CEO Rajiv Ramaswami sounded upbeat on his first Nutanix earnings call. He declared Q2 “a strong quarter across the board,” and said Nutanix “exceeded guidance across all metrics.”
The software vendor’s second quarter fiscal 2021 revenue of $346.4 million, while flat, beat analysts’ estimates, as did its quarterly loss of $0.37 per share versus the expected loss of $0.47.
Meanwhile, its annual contract value billings grew at a record 14% year over year to $159.2 million, and its annual run-rate contract value increased 28% to $1.38 billion. “We gained momentum in our renewals engine and continued to make progress on our transition to subscription,” Ramaswami added.
Also on the call, Ramaswami touted Nutanix’s customer growth. The vendor ended the second quarter of fiscal 2021 with about 18,770 end-customers, including about 950 of the Global 2000 after adding about 20 in the quarter. These include Hitachi Systems Power Services, Mercedes-Benz do Brasil, Roche, Saint-Gobain, and Total Gas & Power.
While Nutanix’s historical strength has been in selling its core hyperconverged infrastructure (HCI) software stack to medium and smaller enterprises, “we’ve also penetrated a good amount of the global large customers as well,” Ramaswami said. “With these larger customers, we are more focused on winning specific use cases. We’re not quite there yet, in terms of being able to say we are the platform of choice for everything, although we would like to get there.”
How to Win Against VMwareGetting there, however, will require taking market share from Nutanix’s top competitor and Ramaswami’s previous employer — VMware — and Ramaswami’s got a plan for that, too.
Ramaswami joined Nutanix in December, just days after announcing he would leave his COO post at VMware. Shortly after, VMware filed a lawsuit against him alleging that Ramaswami breached his legal and contractual duties to VMware by “secretly meeting” with Nutanix top brass while working with VMware’s leadership to shape that company’s strategy.
After the Q2 earnings call, in an interview with SDxCentral, Ramaswami said that he’s “letting the lawyers handle the lawsuit,” while he runs Nutanix. “Now, that said, we strongly believe the law is very much in our favor.”
He also provided more details about Nutanix’s opportunity in the market, his plan to “drive more simplification” across the company’s products, and how Nutanix will win bigger deals against VMware.
Nutanix CEO: Why We Are Better“First, why are we better? If you look at the differentiators for us: first, fundamentally the core architecture,” Ramaswami said. “It’s quite architecturally differentiated from a resilience perspective, performance of scale. What this means is that our customers can run the most mission critical applications, demanding ones like large databases and medical technology applications, on our platform. Then, we also provide a complete set of data services.” This includes file, object, and block storage services along with disaster recovery and backup, he added.
“Number two is we offer technology choice,” Ramaswami said. This is a key differentiator for Nutanix, which, unlike other HCI software vendors, supports its own AHV hypervisor as well as VMware ESXi, Microsoft Hyper-V, and Citrix Hypervisor. “We allow the customers to choose their hybrid platform. And going forward we allow them to choose a cloud platform as well.”
By this, he means as opposed to VMware, which Nutanix has long criticized for not supporting third-party hypervisors and its software licensing costs. During Nutanix’s first quarter, it introduced a couple of new hybrid cloud products with Amazon Web Services (AWS) and Microsoft that allow customers to use the same software license whether they run Nutanix’s software stack in on-premises environments or in public clouds.
Driving Simplicity Across the Portfolio“The last one is simplicity,” Ramaswami said. “Nutanix really has a design-first approach. We really simplify how customers can use and adopt the product.”
Driving even more simplicity remains a top priority for Ramaswami. He said he’s met with several customers during his first quarter as CEO, and they share this concern. “Some would like us to make it easier for them to adopt and consume our software by delivering more solutions that bring our portfolio together and to simplify the pricing and package.”
This involves bundling products together around specific use cases instead of selling each separately. So, for a customer deploying cloud-native workloads, this may include Karbon, which is Nutanix’s Kubernetes management product, along with its AHV hypervisor, object storage, and Era database management software, Ramaswami explained.
“You’re going to see us put these solutions together and then also price them together as well, so that customers can just buy them with a simple, easy to use model, rather than trying to find different products, integrate them together themselves, and get them to work,” he told SDxCentral.
Selling to specific use cases also plays a key role in Ramaswami’s plan to grow Nutanix market share. “We don’t have the scale and size that some of the other players in the market have,” he said. “And so what that means is that while customers like our product, especially the big ones are not necessarily going to go all in for their entire footprint with us on day one. We’re going to have to work our way in, and then expand one use case at a time. And these use cases can themselves be substantial.”
Multi-Million-Dollar DealsFor example, during the second quarter a “leading financial services company” headquartered in the Europe, Middle East, and Africa region, tapped Nutanix in a “multi-million-dollar, one-year subscription deal,” to modernize its data center and provide virtual desktops to more than 90,000 employees. The customer deployed Nutanix’s core software stack along with its hypervisor and Files storage service running on Hewlett Packard Enterprises (HPE) hardware.
“That’s a pretty big deployment,” Ramaswami said. “And if we do well, that will open the door for us to go into the next use case, maybe databases. Now we get to run their databases workloads and so forth. That’s the approach that we need to take with larger companies.”
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