Nutanix bets on hybrid multicloud world

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Nutanix president and CEO Rajiv Ramaswami.
Nutanix president and CEO Rajiv Ramaswami.

It has been a busy year for Nutanix. It got a new CEO, Rajiv Ramaswami, who took over from co- founder Dheeraj Panday, inked a deal with Red Hat, and there was also the matter of a global pandemic. There was also a kerfuffle as Ramaswami joined from VMware, which claims that he was in ‘secret talks’ with Nutanix while he was still employed at the company. It has now sued Ramaswami.

But the cloud software specialist has also by now bedded down its subscription model, which seems to be bearing fruit. Earnings for Q3 at the end of May showed its annual contract value billings were at $159.9 million compared to $135.3 million for same period last year, and its run rate for annual contract billings for the quarter was at $1.45 billion, from $1.15 billion prior. It reported a loss of $123.640 million.

Opening this year’s online .NEXT conference yesterday, Ramaswami said CIOs’ thinking about where their application workloads could run has evolved. Quoting from a Morgan Stanley report, he said that the CIO respondents say that only a third of workloads will run in public cloud by 2023, whereas before they thought about half would. This decline is due to concerns about data governance, security, how edge use-cases will perform, and cloud cost.

Ramaswami then spoke to Martin Casado, a general partner at venture capital firm Andreessen Horowitz. Casado co-authored a report earlier this year with Sarah Wang, in which they posited that across 50 of the leading software companies, an estimated $100 billion in market value was being lost to cloud impact on margins, compared to if they were running the infrastructure themselves.

It is important to remember that the world is still in the early days of cloud.

Martin Casado, general partner, Andreessen Horowitz.

The Andreessen report says there’s now a dawning realisation about the long-term cost implications of cloud, which are now starting to show up in total cost of revenue and cost of goods sold (COGS) graphs. This, says the report, has led to a measure of workload repatriation, and holds up the example of Dropbox which saved a ‘whopping’ $75 million by an optimisation exercise, much of which came from repatriating workloads from public cloud.

Headroom for growth

Casado said it was important to remember that the world was still in the early days of cloud, which is worth about $300 billion a year presently, and growing at 20% year-on-year. He expects this to carry on for at least a decade.

“We’re just starting to understand the implications of cloud. We know the benefits, the agility, but we’re just starting to understand the economic implications…There’s a lot of discussion around what is the right architecture for cloud, what is the right cost model, how should I use cloud in different ways.”

Ramaswami said Nutanix now has about 20 000 enterprise customers which had all started their journey to the cloud in on-prem data centres, and almost all of them were now looking to use public cloud.

Offering his advice, Casado said the multicloud approach promised the most ‘optionality’.

“Just like all companies are becoming software companies, it feels like all software companies are becoming SaaS companies. If you’re building a SaaS service, which is really the primary mechanism for distributing software, the cloud becomes part of your cost of goods sold, and the primary way to rein that in is by having optionality on the backend.

“Cloud is not a location, it’s not a company. Cloud is an operating model, and that’s something you can consume with on-prem equipment, you can consume it in a colo (colocation), or you can consume it as a service over the public Internet. The important thing is that you have optionality in how you consume it.”

Ramaswami said that choice of cloud is dependent on a variety of factors. “CIOs are discovering what works for them. But one thing is becoming clear, and that is hybrid multicloud deployments are going to be the dominant strategy.”

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