AWS & VMWare going after NTNX's market

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Hi Fools,

I’m curious what people think of the AWS announcement at re:Invent last week pertaining to AWS Outposts ?

https://aws.amazon.com/outposts/

This seems to be a direct shot at Nutanix’s market, the private data center hybrid cloud.

As the overview says, Outposts comes in 2 flavors. One flavor allows you to leverage an existing investment in VMWare Cloud, the other flavor is an AWS native variant of Outposts for on-premises hardware. The latter allowing you to leverage the native AWS APIs to build cloud infrastructures in your own data center.

Unless I had an existing investment in Nutanix’s offerings, as a CIO, I’d be taking a very hard look at using either the VMWare or preferably the AWS Native offering of Outposts!

I’d love to hear other people’s thoughts on this, as I haven’t dug into Nutanix too much, and only have a small starter position in it right now. But given this move by AWS, I’m more bullish on them than NTNX at this point…

–
Paul

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Interesting tweetstorm on “nobody ever gets fired for buying AWS” :

https://twitter.com/stevesi/status/1068579932610027520

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Paul,

I’m curious what people think of the AWS announcement at re:Invent last week pertaining to AWS Outposts ?

I’m interested to hear what others think as well, but have some general thoughts of my own as a non-industry insider and just one who follows stocks.

The first key point is Nutanix avoids vendor lock-in. The more AWS offers, the more locked-in its clients will be. Nutanix is specifically looking to avoid that.

Secondly and while Amazon continues to show incredible innovation across many verticals, specialization shouldn’t be underestimated. Software doesn’t necessarily follow the same path as capital intensive verticals. Disruption from below is more likely in software.

Thirdly, the HCI market is growing. Nutanix has the largest market share. Following HCI are many more services that allow superior flexibility for their customers as they always have.

Combining all these elements makes me want to hold them as a relatively large position. Companies can’t rely on sole sourcing, Amazon isn’t guaranteed to have a better product, and the smaller Nutanix continues to nimbly innovate.

A.J.

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Hi Phoolio,

You bring up some great points! I’m not sure Nutanix avoids vendor lock-in, so much as they want to be the vendor you lock in with. They may help you avoid lock-in with one particular cloud vendor, but your solutions designed with Nutanix won’t work with VMWare, they only work with Nutanix!

At some point you need to make decisions, and at that point you’ve placed your bets with a particular type of technology. And at some point maintaining flexibility becomes a cost and liability unto itself that might have been better avoided by locking in. All of this is going to be entirely case dependent, however, so, having choices in the market is good.

And I hear what you’re saying about disruption from below. But I don’t think we’re going to see disruption in the public cloud market for some time. Take IBM for example. It took decades to disrupt them, and that disruption came in the form of something they never dreamed of; the PC and the Internet. Something so entirely different from the mainframe that they couldn’t see it coming until they had been passed by and were forced to pivot from a mainframe software/support/services company into essentially a consulting and professional services company.

AWS has such an enormous lead on other cloud providers, and, all the other cloud providers are playing the game by Amazon’s rules, that disruption won’t come from that direction. And cloud is still in its infancy. So to expect disruption this early I think is very premature. We can’t have disruption until there is something to disrupt. And this segment hasn’t really congealed into anything solid enough for disruption yet. To have disruption we need an entrenched paradigm with obvious drawbacks and problems ripe for solving. I don’t think we’re there yet. AWS certainly has flaws, but they’re flaws of immaturity mostly, not flaws of entrenched paradigms.

The HCI market is growing. I’m not sure how fast though. I think a lot of companies are still weary of the cloud. Small start-ups understand the cloud and intuitively understand that paradigm. Mature companies with mature data centers and software stacks are essentially faced with re-writing their entire stack to be more “cloudy”. That’s a huge prospect. Slowly evolving your data center in that direction is probably the right way to go. And I think this is where VMWare and Nutanix are going to shine.

AWS, in this regard, is coming to the party from left field I think. For a company that hasn’t figured out the cloud yet, and has no idea how to move their stack to the cloud, Outposts might not help. If they haven’t figured out the cloud paradigm yet moving the cloud closer too them faster doesn’t help. Whereas both VMWare and Nutanix can offer them something more familiar with a slower more comfortable migration path.

Except, AWS is really good at helping people realize how much money they can save by reformulating their software stacks to fit the cloud paradigms. The question is, how quickly can they move enough companies such that Outposts becomes the defacto standard for on-premises cloud solutions?

The other thing I’m thinking about too is the idea of companies which have both public & private offerings, or want to do business with the government. The ability to transform their existing data center into an AWS compatible private cloud for their private offerings but continue to use the public cloud for either development/QA purposes, or whatever, is very, very attractive. As a CIO, I would most definitely want to transform my data center into something that is API compliant with whatever cloud I’m using. This creates a maximum ROI position for Infrastructure As Code and code reuse.

Sorry, I started rambling there with my thoughts. Clearly I need to think about this a lot more, as things seem incredibly muddied. I need to really understand what Nutanix is offering now that makes it still attractive in light of AWS getting into the HCI game. The partnership with VMWare too is likely to have a huge impact as well. It might be entirely too early, but my gut tells me AWS is going to be the winner over the long run.

–
Paul

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This article has a bit more info about AWS Outposts:

https://www.zdnet.com/article/aws-outpost-brings-its-cloud-h…

This article to me seems to imply it’s a solution for bigger companies who can afford to purchase full racks of managed equipment. If that’s the case, then Nutanix probably has plenty of market share in the smaller foot print data center area to co-exist with Outposts.

It will be fascinating to see what happens.

–
Paul

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I’ll try to not get down in the weeds.

First, let’s try and understand “lock in”. Every company is presumed to abhor this situation. They wish to maintain maximum flexibility and always want to open new requirements to competitive bidding. Lock in inhibits both flexibility and bidding contests. OK, reality is that every IT product to a lesser or greater extent represents some degree of lock in. And the notion of buying from vendor A one time and vendor B the next time and then vendor C a little later creates a support nightmare as no two vendors are going to offer identical products, so companies tend to buy the same stuff from the same companies in order to minimize support headaches which can be costly and time consuming.

But at the same time when it comes to the cloud, not every company is going to commit everything to a single cloud provider. I worked at a big aerospace firm. Cloud was just beginning to be a thing when I retired about 8 years ago. Even then they had stuff running on Azure and AWS, maybe elsewhere that I wasn’t aware of as I wasn’t really involved with it.

Unless you’ve made a decision that AWS will service all your needs, Outpost wouldn’t even be considered.

And that doesn’t even begin to address the features and functions available in the real world today. Outpost is pretty much vaporware, Nutanix is real stuff that provides a rich and deep feature set.

You’re welcome to listen to your gut, but the voice in my head is telling me Nutanix is the winner in the HCI arena. And one more thing. You can’t invest in AWS, you have to buy AMZN to get a piece of it.

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Unless you’ve made a decision that AWS will service all your needs, Outpost wouldn’t even be considered.

And that doesn’t even begin to address the features and functions available in the real world today. Outpost is pretty much vaporware, Nutanix is real stuff that provides a rich and deep feature set.

You’re welcome to listen to your gut, but the voice in my head is telling me Nutanix is the winner in the HCI arena. And one more thing. You can’t invest in AWS, you have to buy AMZN to get a piece of it.

brittlerock,

Excellent points! I’m not sure Outposts is vaporware. I’ll concede to them having no install-base yet, but Amazon doesn’t typically announce AWS features unless they’re ready to ship it. When they make an announcement at re:Invent of some new service or feature, it’s opened up to the world that day for prime-time use. With Outposts, I’d expect the same. They’re ready to roll racks into people’s data centers right now!

And I think there are plenty of people willing to commit to AWS enough to want Outposts in their data center. The playing field is probably big enough for both Outposts and Nutanix, though, because there are people who will want to spread things across multiple cloud providers, and Nutanix offers a decent enough abstraction layer to do that.

As for not being able to invest in AWS without buying Amazon, I don’t think that’s relevant for two reasons. One, because investing in Amazon is investing in AWS, and AWS is becoming a big enough percentage of their bottom line at this point to consider everything else ancillary to AWS. And two, because if AWS rolls out an on-prem solution that kills Nutanix, it very much matters to Nutanix investors. Nutanix is currently undergoing a shift away from hardware in order to provide more of a services-based abstraction layer to create a hybrid cloud. This is a potential stumbling point for them. If they screw this up at exactly the same time AWS offers a better, more viable solution to those looking to bridge their data centers to AWS, Nutanix will take a hit.

I see this as a very real threat to Nutanix. It may not be a death blow, it may not even knock them out. But I think it very well could make a lot of customers who are already exclusively AWS oriented reconsider their options. I know I would, especially if cloud flexibility was not a high priority to me, which it often isn’t.

–
Paul

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I’ll concede to them having no install-base yet, but Amazon doesn’t typically announce AWS features unless they’re ready to ship it. When they make an announcement at re:Invent of some new service or feature, it’s opened up to the world that day for prime-time use. With Outposts, I’d expect the same. They’re ready to roll racks into people’s data centers right now!

https://aws.amazon.com/about-aws/whats-new/2018/11/announcin…

…AWS Outposts will be generally available in the second half of 2019. Visit the AWS Outposts product page to learn more.

Brian

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You bring up some great points! I’m not sure Nutanix avoids vendor lock-in, so much as they want to be the vendor you lock in with. They may help you avoid lock-in with one particular cloud vendor, but your solutions designed with Nutanix won’t work with VMWare, they only work with Nutanix!

FlixFool

From what I learned about Nutanix that would not be true: https://www.nutanix.com/solutions/virtualization-cloud/vmwar…

Also, I think Nutanix does help companies avoid cloud lock-in, not vendor lock-in. Most companies do not only use one cloud:

More than 80% of companies use a multi-cloud strategy, typically comprised of a hybrid cloud model which relies on public and private clouds, according to Rightscale’s 2018 State of the Cloud. The report is based on a survey of almost 1,000 technical executives and cloud practitioners.

On average, companies are using 4.8 private and public clouds to run applications and experiment with new services. The increased cloud use has sparked more investment. One-fifth of enterprises plan to more than double cloud spending, and another 17% expect to increase cloud spending by 50-100%, according to the report.

https://www.techrepublic.com/article/why-86-of-enterprises-e…

The killer app for the multi-cloud environment seems to be MIGRATION. What Nutanix seems to be aiming to build would be a platform that would be the best at MIGRATION…meaning that if a company wants to switch applications to run on a different cloud because of regulatory reasons, pricing, richer feature set elsewhere or simply to have a backup on a different cloud, then Nutanix might be the best service to do that.

I also encourage people to read either my Nutanix conference call notes in the paid services https://discussion.fool.com/4056/q1fy19-conference-call-transcri… or read the actual conference call itself: https://www.fool.com/earnings/call-transcripts/2018/11/27/nu…

Just from light reading on the subject, I think Nutanix would be a lot further ahead of VMware as far as features might be concerned. In fact, I think a lot of what Nutanix seems to be doing would be disrupting VMware.

One thing that the Nutanix CEO claims would be that VMware does not try to compete against Nutanix where the potential customers want to see a proof of concept. The Nutanix CEO gave a example where VMware blew a proof of concept with a airport.

Nutanix has been calling VMware out lately:

“Our dominance in the core is why VMware avoids doing PoCs in accounts when we are in a head-to-head fight,” he said, citing a Q1 customer win. He didn’t name the customer but said it’s a major international airport in the Europe, Middle East, and Africa region and “one of the busiest in the world.”

“With this customer, VMware’s good-enough wasn’t good enough to create dynamic, cloud-grade platform for the majority of their core airport applications,” he said. Later on the call, Pandey added “we really want to go after PoCs, proof of concepts, with VMware.”

https://www.sdxcentral.com/articles/news/nutanix-challenges-…

What does the Nutanix CEO say about AWS?

The Nutanix CEO claims that:

“Only Amazon AWS has a true grasp of infrastructure and even they will have to think hard about how to make it truly enterprise workload ready and also miniaturize themselves, that is, ship code to tens of thousands of sites to disperse clouds.”

Dheeraj Pandey

One of the few companies that I think Dheeraj Pandey respects as a competitor might be Amazon but I still think that Nutanix might even be ahead of Amazon in understanding network architecture.

I am no expert in this area but I think Nutanix has a decent sized lead in creating a multi-cloud operating environment that can MIGRATE applications between any cloud as necessary…whether that cloud be a public cloud or private cloud or increasingly a cloud on the Edge.

Starrob

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…AWS Outposts will be generally available in the second half of 2019. Visit the AWS Outposts product page to learn more.

Whoops… Somehow I missed that.

Thanks!

Paul - sheepishly slinks away full of embarrassment. :-/

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Hi Starrob,

Thanks. Perhaps I’m looking at this from too much personal experience, which is obviously in contradiction to what the market is actually saying. This is a hazard for me, since I work in this space, but typically in very small to barely-medium sized companies… So, thanks for pointing out where I’m missing forests for trees!

The killer app for the multi-cloud environment seems to be MIGRATION. What Nutanix seems to be aiming to build would be a platform that would be the best at MIGRATION…meaning that if a company wants to switch applications to run on a different cloud because of regulatory reasons, pricing, richer feature set elsewhere or simply to have a backup on a different cloud, then Nutanix might be the best service to do that.

This puts an entirely new twist on my understanding of what Nutanix is…

I looked at Nutanix a few years ago at a previous job. Our IT dept. had them in the data center for some things. But it was the old proprietary hardware solution the IT guys had. I was looking at them for an HCI application for a possible use between our on-prem software stack and things in the cloud. This solution was, according to them at the time, a new feature they gained from a recent acquisition (can’t remember who). Based on that presentation, it appeared that they would allow you to write templates for your deployments in an abstracted way and they would handle interfacing between your data center and AWS. It is this side of Nutanix I have been assuming the company is pivoting away from the hardware to.

But for some reason I think I discounted this as a means to migrate BETWEEN cloud providers. I don’t know why. Now that I see how you wrote the above it seems blatantly obvious that this is the killer app for multi-cloud environments!

I was always considering Nutanix to be more of a help with migrating in the sense of moving applications out of the data center and into the cloud, but wanting a stepping-stone from one to the other. I can see now that this is an entirely flawed perspective. Of COURSE they want to be able to migrate across clouds.

So, brittlerock’s point of someone having to buy into AWS exclusively for Outposts to be viable makes a lot more sense now. From my perspective down here in the small-company weeds, we’re only operating with one cloud provider, AWS. We’re too small to be able to consider spanning multiple environments, and we couldn’t afford an abstraction layer like Nutanix, so for us, focus makes sense.

Clearly I need to dig into Nutanix more deeply and better understand it much better!

Thank you all for showing me the errors in my thinking!

–
Paul - who reminds himself that confirmation bias is a sneaky, and very real thing…

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This puts an entirely new twist on my understanding of what Nutanix is…

FlixFool

Nutanix would, in my opinion be a rapidly evolving company, in a rapidly evolving space.

Nutanix was once mostly about Hyperconverged Computing but currently they would be in the process of evolving into a platform that does multi-cloud management.

In the last conference call the CEO said this:

…there will be need for a new metaphorical “hypervisor of virtualization stack on top of multiple clouds”, just like there was a need for virtualization or a hypervisor across multiple servers and across multiple storage boxes on-prem.

Dheeraj Pandey

Nutanix wants to be the “hypervisor of virtualization stack on top of multiple clouds”

That’s Rulebreaking type stuff…Nutanix seems to be a first mover in that direction.

Starrob

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Nutanix in 30 seconds it’s called…or for me at least 5 minutes and then some.

https://www.nutanix.com/documents/datasheets/nutanix-in-30-s…

WHAT IS ENTERPRISE CLOUD?
An Enterprise Cloud is a unified IT operating environment that melds private, public and distributed clouds, providing a single point of control for managing infrastructure and applications in any cloud. The Enterprise Cloud delivers a consistent, high-performance and seamless experience for both cloud operators and consumers of cloud-delivered services and applications.

-Advanced automation and orchestration of applications running in Nutanix clouds and public cloud services, such as Amazon Web Services (AWS) and Google Cloud Platform through Nutanix Calm
-Cloud services that natively extend the capabilities of datacenter infrastructure through Nutanix Xi Cloud Services

This here I thought was really intriguing

The Nutanix Enterprise Cloud OS becomes smarter over time with patented X-Fit machine-learning technology that leverages data-driven algorithms to reduce unplanned administrator intervention.

“One OS. One Click. Any Cloud”

Darth

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