“There’s a method to the madness:” Nutanix CEO Pandey talks strategy

Dheeraj Pandey, Nutanix’s founder and CEO, talks about where the company is headed, on multiple fronts.

Dheeraj Pandey, Nutanix’s founder and CEO

WASHINGTON D.C. – At their just-concluded .NEXT event here, Nutanix’s major announcements significantly advanced the company’s hybrid cloud capabilities. Their Xi Cloud Services, based on the same technology stack as their on-prem software used in private cloud, makes it much easier for customers to move between the two. The new Nutanix Calm adds application management and orchestration abilities across different cloud environments to their Prism management software. Together they continue the company’s evolution, from its beginnings as a mid-market-focused maker of hyper-converged infrastructure, to a hybrid cloud- and enterprise-focused firm with its own operating system.

Dheeraj Pandey, Nutanix’s founder and CEO, emphasized however that the strategy really has not changed at all.

“It was always based on the premise that the means to the end was making things invisible,” Pandey tod ChannelBuzz. “We never even came up with the term hyper-converged. That was forced upon us. It was all about making the infrastructure invisible. Then it was about making virtualization invisible, having a control plane that’s agnostic to the hypervisor. Now the goal is to make the cloud invisible.”

The new Nutanix cloud services also bring the same strategy to the OPEX model.

“We were on this decision tree which was all about owning everything,” Pandey explained. “But why should OPEX be against the tenets of invisible infrastructure? Renting is yet another form factor that can be consumed. What we are doing with Xi is figuring out how to build a shared economy for Nutanix.”

The underlying philosophy has not changed, but only its scale and scope, Pandey stressed.

“There’s a method to the madness,” he said. “We had to be very good at data management before we called ourselves an infrastructure company. Then we had to move to compute, then to the operating system. In the same way, we couldn’t have done calculus before algebra, or algebra before arithmetic.”

At .NEXT, OEM partner Dell EMC attempted to dispel speculation about the future of the two companies’ partnership, publicly reaffirming their commitment to the relationship. Pandey pointed out an irony, however, in that Dell played a key role in broadening out Nutanix’s strategy beyond their initial base.

“At that point, we were quite happy doing the appliance business,” Pandey said. “Dell came to us. They convinced us that partnering with them with our software only was the right thing to do. They opened our minds to think about how we could be a software company.”

Pandey referred to Dell EMC as one of the best possible partners.

“I really like Dell’s ability to find who is an honest product and who is not,” he said. “They know there are only three honest [virtual] operating systems out there – VMware, Microsoft and Nutanix. Their strategy has a fork in the road for end users – if they want choice it’s Nutanix [with the XC series]. If it’s a pure play VMware workload, they go with their own systems. They have a more nuanced decision tree. For us, it’s one software for every workload, but for them it’s different.”

Just before the event, Nutanix and IBM announced a major strategic partnership around IBM’s POWER systems, joining Dell and Lenovo as significant strategic partners. Nutanix has also unilaterally announced support for both Cisco and HPE servers – a move welcomed by neither vendor and publicly dismissed by HPE, who suggested that their customers wanting HCI should purchase HPE’s own SimpliVity offering instead.

While Pandey seemed to hold out little hope Cisco or HPE would change their views in the short term, he made it clear he thinks that they are on the wrong side of history here.

“They think we are a hyper-converged company,” he said. “They think that this is a hardware play, but it’s actually about software. They think its about storage, while storage is just the beginning of true convergence. You need an entire OS to build a cloud – a control plane, including operations management and systems management. Cisco and HPE just have a software-defined storage piece that need the rest of the OS to really build a cloud experience.

“If anything, the architecture of the blade server is imploding in front of their eyes,” Pandey continued. “The future is rack mounts – not blades with proprietary backplanes. Data and compute have to live together as much as possible. You need a lot of flash drives, NVMe drives, and you need to have a rack mount server. Blade architecture is fading quicker than the world ever imaged, and the moment you have rack mounts you need a distributed system. To make that work, you need a cluster and HPE doesn’t have a cluster in its HCI.

“Both these companies will realize they need an entire OS,” Pandey stressed. “I think Cisco is beginning to realize it.”

Pandey said that Nutanix continues to look to expand its number of strategic vendor relationships – in due course

“The leverage piece from these is important – providing they are win-win relationships,” he said. “They significantly grow the blast radius of this company. Every year we complete one or two of these large relationships This year it has been Google and IBM. We need to execute on them first, and then we can continue to do more about the future.”

With the Xi Cloud Services and Calm unveiled at .NEXT, Pandey indicated that the near term technology roadmap will be more about consolidation than bringing forth additional big initiatives.

“It will be fine tuning for a while,” he said. “It generally takes a year to 18 months to fine tune things. Our partners will push in this direction. Google and IBM and others will definitely push us in a good direction, to try to overachieve for our common customers.”

Pandey also said that company’s financial strength is moving in the right direction.

“We have been operating cashflow positive for the last four quarters, and we basically run the business on cash,” he said. “We also have $463 million of deferred revenue over the next three to five years, and that doesn’t reflect in the P&L.”

Pandey emphasized as well, that even given Nutanix’s growth, he thinks keeping a startup’s perspective is essential.

“I’d hate to lose that mentality,” he said. “It’s about keeping that agility, that insurgency, alive in the company. When things get too monolithic, it takes the joy out of engineering. We are constantly figuring out ways to modernize and segment our operations, to keep them small, and keep things creative.”

Pandey said that for Nutanix, the biggest challenge in today’s market is keeping this internal creativity.

“The enemy is not outside, but is actually within,” he said. “It relates to the paradox of growth in the company: growth creates complexity, and complexity creates growth. We have to manage this by continuing to act like a startup, and by being authentic. I’d worry more about competition if we were in a nichey market, but we aren’t. The TAM is almost unlimited.”