A report tracking enterprise VARs (value-added resellers) by analyst William Blair provides insights into the current state of the enterprise IT infrastructure market and the prospects and challenges for industry players like Commvault, NetApp, Nutanix, and Pure Storage.
The report, authored by Jason Ader and Sebastien Naji, shares perspectives of 64 resellers on quarterly spending. The recent findings on Q2 2023 reveal “growing optimism that the worst is behind us, especially as the macro environment has been more resilient than many expected and customers’ IT needs are steadily expanding.”
“Though there was an uptick in positive sentiment (34 percent of respondents felt better than three months ago), the general consensus was that things are staying the same (78 percent of respondents),” they say. “The pipeline for the third quarter looks solid with 42 percent of respondents expecting better results versus the second quarter. Finally, pricing pressure rose from the prior three quarters as vendors saw increased pushback from customers.”
The main customer priorities, according to VARs, revolve around cloud apps/services, security, data protection, and networking. There has been a small degree of workload repatriation from the cloud, but this is balanced by ongoing trends towards cloud migration. The report reveals a negative impact on the size and number of on-premises data center refreshes due to continued cloud migration. Ader writes: ”VARs assert that the size and number of on-premises datacenter refreshes are being negatively impacted by the continued migration to cloud (less on-premises infrastructure needed going forward).”
Although the security and networking areas were strong, there were weak areas in servers and storage “as customers digest prior purchases, sweat assets, and move more workloads to the cloud … VARs are starting to see green shoots of recovery in the second half for on-premises compute and storage, especially for larger projects that have been on hold.”
Specific vendors mentioned in the survey were Commvault, NetApp, Nutanix, Pure Storage, and Varonis, each offering a unique perspective on the state of the market.
The report indicates that Commvault resellers have observed steady customer renewal and expansion activity, given that data protection is a customer priority.
The Federal market was a strong point, with Metallic’s FedRamp status a contributor. Metallic in general is doing well with its SaaS backup capabilities, both for new customers and as a cross-sell opportunity in existing Commvault accounts. M365 and Salesforce backup featured as a focus with Metallic backups.
The two analysts noted that Commvault is fighting for business in a tough market: “The data protection market remains highly fragmented and competitive, with newer vendors like Rubrik, Cohesity, Veeam, Druva, HYCU, and OwnBackup all seeing good traction … often viewed as less expensive and easier to manage and sell than incumbent offerings from Veritas, IBM, Dell-EMC, and Commvault.”
”We think Commvault is faring better than Veritas and Dell-EMC, which VARs say are both donating significant market share.”
NetApp VARs reported mixed views, some doing well, others seeing lower demand. The VARs think “NetApp still has the best storage technology for public cloud and hybrid cloud use cases. Its cloud-native solutions (wherein NetApp’s file storage is a first-party service offered by the three big CSPs) continue to be a major differentiator for the company – e.g. Azure NetApp File (ANF) and Cloud Volumes Service (CVS) for Google Cloud … as well as the newer FSx for ONTAP in AWS.”
However, “several VARs noted that adoption remains somewhat narrow, supporting NetApp’s commentary that cloud revenue is concentrated among a small number of large customers.”
In the cloud ops area, “Spot is not performing as well as it could be amid the current focus on reducing cloud costs and cloud optimization. Following the departure of Anthony Lye in August 2022, the NetApp cloud portfolio has had mixed results – though NetApp management believes with the appointment of Haiyan Song as General Manager of the CloudOps business, this portfolio could get a new boost.”
The VARs noted that Nutanix was doing well and gaining share. “Nutanix renewals continued at a solid pace in the second quarter particularly for its Core HCI (hyper-converged infrastructure) platform as customers expand nodes and move new workloads to Nutanix. With HPE’s SimpliVity and Microsoft’s Hyper-V solutions continuing to lose share, Nutanix has seen some good replacement opportunities within certain enterprise accounts (we heard of an eight-figure win with Micron in the quarter).”
Uncertainty about VMware’s future with Broadcom may mean Nutanix will gain share in HCI over VMware’s vSAN. But “HCI demand appears to have been more muted of late as customers strive to move more workloads to the public cloud (causing some downsizing of HCI projects).” However, Nutanix and HPE are doing well, with Nutanix’s HCI software on HPE hardware winning against Dell’s VxRail, “which is losing traction with customers given the ongoing brouhaha around VMware’s acquisition.”
Some VARs said Nutanix is struggling to upsell customers to its add-on offerings which are thought to be expensive.
The two analysts worry that “a secular shift to cloud for midmarket customers will weigh on the company’s ability to meet its growth and profitability targets.”
In the Pure Storage all-flash array area VARs noted that after “strong storage growth in 2021 and 2022, this year has seen deal activity come down as customers digest previously purchased capacity.” In particular, “IDC estimates the external enterprise storage systems market will contract by 1.8 percent in 2023 before returning to 5.5 percent growth in 2024.” On that basis, Ader said: “We are modeling a 7 percent year-over-year decline in Pure product sales in its July quarter, reflecting the tough comps from last year.”
He says on-premises demand remains resilient, driven by large unstructured data sets and the fact that larger customers are hesitant to move their tier-1 apps to the cloud.
The VARs are seeing continued expansion and refresh activity with backup, ransomware protection, AI/ML, and analytics use cases mentioned. In the data protection area “Pure FlashRecover (which is powered by Cohesity) has been the prominent product here, with Pure reps promoting its near instant restore capabilities in the event of a ransomware disaster.”
The VARs like the lower-cost appeal of the QLC-based Flashblade and FlashArray //E products but “many customers still see Pure as a pricey alternative.” Reflecting this, “many VARs continue to highlight that Pure is still a pricier solution for backup use-cases, and that success in data protection is mainly driven by existing Pure customers being upsold to an additional use-case.”
VARs selling data security vendor Varonis’s offerings observed: ”The rapid growth in unstructured data across different, distributed file stores (both on-premises and in the cloud) has made managing data access complex. This complexity has led to to more customer demand, with multiple VARs noting that data security remains a high priority spending area for customers.”