 From the SiliconANGLE Media office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. Hi buddy, this is Dave Vellante and welcome to this special CUBE Insights powered by ETR. We've been running these breaking analysis segments and today we're going to talk about some spending data that shows that there's continued interest in hyper-converged infrastructure. So we've been running these segments over the last several weeks. With our partner ETR, they've got a database of about 4,500 IT practitioners and CIOs. They go out quarterly and ask spending intentions and so we've been sharing that along with our opinions. These are completely independent segments. I want to disclose that a number of the companies that we're talking about today, Nutanix, VMware, Dell EMC, Cisco, HPE, they sponsor theCUBE, but they have absolutely no input into editorial. They don't affect our opinion in any way, shape, or form. So let's get into it. I'm here with Stu Miniman. Stu is an expert in this field. He's covered the space. Stu, let's look at some of the fundamentals. What do people need to know? Alex, if you put up the slide, Stu, maybe you could talk to it. Yeah, Dave, thanks. I've been watching you have some fun with this. I enjoyed swimming in some of the data here and as you know, Dave, we've been watching since before hyper-converged infrastructure or HCI was a term that everybody talked about. We were looking at how these hyperscale trends are going to impact the enterprise we put out our servers and research years and years ago so we know all of these companies really well. And despite the latest AI and cloud and everything, the data shows HCI, the simplification of the data center, building out what we would call true private cloud is important today. So right, we wanted to know when you look at the data, first of all, how are the vendors doing? Who are the leaders in this space here? There were a whole number of startups that came in this space. When we first analyzed the market, it was companies like Microsoft and VMware that own the operating system. We thought it would be hugely important. If you look in the big names in this environment, Dell partnered with everyone. Of course, they bought Dell, bought EMC, which included a stake in VMware. What's that relationship with Nutanix? How is that shaping the market? As well as how is cloud impacting things? Both from a spending standpoint, has cloud sucked away revenue from HCI as that specter has overhung everybody in the IT space? And also, how does HCI fit into multicloud and how does that fit? Okay, great. So thanks for that setup, Stu. Now let's get into some of the data. Alex, if you bring up the slide, the next slide, this is spending intentions for Nutanix, VMware and some other vendors. I'll go through that. But it's basically showing Nutanix and VMware are fighting it out. You know they're in this internecine battle and social and there's a war going on because there's big money to be made here. So for those of you familiar with these segments, this is data from Enterprise Technology Research from their July 2019 spending intention survey. So they're asking about spending intentions for the second half of 2019. The end of the survey out of the 4,500 people on the panel, 1,068 responded to this survey. So on the left-hand side, you see the vendors. Nutanix, VMware with vSAN, Dell EMC with VxRail, specifically, then SimpliVity and then Springpath or Cisco. So what the chart shows is what we call NetScore. And NetScore is calculated by taking the red on the bar, which is we're going to leave the platform. That's the dark red. The lighter red, which is we're going to spend less in the second half. The gray, which says spending is going to be flat. The dark green or the evergreen, which says we're going to increase spending in the lime green, which is going to add to the platform. You take the green minus the red, you get NetScore. Higher than NetScore, the better. You can see Nutanix and VMware with vSAN are leading the pack and then we'll go through that. But then you see shared accounts. That's the number of indications for spending that they received out of those 10.68. So Stu, what is this data telling you? So first of all, Dave, it confirmed kind of the general market share numbers that we hear out there. The vendors that track that on quarterly. VMware has the most customers, has the largest revenue, and their largest partner for that, of course, is Dell. VMware and Dell go to market, joint product development, joint engineering, joint go-to-market, and it's the biggest piece of the vSAN. So that's where we specifically wanted to look at the vXRail and vSAN and vXRail doing very well. They're adding new customers. It was interesting to me that you saw vXRail kind of ramping up a little more on the, you know, attracting new companies, but also look to be losing some on the tail end of the dark red, as opposed to vSAN in general, is a little bit more stable. We know how many thousands of customers they have out there and VMware is a software story, as opposed to vXRail is that full appliance. Nutanix is the second horse in this two-horse race that we're really talking about here from HCI. There's some discussion in the marketplace after two quarters being down. Is Nutanix showing weakness? What's happening there? The most recent quarter announcement was Nutanix is doing well. Seems to, you know, they had a little bit of change as they're going through their move to a software model and sorting things out with sales and marketing and their channel. The data here shows that the second half of the year looks good for Nutanix. So to some of the questions I asked in the first slide, Dave, you know, Nutanix and VMware, of course the clear leaders in this space. SimpliVity, which was of course bought by HP, Springpath, which is the Hyperflex from Cisco are far behind those two out there. And it seems that even though Dell and VMware are fighting very much with Nutanix, that is not, you know, heavily dampening Nutanix's from the respondents in this survey. Okay, and just a word on the data. So you see 184 shared accounts for Nutanix, 174 for VMware and down the line. Only 42 for SimpliVity and only 18 for Springpath. It's in Cisco. It's an indication of the size of the install base. Obviously the more shared accounts, the more mentions, the larger the install base. Again, they're statistically significant. ETR does a very good job of that. Let's look at, oh, actually I want to make another point here. So how are these net scores? Let's put them in context. The hottest net scores we've seen recently are Snowflake and UiPath with 80% plus net score. Okay, so that's really, they're off the charts, they're growing like crazy. We saw Salesforce with 55%, you know, so in Workday, sort of in there as well, companies that are growing share. So SAP in the 30% range. And so you see the Dell EMC VxRail, that's kind of holding serve. You know, it's not like dramatically gaining share, but you know, they're growing a little bit. And I think a lot, Dave, it shows to the maturity of this market. HCI is not new. Both Nutanix and VMware have thousands of customers, specifically with Visa, and we're talking VMware. So it was more when I saw some of your charts, you know, Microsoft has a similar net score. You know, well-liked, good install base, still growing and the like, and brings in the discussion of when we did some cross-section of the analysis looking at cloud companies and how does this impact their public cloud spend? Is this, you know, detracting if this customer is also doing public cloud? And the long and the short of it is VMware and Nutanix are pretty much the same, if not actually a little bit better when you talk about a customer that's looking at their overall cloud spend. So to me, that really signals that both VMware and Nutanix are doing a good job into how their solution fits into a customer's overall, you know, hybrid cloud strategy. All right, let's take a look at the next slide, which is talks to time series. So this is hyper-converged infrastructure, spending intentions, again, for the second half of 2019. Over time, so the July 19 survey you can see is the most recent one. We go all the way back to January 17, and you can see Nutanix on the top, VMware, Visa, and on the bottom. We just selected those two. We're just repeating the net score and the shared accounts. And you can see these things tend to bounce around a little bit. You can see Nutanix maintains a lead, but the market's starting to converge. These two companies are coming together. We hear a lot about VSAN doing very well. It's kind of held on. You can see a slight downward pressure in July and the July survey, it's unclear what that means. That could be an indication of just some uncertainty in the marketplace, some economic macro concerns, tariffs, or potential headwinds there. So there could be some uncertainty there, but what do you take away from this slide? Yeah, first of all, right, as you showed, Dave, VMware is a bit more steady. Nutanix had gone up for a bit and come down. Both of them staying relatively stable, somewhere between kind of 45 and 55 lately. A little bit, if you look at the overall trend, Nutanix is down. VMware could surpass them from the net score in the future if this trend holds, but both of them doing quite well. When you looked at all the other vendors in there, of course, the scale is just showing 40 to 70%. If you put all the others, which are down much lower, you can see once again, that kind of the clear leadership, these two companies just strong lead, does not look like there are any challengers in this space that are ready to be a clear number three yet in the market. But Nutanix, at one point, had no competition. Now VSAN comes in, and of course- Well, absolutely. So no, it's impivity and scale computing, and there were a whole host of startups. There's all the brand new startups in the space, everything from little companies like Diamante, Pivot3, who was around doing this before it came. So there's always been a lot there, but Nutanix is the one that separated from the pack, the only one in this space that's gone IPO, but VMware's there. Microsoft, one that they rebranded their Azure Stack HCI for what they put in the data center last year. So expect Microsoft partnering with all the big server manufacturers to push farther into HCI, but really has not directly impacted this market too much just yet. But there's definitely been some pressure on Nutanix from an earnings standpoint. Stock's been hit. You've had some executive departures. There's some rumors about acquisition with Google. Your thoughts on that? Yeah, definitely. So, John Furrier, you just had Dheeraj Pandey, the CEO of Nutanix, inner Palo Alto studio, leading up to the Copenhagen show for Nutanix that I will be at. Sure, Sunil Poti, who was basically the number two at Nutanix is now working for Thomas Kurian-TK over at Google Cloud. My indication from what I hear, he is not over there to help broker a deal. Sunil had a great run at Nutanix. There was a clean break there, but there is a mostly new executive team at Nutanix now a couple of years past the IPO. And the team at Nutanix, they have their platform. They have a bunch of SaaS offerings that they're doing there. Do they have a relationship with Google? Absolutely. They had Diane Green at one of their events a couple of years ago, they did joint engineering. But I actually saw that engineering effort cool off a little bit in the last year or so since the new regime came on in Google Cloud. So, does Nutanix have a lot of enterprise accounts and know how to work with the enterprise? And could that be a boon to Google? Absolutely. But the personnel of a Nutanix executive over at Google and Brian Stevens is the CTO of Google Cloud being on the board of Nutanix. I do not think that that is telegraphing that an acquisition is going to happen. It could, we see lots of big acquisitions. Nine or $10 billion for Nutanix could be interesting for Nutanix and help them get in a lot of places and help Google, but Dave, I going on record say I don't think it's going to happen. I don't think Cisco is going to buy Nutanix. Infrastructure's not the real push for Chuck Robbins and that team. And at the Google Cloud event, Dave, that we were at, we saw Sanjay Poonan from VMware up on stage, touting how deeply VMware is going to partner. So, both VMware and Nutanix are partnering with all of the clouds. VMware, of course, has a very deep relationship with VMware. They're going deeper with Google. They are even partnering with the old enemy of Microsoft. So, I would give VMware definitely has a deeper and more public relationship with all the public cloud providers, but Nutanix is also partnering and expanding their portfolio to give themselves good growth beyond just the core HCI market. HPE is another one. So, Nutanix and HPE are working together. Kind of the enemy of my enemy is my friend. Nutanix was not at VMworld this year. They kind of booted out. So, they belly up to HPE. HPE loves having. They have their as-a-service offerings and Nutanix is one of those as well as Nutanix and sell the HPE. So, as the Dell relationship is likely going to dial down over time as Michael Dell and the team want to sell more Dell hardware with VMware software, HPE is another. And they also partner with Lenovo on the Nutanix side. All right, Stu, bring it home. What are the key takeaways on this cube insights? Okay, so HCI is a two-horse race right now. There are interesting companies to look at beyond the two, but if you want to understand who the leaders are in this space, it is VMware, especially with their VxRail and Nutanix, are the two leaders in that space. Really looking and understanding how they're expanding into multi-cloud and hybrid cloud solutions. VMware very much with their VCF offering, which packages VSAN to go into the VMware cloud offerings and Nutanix with an interesting strategy both with how they really spread some of their services like what they're doing with ZyCloud as well as some SaaS offerings which some of them really have a disconnect, not in a bad way, but just are not tied directly to the hardware. What the infrastructure companies have tried to do for years, both of them, VMware's done tons of acquisitions. Nutanix has done quite a few acquisitions too. So your second point here, what's the impact of Dell VMware versus the Nutanix badly? You're saying not a significant impact on spending intentions yet. I mean, there's clearly some evidence that those two markets are coming together that VMware is pressuring Nutanix, but why do you say yet? What do you expect? I mean, is OEM deal with Dell? It's the OEM relationship. There is a huge pipeline of Dell hardware with Nutanix software and they're at loggerheads. So absolutely the Dell family, Dell EMC and VMware are doing all they can to dial that down. So they put pressure on the channel and even some of the most loyal Nutanix channel partners that work with Dell have had pressure to do more and more VxRail. So I expected to have impact, but just as, Dave, I'll dial back the clock. You probably remember when EMC had a relationship with HP and HP killed the OEM of EMC storage, EMC storm back and got a lot of those accounts. Same thing happened when EMC and Dell broke up a couple of years before the acquisition. So Nutanix is storming to go with with HPE as one of their server partners and do their. So can Nutanix keep their growth and momentum going as Dell is no longer their biggest partner? Well, they're fighting of two front war. They are one with Dell VMware. They're also fighting the war with the public cloud guys even though they're partnering with the public cloud guys, right? They're sort of taking that cloud model, but of course it's on-prem. So you say, how does public cloud affect HCI spending? Not a significant impact on spending intentions yet. Is it, can I infer from that that you do expect there to be pressure on that second front? Yeah, so as I've talked about before, Dave, when we look at VMware and VMware gives the VMware cloud in AWS and say, great, that gives me a nice path to be able to use public cloud, but maybe I don't need some of this VMware licensing and software in there. The question for Nutanix is very similar. What services do they have? How do they become more sticky in customer environments? And absolutely they're driving a roadmap for that and working with their customers. Well, I think about Nutanix is that customers are really happy. Their customers really like Nutanix. They like the simplicity. And I've talked to a number of Nutanix customers that are very happy in that regard and they have a leading product in that regard. But they're aiming at the multi-cloud space and they play there. You make a really good point. The killer use case, what did HCI deliver? It delivered simplicity. Today, if you talk about public cloud in general or even hybrid or multi-cloud, simplicity is not how you would describe this. So can the customers that did the company that did HCI, so VMware, Nutanix, HPE, and Cisco, they're all fighting for that hybrid and multi-cloud environment. And if they can help deliver simplicity of management, simplicity of leveraging my data, they can be successful in that space. Okay, so you're sort of positive on the multi-cloud, their position in multi-cloud, even though they're not one of the big five. Yeah, and the good news for a Nutanix is that they're growing off a much smaller base than, say, VMware, when you say they have five or 600,000 customers, hey, how big of an impact will public cloud have on them? All right, so we don't pick stocks, we're not making recommendations. But do you feel like it's overdone, that it's undervalued, independent of the macro? Do you feel like the pressure on Nutanix is warranted or do you feel like it's got legs? So, I feel Wall Street tends to over adjust when they go through things. When I talked to my friends on the Wall Street stuff, definitely Nutanix took more of a beating probably than they should have, but they had two quarters that weren't great. And some of that was the management changes, they blamed that they couldn't hire sales and marketing fast enough, something we'd asked if you're a company in the valley and you've gone from a few hundred people to a few thousand people, how do you keep adding good quality people? That's challenging. So, yes, I think we've actually seen Dave in the last week or so, Nutanix has been one of the fastest growing stocks in the tech market. So, they're adjusting some. So, I still think Nutanix has plenty of room for growth. The question is, what's their path to say $2 billion or is it an exit for $9, $10 billion down the road? All right, so great stuff. Thank you for that analysis and thank you for watching this episode of theCUBE Insights powered by ETR. This is Dave Vellante for Stu Miniman. We'll see you next time.