News Stay informed about the latest enterprise technology news and product updates.

Nutanix customers trending larger, spending more on HCI

Besides proving there is plenty of growth still going on in the hyper-converged infrastructure market, Nutanix’s last earnings report showed HCI has moved well beyond VDI and niche applications.

Nutanix closed a $20 million deal last quarter, its largest ever. The unnamed Department of Defense agency uses the Nutanix platform “to power combat edge clouds around the world,” according to Nutanix CEO Dheeraj Pandey. He said the customer will use Nutanix in 15 remote sites.

Then there was a financial services firm that spent $5 million on a Nutanix deal last quarter. The HCI pioneer claimed 23 deals worth more than $1 million in the quarter.

It’s not only Nutanix that’s seeing larger HCI deals. VMware also closed its largest deal for its vSAN HCI platform last quarter – a 1,200-retail store server refresh involving Dell EMC VxRail appliances.

“It’s part of the journey of maturation of hyper-convergence,” Pandey said in an interview after the earnings call. “We’re solving big problems for the enterprise. And there are different approaches. The approach we take is, we don’t bundle anything, we don’t have the luxury to bundle things with larger deals that are beyond just hyper-converged. For us, it’s all product and quality and customer service, and how we handle the highest-end workload.”

Nutanix is now nine months into its shift to a software-centric business model. It still sells branded appliances but has flexible licensing options. Customers can choose to spread their software licenses across Nutanix appliances or server purchased through OEM deals with Dell EMC and Lenovo or other hardware partners.

The change to a software model hasn’t changed Nutanix’s pattern of growing revenues while losing money. Nutanix reported $304 million in revenue last quarter, up 20% year-over-year. It lost $87.4 million compared to $66.1 million in the same quarter a year ago. For the full year, Nutanix generated $1.16 billion in revenue compared to $845.9 million in the previous year. Its full year loss of $297.2 million was less than the $379 million loss the year before.

Nutanix customers now number more than 10,000, including 1,000 last quarter.

“The biggest change is around consumption,” Pandey said of the move to a software model. “When people have portability, they can take these software licenses and run them on different hardware platforms. Many companies don’t want to buy hardware up front because of Moore’s Law and the commoditization of hardware. They want to buy more software and less hardware up front.”

Nutanix’s consumption model will likely change again over the next year with more cloud-based subscription coming. Its Xi Leap – a cloud-based disaster recovery service with one-click failover and failback – is due to be generally available the end of the year.

Beam, Nutanix’s multi-cloud management dashboard, is available now. And Nutanix in August spent $165 million to acquire Frame, a startup developing desktop-as-a-service that Nutanix intends to make available as part of Xi. Pandey said the goal for making Frame available is early 2019.

So now that Nutanix has $1 billion in annual revenue and projects to hit $3 billion in three years, what’s its timeframe for profitability? Pandey refers to the Nutanix strategy as “measured growth” and it funds its spending through free cash flow. Nutanix had $22.7 million in operating cash flow from last quarter.

“Right now we believe Nutanix customers are willing to pay us more, and it’s important that we create the foundation of a customer base that continues to buy from us,” he said. “We’re going to spend a lot of money this year, but we don’t want to touch the bank. How do we do this at cash-flow break-even rather than touching the bank? That’s one guardrail that helps balance the two paradoxes.”