't want Nutanix to just be independent in ownership. He wants the company to embody an independent mindset in everything it sells.

  • While companies like AWS, Microsoft, IBM and others are also all pivoting to hybrid cloud, Ramaswami believes Nutanix is one of only a few true independent vendors in the marketplace.
  • The big cloud providers have started to get into the hardware game with services like Azure Stack and AWS Outposts. But ultimately, Ramaswami says that still doesn't give customers any optionality and ultimately locks them in to one vendor.
  • Instead, Nutanix touts its ability to let users run their applications on the services of their choosing.
  • "We have the ability to offer unique value propositions that complement the value propositions being offered by the hyper-scalers. That is a recipe for becoming a strong independent company," Ramaswami said.

But Ramaswami has a lot of work ahead to make that happen. For one, Nutanix is in the midst of a transformation to a subscription sales model.

  • "It's a bit of a messy situation," Andrews said. "It's hard to really model this company financially and what it could look like when the dust settles."
  • Investors appear to agree; the share price is lower now than it was after Nutanix shares popped on their first day of trading in 2016.
  • The company, however, has some breathing room. Bain Capital injected $750 million into Nutanix in 2020.
  • It's also no stranger to product overhauls. Nutanix started as an appliance vendor, packaging both hardware and software together, before pivoting to software and SaaS.
  • Nutanix "is undervalued at this point. As we come out of this subscription journey, as we talk to investors about our growth and path to profitability, we see a significant opportunity to create more value for our shareholders," said Ramaswami.
  • Alongside that shift, it's also changing what it sells to customers by packaging up disparate products into one offering.
  • "What we want to do is to bring these products together in a cohesive product portfolio that is aligned to how customers are solving their problems," Ramaswami said.

Partners are going to be critical to Nutanix's future. Ramaswami plans to rely heavily on a broad range of them to grow the company beyond its current annual revenue of $1.3 billion.

  • Those include AWS, Microsoft Azure, Citrix, Palo Alto Networks and even Dell, which has a majority stake in key rival VMware (more on that in a second).
  • And Ramaswami wants more partnerships like existing ones with Oracle and MongoDB.
  • "We are focused on landing mission-critical workloads on the platform," he said. "We don't provide the databases themselves, but … we help our customers run those very efficiently on the Nutanix platform."

One cloud hanging over Ramaswami's efforts is a lawsuit from his former employer, which happens to be VMware.

  • The company filed a lawsuit in 2020 alleging Ramaswami held secret meetings with Nutanix while still being employed and privy to internal discussions at VMware.
  • Ramaswami declined to comment on the pending litigation.
  • The lawsuit isn't expected to succeed, according to legal experts, given California's prohibition on non-compete clauses.
  • Dell is spinning off its VMware stake, which will likely ease the path to a partnership.

Customers love Nutanix's products, according to industry analysts. But good products alone don't make a company successful. And while Ramaswami may be trying to position Nutanix as independent for the long haul, investors aren't going to wait around.

The Bain investment is a big vote of confidence in the business. But the hybrid cloud is hot. And for the companies that are likely interested in acquiring Nutanix, the price tag would be a rounding error on their balance sheets.

— Joe Williams

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This Week On Protocol

Checking progress on DevOps: It's all the rage within IT departments right now, but determining how successful the pivot to DevOps has been can be a challenge for enterprises. Protocol's Kevin McAllister polled our Braintrust to figure out how they measure progress.

Coming Up

April 19: IBM reports earnings.

April 20: Collision kicks off. Protocol's Joe Williams is doing a fireside chat with CrowdStrike CEO George Kurtz.

April 22: Intel reports earnings.

Around the Enterprise

A MESSAGE FROM HEWLETT PACKARD ENTERPRISE

Global lockdown orders and the ongoing pandemic have disrupted supply chains, underscoring the need for greater agility and resilience. On the season premiere of The Element Podcast, leading experts from MIT and Hewlett Packard Enterprise explore how companies are rapidly transforming their supply chains and adapting for a more dynamic and digital future.

Learn more

Thanks for reading — see you Thursday.

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