William Blair analyst Jason Ader has detected early signs of a Nutanix business upswing, following feedback from reseller sources.
In his customer newsletter this week, he wrote: “We heard that the Nutanix organisation (top to bottom) has refocused on the core HCI business, emphasizing new logos and footprint capture instead of jamming its full-stack vision down customers’ throats.”
Ader regularly polls the channel about their enterprise storage business. In the most recent survey resellers noted a solid pace to their Nutanix business in the July 2019 quarter.
They reported a growing number of seven-figure deals, an improving sales pipeline and good distribution across commercial and public sector accounts and across workloads (including many mission-critical apps).
Nutanix blamed a downturn in recent quarters on inadequate marketing spending, senior sales management changes and a slowdown in hiring salespeople. Also a slew of product introductions meant the portfolio lacked crisp messaging.
Sky-high for HCI
The VARs said HCI demand remains robust and the market remains a two-horse race between Dell and Nutanix. Dell has become stronger in the HCI space over the past year but Nutanix continues to win a goodly share of deals.
The upswing may be reflected Nutanix’s October quarter revenues. But Nutanix’s shift to subscription model and changes in sales leadership are complicating factors.
But what about the long-term prognosis? According to Ader, several VARs noted that the public cloud is consuming more infrastructure spending and this creates headwinds for Nutanix’s business.
The notion here is that there is only so much enterprise IT infrastructure spending available. If a higher proportion goes to the public cloud then less budget is left for on-premises- where Nutanix makes the lion’s share of its sales.
Is a rising public cloud shrinking on-premises IT?
IDC has found that although public cloud spending is growing so too is private cloud (on-premises) spending.
For example, quarterly spending on public cloud IT infrastructure reached $12.1bn in 3Q18 and grew 56.1 per cent year over year. Spending on private cloud infrastructure grew at half of this rate, 28.3 per cent, reaching $4.7bn. To summarise, private cloud budgets are not shrinking, merely growing more slowly than public cloud.
Also Nutanix was built with idea of enabling customers to run any app at any scale on any cloud – meaning public clouds. Its Cloud Connect integrates public cloud services such as Amazon Web Services with Nutanix on-premises environments. Nutanix could evolve to making its software run in the public cloud as well as on-premises. That would reduce the effect of the headwinds identified by Ader.