How big is the hyperconverged infrastructure market?
What’s in a number? Plenty, according to cloud computing company Nutanix.
Nutanix sells hyperconverged infrastructure (HCI), which combines storage, networking and compute in a single appliance. This is easier to manage than three-tier architecture, and is also an essential component on an organisation’s journey to the cloud.
Nutanix no longer sees itself as a hardware company, and about 18 months ago said it will only take into account revenue from the sale of its software. Its software can be run on any x86 hardware.
It has also moved to a subscription model. Other companies have done this before, such as Adobe, but few, if any, have made the jump from hardware to software subscription only.
This is according to Tonya Chin, VP, corporate communications and investor relations at Nutanix.
Speaking at the company’s annual .NEXT conference, held last week in Copenhagen, she said that analysts from both Gartner and IDC publish market share statistics for the HCI market, and have different ways of measuring it.
In the past, when a company shipped an HCI appliance, it was the one credited with the sale. Now, it’s getting a little trickier: what do you count, the appliance, or the software? And this is especially galling to Nutanix, which, as mentioned, no longer sells hardware. Yet, this is the way it’s still being tracked by IDC in this market.
And as the tables below show, the way you measure the market has an effect on the results.
Gartner rates Nutanix as the leader in market share for HCI software in its report from Q1 2019. It says Nutanix has 50% of the market share, while VMware comes in at 42.5%. It says Nutanix made $179.8 million from HCI software (excluding the appliance revenue) in that quarter. VMware was in second place, at $153 million.
These two vendors account for the vast majority of the HCI software market. Gartner reckons that, together with smaller vendors, the HCI software market is worth $359.9 million per quarter.
IDC, on the other hand, provides two views of the HCI market; one is a hardware-centric view, the other software-centric. It appears that IDC does it this way to provide a complete view of the HCI market. The problem, according to Nutanix, is that it also includes hardware sales in both these numbers. In its chart ‘based on owner of HCI software’ for Q1 2019, IDC says Nutanix sold $526.5 million, and VMware sold $750.7 million. In its ‘worldwide hyperconverged systems as branded’ chart, IDC reports that Dell EMC sold $586.7 million and Nutanix $255.7 million.
Nutanix used to sell software licenses for ‘life-of-device,’ now it sells licenses in one-, three-, and five-year increments. The license was also not ‘stuck’ on a piece of hardware, and can be moved to another server, says Chin.
This move to a subscription model means that the company’s revenue is going to be ‘compressed’, and earnings would only start reflecting in four to five years’ time, according to Chin.
“It’s not apples to apples when you’re trying to compare revenues. And IDC, in particular, is struggling with this,” she said.
We’ve asked IDC for comment, and will report back.
HCI worldwide sales
Below are the worldwide sales of hyperconverged infrastructure, as measured by Gartner and IDC. Both offer differing interpretations of the market.
Competitive landscape of HCI-software only, 1Q19 ($M)
|Vendor||1Q19 revenue||1Q19 market share||1Q18 revenue||1Q18 market share||1Q18-1Q19 growth|
Top 3 companies, worldwide hyperconverged systems, based on owner of HCI software, Q1 2019 ($M)
|Company||1Q19 revenue||1Q19 market share||1Q18 revenue||1Q18 market share||1Q18-1Q19 revenue growth|
|3. Hewlett Packard Enterprise||$83.5||4.6%||$61.3||4.9%||36.2%|
|3. Dell Technologies||$66.8||3.7%||$53.4||4.3%||25.1%|
|Rest of market||$314.7||17.2%||$217.3||17.5%||44.9%|
Top 3 Companies, worldwide hyperconverged systems as branded, Q1 2019 ($M)
|Company||1Q19 Revenue||1Q19 Market Share||1Q19 Market Share||1Q18 Market Share||1Q19/1Q18 Revenue Growth|
|1. Dell Technologies||$586.7||32.2%||$357.7||28.8%||64.0%|
|3. Hewlett Packard Enterprise||$83.5||4.6%||$61.0||4.9%||37.0%|
|Rest of market||$743.9||40.8%||$482.4||38.8%||54.2%|