From the SiliconANGLE Media Office in Boston, Massachusetts, it's theCube. (techno music) Now here's your host, Dave Vellante. Hi everybody, this is Dave Vellante and welcome to this special Cube Insights, powered by ETR. We've been running these Breaking Analysis Segments and today we're going to talk about some spending data that shows that there's continued interest in hyperconverged infrastructure. So we've been running these segments over the last several weeks with our partner ETR. They've got a database of about 4,500 IT Practitioners and CIOs. They go out quarterly and ask spending intentions. So we've been sharing that, along with our opinions. These are completely independent segments. I want to disclose that a number of the companies that we're talking about today: Nutanix, VMware, Dell EMC, Cisco, HPE. They sponsor theCube, but they have absolutely no input into editorial. They don't affect our opinion in any way, shape or form. So let's get into it. I'm here with Stu Miniman. Stu is an expert in this field. He's covered the space. Stu, let's look at some of the fundamentals. What do people need to know... Alex, if ya put up the slide, Stu, maybe you could talk to it. Yeah. Dave, thanks. I've been watching you have some fun with this. I enjoyed swimming in some of the data here and as you know, Dave, we've been watching since before hyperconverged infrastructure, or HCI, was a term that everybody talked about. We've been looking at how these hyperscale trends are going to impact the Enterprise. We put out our server SAN research years and years ago, so we know all these companies really well. And despite the latest AI and cloud and everything, the data shows, HCI, the simplification of the data center, building out what we would call True Private Cloud is important today. So right, we wanted to know when you look at the data, first of all, how are the vendors doing? Who are the leaders in this space here? There were a whole number of startups that came in this space. When we first analyzed the market it was companies like Microsoft and VMware that owned the operating system we thought would be hugely important. If you look in the big names this environment: Dell partnered with everyone, of course they bought Dell, bought EMC, which included a stake in VMware. What's that relationship with Nutanix? How is that shaping the market? As well as how is cloud impacting things? Both from a spending standpoint, has cloud sucked away revenue from HCI as that specter has overhung everybody in the IT space? And also, how does HCI fit into multicloud and how does that fit? Okay, great. So thanks for that setup, Stu, now let's get into some of the data. Alex, if you bring up the slide, the next slide. This is spending intentions for Nutanix, VMware and some other vendors. I'll go through that. But it's basically showing Nutanix and VMware are fighting it out. You know they're in this internecine battle and in social, and (chuckles) there's a war goin' on, because there's big money to be made here. So for those of you who are familiar with these segments, this is data from Enterprise Technology Research, from their July 2019 Spending Intentions Survey. So they're asking about spending intentions for the second half of 2019. The end of the survey, out of the 4,500 people in the panel, 1,068 responded to this survey. So on the left hand side you see the vendors: Nutanix, VMware with vSAN, Dell EMC with VxRail, specifically. Then SimpliVity, and then Springpath, or Cisco. So what the chart shows is what we call, Net Score. And net score is calculated by taking the red, on the bar, which is, we're going to leave the platform, that's the dark red. The lighter red, which is, we're going to spend less in the second half. The gray, which their spending's going to be flat. The dark green, or the evergreen, which says, we're going to increase spending. And the lime green, which I'm going to add to the platform. You take the green, minus the red, you get net score. Higher the net score, the better. You can see, Nutanix and VMware with vSAN are leading the pack. And then we'll go through that. But then you see, Shared Accounts. That's the number of indications for spending that they received out of those 1068. So Stu, what is this data telling you? So first of all, Dave, it confirmed kind of the general market share numbers that we hear out there. The vendors that track that on quarterly. VMware has the most customers, has the largest revenue, and their largest partner for that, of course, is Dell. VMware and Dell go to market, joint product development, joint engineering, joint go to market and it's the biggest piece of vSAN, so that's where we specifically wanted to look at the VxRail. And vSAN and VxRail, doing very well. They're adding new customers; was interesting to me that you saw VxRail kind of ramping up a little more on the, attracting new companies, but also looked to be losing some on the tail end of the dark red. As opposed to vSAN in general, is a little bit more stable. We know how many thousands of customers they have out there, and Vmware's a software story as opposed to VxRail is that full appliance. Nutanix is the second horse in this two-horse race that we're really talking about here, from HCI. There's some discussion in the marketplace after two quarters being down, is Nutanix showing weakness? What's happening there? The most recent quarter announcement was that Nutanix is doing well, seems to... They had a little bit of change as they're going through their move to a software model and sorting things out with sales and marketing in their channel. The data here shows that the second half of the year looks good for Nutanix. So to some of the questions I asked in the first slide, Dave, Nutanix and VMware, of course the clear leaders in this space. SimpliVity, which was of course bought be HP, Springpath which is the hyperflex from Cisco, are far behind those two out there. And it seems that even though Dell and VMware are fighting, very much with Nutanix, that is not heavily dampening Nutanix's from the respondents in this survey. Okay, and just a word on the data, so you see 184 shared accounts for Nutanix, 174 for VMware and down the line. Only 42 for SimpliVity and only 18 for Springpath, and Cisco. It's an indication of the size of the install base, obviously the more shared accounts, the more mentions, the larger the install base. Again, they're statistically significant; ETR does a very good job of that. Let's look Stu, at... Oh, actually I want to make another point here. So how are these net scores? Well let's put 'em in context. The hottest net scores we've seen recently are: Snowflake, and UiPath, with 80% plus, net score. Okay, so that's really, they're off the charts, they're growing like crazy. We saw Salesforce with 55%, so, and Workday sort of in there as well. Companies that are growing share. So SAP in the 30% range, and so you see the Dell EMC, VxRail, that's kind of holding serve. It's not like, dramatically gaining share, but they're growing a little bit and then-- And I think it's a lot, Dave, it shows to the maturity of this market. HCI is not new, both Nutanix and VMware have thousands of customers, specifically with V's then we're talking VMware. So it was more, when I saw some of your charts, Microsoft has a similar net score. Right Well liked, good install based, still growing and the like. And brings in the discussion of when we did some cross section of the analysis looking at cloud companies and how does this impact their public cloud spend; is this detracting if this customer's also doing public cloud? And the long and the short of it is VMware and Nutanix are pretty much the same if not actually a little bit better when you talk about a customer that's looking at their overall cloud spend. So to me that really signals that both VMware and Nutanix are doing a good job into how their solution fits into the customer's overall hybrid cloud strategy. All right, let's take a look at the next slide, which talks to time series. So this is hyperconverged infrastructure spending intentions again, for the second half of 2019, over time. So the July '19 Survey you can see is the most recent one. We go all the way back to January '17 and you can see Nutanix on the top, VMware or vSAN on the bottom. We just selected those two. We're just repeating the net score and the shared accounts. And you can see these things tend to bounce around a little bit. You can see Nutanix maintains a lead, but the market's startin' to converge. These two companies are coming together. We hear a lot about vSAN doing very well, it's kind of held on. You can see a slight downward pressure in July, in the July survey. It's unclear what that means. That could be an indication of just some uncertainty in the marketplace. Some economic macro concerns. Tariffs, potential headwinds there, so there could be some uncertainty there. But what do you takeaway from this slide, Stu? Yeah, first of all right. As you show, Dave, VMware is a bit more steady, Nutanix gone up for bit and come down. Both of them stayed relatively stable. Somewhere between kind of the 45 and 55 lately. A little bit, if you look at the overall trend, Nutanix is down. VMware could surpass them from the net score in the future, if this trend holds. But both of them doing quite well. When you looked at all the other vendors in there, of course the scale is just showing 40-70%, if you put all the others, which are down much lower, you can see once again, that kind of the clear leadership. These two companies, just strong lead. Does not look like there any challengers in this space that are ready to be a clear number three yet, in the market. But Nutanix at one point had no competition. Yeah. Okay, now vSAN comes in and of course-- Oh no, absolutely. So no, SimpliVity and Scale Computing, and there were a whole host of startups. There's all the brand new startups in the space. Everything from little companies like Diamante, Pivot3, who was around doing this before it came. So there's always been a lot there, but Nutanix is the one that separated from the pack. The only one in this space that's gone IPO. But VMware's there, Microsoft won that, they rebranded their Azure Stack HCI for what they put in the data center last year. So expect Microsoft partnering with all of the big server manufacturers to push farther into HCI, but really has not directly impacted this market too much, just yet. But there's definitely been some pressure on Nutanix from an earning standpoint, the stock's been hit. You've had some executive departures. There's some rumors about acquisition with Google. Your thoughts on-- Yeah, definitely. So John Furrier just had Dheeraj Pandey, the CEO of Nutanix, in our Palo Alto studio, leading up to the Copenhagen show for Nutanix that I will be at. Sure. Sunil Potti who was basically the number two at Nutanix, is now working for Thomas Kurian, TK, over at Google Cloud. My indication from what I hear, he is not over there to help broker a deal. Sunil had a great run at Nutanix, there was a clean break there, but there is a mostly new executive team at Nutanix. Now a couple of years past the IPO and the team at Nutanix, they have their platform. The have a bunch of SaaS offerings that they're doing there. Do they have a relationship with Google? Absolutely! They had Diane Greene at one of their events a couple of years ago. They did joint engineering. But I actually saw that engineering effort cool off a little bit in the last year or so since the new regime came on in Google Cloud. So does Nutanix have a lot of Enterprise accounts and know how to work with the Enterprise and could that be a boon to Google? Absolutely! But the personnel of a Nutanix executive over at Google, and Brian Stevens who's the CTO of Google Cloud being on the Board of Nutanix? I do not think that that is telegraphing that an acquisition is going to happen. It could. We see lots of big acquisitions. Nine or 10 billion dollars from Nutanix could be interesting for Nutanix and help them get in a lot of places and help Google. But Dave, I goin' on record say, I don't think it's going to happen. I don't think Cisco is going to buy Nutanix. Infrastructure's not the real push for Chuck Robbins and that team. And at the Google Cloud event, Dave, that we were at, we saw Sanjay Poonen from VMware up on stage touting how deeply VMware was going to partner. So both VMware and Nutanix are partnering with all of the clouds. VMware of course has a very deep relationship with VMware. They're going deeper with Google, they are even partnering with the old enemy of Microsoft, so I would give VMware definitely has a deeper and more public relationship with all the public cloud providers but Nutanix is also partnering and expanding their portfolio to give themselves good growth beyond just the core HCI market. HP's another one. So Nutanix and HPE are workin' together. Kind of the enemy of my enemy is my friend. Nutanix was not at VMworld this year; they're kind of booted out. So they belly up to HP. Yeah, HP loves having, they have their, "As a service offerings," and Nutanix is one of those as well as Nutanix can sell the HP. So as the, right, the Dell relationship is likely going to die down over time, as Michael Dell on the team, want to sell more Dell hardware with VMware software. HPE is another... And they also partner with Lenovo on the Nutanix side. All right, Stu, bring it home. What are the key takeaways on this cube Insights. Okay, so HCI, who is a two-horse race right now. There are interesting companies to look at beyond the two, but if you want to understand who the leaders are in the space it is: VMware, especially with their VxRail and Nutanix, are the two leaders in that space. Really looking and understanding how they're expanding into multicloud and hybrid cloud solutions. VMware very much with their VCF offering, which packages vSAN to go into the VMware cloud offerings. And Nutanix with an interesting strategy, both with how they really spread some of their services like what they're doing with Xi Cloud, as well as some SaaS offerings, which some of them really have a disconnect. Not in a bad way, but just are not tied directly to the hardware. What the infrastructure companies have tried to do for years. Both of them, VMware's done tons of acquisitions. Nutanix has done quite a few acquisitions too. So your second point here, what's the impact of Dell VMware versus the Nutanix battle? You say not a significant impact on spending intentions yet. I mean there's clearly some evidence that those two markets are comin' together, that VMware's pressuring Nutanix. But why do you say, yet? What do you expect? I mean is it the OEM deal with Dell? It's the OAM relationship. There is huge pipeline of Dell hardware with Nutanix software and they're at loggerheads. So absolutely, the Dell family: Dell, EMC and VMware are doing all they can to dial that down. So they put pressure on the channel. And even some of the most loyal Nutanix channel partners that work with Dell, have had pressure to do more and more VxRail. So I expect it to have impact, but just as, Dave, I'll dial back the clock. You probably remember when EMC had a relationship with HP and HP killed the OEM of EMC storage. EMC stormed back and got a lot of those accounts. Same thing happened when EMC and Dell broke up a couple of years before the acquisition. So Nutanix is storming to go with HPE as one of their server partners, and (mumbles). So can Nutanix keep their growth and momentum going as Dell is no longer their biggest partner? Well, they're fighting a two-front war. They've got one with Dell VMware and they're also fighting the war with the public cloud guys, even though they're partnering with the public cloud guys. All right, they're sort of taking that cloud model but of course it's on prim. So you say how this public cloud affects HCI spending; not a significant impact on spending intentions yet. Can I infer from that that you do expect there to be pressure on that second front? Yeah, so as I've talked about before Dave, when we look at VMware and VMware gives the VMware cloud in AWS. Some say, "Great, that gives me a nice path to be able to use public cloud. But maybe I don't need some of this VMware licensing and software in there." The question for Nutanix is very similar. What services do they have? How do they become more sticky in customer environments? And absolutely, they're driving a roadmap for that in working with their customers. Well the thing about Nutanix is that customer's really happy. The customer's really like Nutanix. They like the simplicity. I've talked to a number of Nutanix customers that are very happy in that regard. And they have a leading product in that regard. But they're aiming at the multicloud space and can they play there? And Dave, you make a really good point. The killer use case, what did HCI deliver? It delivered simplicity. Today, if you talk about public cloud in general or even hybrid or multicloud, (chuckles) simplicity is not how you would describe this. So can the customers, the companies that did HCI, so, VMware, Nutanix, HPE and Cisco, they're all fighting for that hybrid and multicloud environment. And if they can help deliver simplicity of management, simplicity of leveraging my data, they can be successful in that space. Okay, so you're sort of positive on the multicloud, their position in multicloud. Even though they're not one of the big five. Yeah, and the good news for a Nutanix is that they're growing off of a much smaller base then say VMware, when you say they have five or 600,000 customers. Hey, how big of an impact will public cloud have on them? All right, so we don't pick stocks. We're not making recommendations. (laughs) But, do you feel like it's overdone, that it's undervalued? Independent of the macro. Do you feel like the pressure on Nutanix is warranted, or do you feel like it's got legs? So I feel Wall Street tends to over adjust when they go through things. When I talk to my friends on the Wall Street stuff. Definitely Nutanix took more of a beating probably then they should have. But they had two quarters that weren't great. And some of that was the management changes, they blamed that they couldn't hire sales and marketing fast enough. Something we'd asked, if you're a company in the Valley and you've gone from a few hundred people to a few thousand people. How do you keep adding good quality people? That's challenging. So yes, I think we've actually seen Dave, in the last week, or so Nutanix has been one of the fastest growing stocks in the tech market. So they're adjusting some. So I still think Nutanix has plenty of room for growth. The question is, what's their path to say, two billion dollars? Or is it an exit for 9-10 billion dollars down the road? All right, Stu, some great stuff. Thank you for that analysis. And thank you for watching this episode of theCube Insights, powered by ETR. This is Dave Vellante, for Stu Miniman, we'll see ya next time. (techno music)