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HCI market: rich get richer as Dell, Nutanix flourish

Dell, VMware and Nutanix continued to dominate the hyper-converged infrastructure market in the first quarter, combining for most of the fast-growing segment.

According to IDC’s first quarter converged systems tracker, Dell and its subsidiary VMware led the market depending on whether it is measured by branded hardware or HCI software-led sales. Nutanix was second either way. Hewlett-Packard Enterprise and Cisco outgrew the overall market but remained well behind the leaders.

IDC measures the HCI market two ways: by the brand of the hyper-converged system and by the owner of the software providing the core hyper-converged capabilities. Those are two views of the HCI market, which increased 76.3% year-over-year in the first quarter to $1.2 billion. HCI revenue remained flat with the fourth quarter of 2017, which had been the largest ever for HCI sales.

The HCI market is close to becoming larger than the certified reference systems and converged infrastructure market. Converged systems generated $1.3 billion in revenue during the first quarter, an 0.9% year-over-year decline. Converged systems revenue fell $400 million from the fourth quarter of 2017 to the first quarter of 2018.

Dell, which sells Dell EMC branded HCI appliances along with servers that include Nutanix software, led the branded hardware market with 29.6% share.  Dell’s $363 million in revenue grew 142% year-over-year. Its share increased from 21.6% a year ago and 27.8% in the fourth quarter.  Nutanix branded revenue of $273 million made up 22.2% of the market and represented 71.5% growth in branded revenue. Nutanix branded revenue was 22.9% a year ago and 19.5% in the fourth quarter of 2017.

In the software view, VMware and Nutanix generated nearly 70% of the HCI market. VMware led with $456.3 million, a 109.5% year-over-year spike. Its market share of 37.2% increased from 31.3% a year ago and 32.4% in the fourth quarter. HCI systems with Nutanix’s core HCI software generated $398.7 million in first-quarter revenue, 85.5% year-over-year growth. Nutanix’s 32.5% market share increased from 30.1% a year ago and 29.5% in the fourth quarter.

HPE was a distant third in both views. HPE branded hardware accounted for $61 million and 5% share, a 112.3% year-over-year revenue increase. Based on HCI software ownership, IDC credited HPE with $61.3 million for 280.8% growth. HPE’s year-over-year software growth came from its early 2017 acquisition of early HCI vendor SimpliVity. HPE sells SimpliVity HCI software on ProLiant servers.

Cisco’s HCI revenue was $59.9 million in either view – good for 4.9% share and 145% growth.

Revenue from all other HCI vendors combined grew at a far less impressive rate. From a branded perspective, the “others” category increased 41% for 38.3% share in the first quarter. In the software view, combined revenue from “others” increased only 12.7% and share dropped from 32% a year ago to 20.4%. That means the top four vendors combined for 87.3% of the HCI market when measured by core HCI software. That’s  up from 74.7% in the fourth quarter of 2017.

Converged infrastructure sales decline

Dell held its lead in converged  infrastructure (CI) sales despite a 1% year-over-year decline to $643.1 million. Dell’s 48% share was the same as in the first quarter of 2017. No. 2 NetApp/Cisco increased its CI revenue 16.8% to $462 million and its share of 34.6% was up from 29.3% a year ago. No. 3 HPE held only 7.9% of the CI market after a 42.4% year-over-year revenue decline. HPE’s share slipped from 13.6% a year ago. All other CI vendors combined held less than 10% of the market.

IDC defines converged systems as pre-integrated, vendor-certified systems that must include four components: server hardware, disk storage, networking equipment, and systems management software.

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