Does Nutanix Eat the Lunch VMware Doesn’t Want?
It can be argued that Nutanix is eating VMware‘s lunch in many ways as some customers look to more affordable cloud native alternatives in the wake of VMware’s merger with Broadcom. Meanwhile, the rationale behind the creation of VMware’s new licensing model is based on a strategic business decision that is not unreasonable, at least not for VMware. It is doing this by changing its services which can result in organizations paying more than they did in the past but while getting a lot more in return, VMware executives say. While Broadcom and VMware executives are not saying this exactly, it can be inferred that the VMware market share VMware is losing is not necessarily the “lunch” that Broadcom wants.
At issue is how the business model for VMware products recently changed from that of a perpetual license-driven company to a subscription company. Under the terms of this new agreement model customers enter into, Broadcom has communicated that offerings are available as subscriptions or as term licenses in effect since December. The VMware Cloud Foundation has since featured either an enterprise hybrid cloud solution and the VMware vSphere Foundation for what the company says is a simpler enterprise workload platform for those mid-sized to smaller customers.
As the dust has begun to settle on the new licensing scheme in the wake of the Broadcom and VMware merger, representatives from smaller organizations, like universities with limited budgets, were picking and choosing VMware services and have noted they were often piecing together infrastructure by mixing and matching tools and platforms. However, they now have been faced with rising costs by buying into VMware’s core offerings — while arguably getting more “bang for their buck” — which could be out of the range of their budget. While they might get more value for their money, the initial cost could be prohibitive. This is especially true for smaller institutions that don’t need the entire suite of services that VMware has on offer, while larger companies might benefit from simplified pricing and potentially lower costs.
Price Talk
Some customers put the price increase in starker terms. In the case of the University of Canberra, there has been much talk among IT directors in academia in Australia about VMware’s price increases, Justin Mason, associate director, vendor and operations, University of Canberra in Australia, told The New Stack. The University of Canberra made the switch to Nutanix’s hypervisor a few years ago, so that his team was “fortunate enough not to have to worry.” However, for those existing VMware customers at other Australian universities, there is worry, Mason said. “They are saying, we’re getting stuck with possibly 300% to 1,000% price increases in the last year,” Mason said. “Some organizations just don’t have the budget to handle that.”
@nutanix CEO @RajivRamaswami: @Broadcom’s acquisition of @VMware is the « elephant in the room. » #NEXTconf pic.twitter.com/gb5oTH0Ybx
— BC Gain (@bcamerongain) May 21, 2024
VMware’s pricing policy under Broadcom has generated considerable interest in Nutanix for cloud native, as a more affordable offering for typically smaller organizations, representing a potential goldmine of sorts for not only Nutanix but other players as well. But Nutanix executives are not saying this exactly.
“We’ve been competing with VMware for a while now. VMware is a great company. I worked there for many years, and it has brought a lot of good products to market through its great innovation,” Nutanix CEO Rajiv Ramaswami told The New Stack during a one-on-one interview during Nutanix’s annual user’s conference .NEXT 2024. “However, it is now a different company under Broadcom, and it operates differently.”
Several factors are at play. First, many customers signed three- to five-year deals with VMware just before the acquisition closed, giving them some time, Ramaswami explained. “This protects them for three to five years with locked-in pricing, providing breathing room,” Ramaswami said. “These customers are not in a rush to move because migration is likely not their top priority.”
Apples to Apples — and Oranges
Nutanix and VMware compete directly in the cloud infrastructure platform market but their approaches differ. On offer by both are compute networking, storage management automation and respective hypervisors for building cloud platforms. vSphere factors in hugely as well for both Nutanix and VMware customers. In Gartner’s report, “Hype Cycle for Infrastructure Platforms” from 2023, it characterized the aspects of what Nutanix and VMware, as well as Microsoft, are competing in the intelligent platform market.
“Market momentum around HCI software in the cloud now creates a market for multiple hardware vendors to build software management and integration services,” Gartner analyst Dennis Smith wrote in the report.
But again, the approaches that these cloud native leaders are taking differ. The move to a more simplified offering for VMware consisting primarily of the VMware Cloud Foundation and the VMware vSphere Foundation has certainly made up for its more complicated previous pricing scheme while large enterprises certainly appreciate what VMware says are more services and features for cloud native environments than what they are paying for.
Smaller and more complicated pricing schemes and service agreements are not seen as the best thing for either customers or VMware, which can devote more resources to development with a more simplified business model, Prashanth Shenoy, vice president of marketing, cloud platform, infrastructure and solutions, for Broadcom’s VMware, told The New Stack. In other words, that is not the lunch VMware wants.
VMware also still has small- to medium-sized organizations in mind, Shenoy said.
“Most of our strategic customers, like big enterprises, view VMware and Broadcom as strategic partners rather than as mere product vendors. They see us as akin to a hyperscaler cloud provider, but within their own data centers,” Shenoy said. “For them, the VMware Cloud Foundation is the right offer but we absolutely have offers for smaller data centers.”
The vSphere Foundation is very attractively priced for smaller organizations, while vSphere Standard and vSphere Essentials are even less expensive, “which are meant for small data centers and organizations that don’t need the full vSphere Foundation or VCF,” Shenoy said. “So, while our focus as an enterprise company is to build the best possible private cloud platform, we also cater to smaller customers with tailored solutions,” Shenoy said.
Nutanix continues to seek simplicity and to offer what it says are simpler ways to upgrade, make the switch to Nutanix or just begin a cloud native deployment. Smaller organizations are certainly targeted as well.
“We are probably the easiest alternative because other options require more work, whether switching to containers or moving to the public cloud versus Nutanix,” Ramaswami said. “While it’s not a like-for-like switch, we offer the simplest option, Nutanix is not a plug-in replacement for the VMware hypervisor, but it is the easiest alternative in terms of adopting a hyper-converged architecture.”
Nutanix is also helping to smooth over hardware considerations for new customers, as VMware draws immense hardware resources from Broadcom and agreements with Nvidia for its GPUs for AI in particular. To wit, Nutanix announced during at .NEXT 2024 how Dell would offer hyperconverged appliances with Nutanix Cloud Platform installed and ready to run on Dell servers. Cisco is foregoing its hyper-converged infrastructure (HCI) in favor of Nutanix’s on some of its Cisco servers.
“A switch to Nutanix has often required upgrading hardware so that if customers have recent hardware investments, they might wait until it is fully depreciated before buying new hardware,” Ramaswami said, speaking with The New Stack during .NEXT 2024. “This ties into some announcements we made, aiming to ease the customer’s burden by qualifying our software on more existing hardware.”
It will be interesting to see where this all leads to. For cloud native infrastructure and environments, heavy hitters Red Hat, VMware, Nutanix and Nutanix, as well as SUSE are all widening the threshold for what they offer as the majority of organizations seek containers and Kubernetes to scale operations, on cloud environments as well as on-premises. Richer capabilities such as better adapted storage and data management and disaster recovery — including Veeam’s Kasten and Portworx, not to mention security should be an offer during the coming months.
“I think cloud native is the low-hanging fruit for anybody and cloud native is where people believe the focus should be right now,” Steve McDowell, an analyst for NAND Research, told The New Stack during a Q&A sessions at .NEXT 2024. “The cloud native guys are obviously watching the migration closely.”
