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HomeInterviewNutanix’s transformation makes cloud simple and flexible to use

Nutanix’s transformation makes cloud simple and flexible to use

A leading US cloud computing company, Nutanix continues its growth by transforming the business model from one-time purchase of products and services to pay-per-use subscription.

The goal is to deliver simplicity and flexibility of cloud deployment.

Nutanix President and CEO Rajiv Ramaswami said during his exclusive interview with The Story Thailand that the company is currently on its second journey to scale the organization as it becomes the multi-million-dollar subscription company focused on cloud computing.

After one full year as Nutanix CEO, Rajiv has become strongly convinced that cloud computing, especially hybrid multi-cloud, will grow exponentially while remaining important for several years. It is because companies now set their goal of going digital — and to achieve that, they need to operate their applications in the cloud.

“Our major vision and mission are to make cloud simple, flexible and affordable for our customers to deploy whether they are using their own data center or any public cloud providers,” Rajiv said.

At its very beginning, Nutanix started by developing hyper-converged infrastructure (HCI), bringing site work across computer storage arrays and networking together into a simple software platform that helped customers simplify their infrastructure and operation with reduced cost while allowing them to work seamlessly with every application.

“That’s what I call the first journey of the company.  We are now on the second journey, which is to scale the company as we become a multi-million-dollar subscription company focused on the cloud.”

The CEO defined the company’s past year as the beginning of its second journey of transformation from perpetual software appliance selling on standard configurations to software subscription.

In this second journey, Nutanix will focus of its growth and profitability executed by four key priorities to become a leading hybrid multi-cloud company.

The top priority is to continue supporting customers’ expansion to the public cloud with a hybrid multi-cloud platform. Then, the next priority is to finish their subscription journey before scaling the business to partners and deliver the solutions that customers require. The final priority is to execute on the financial side of the business.

“That is the journey we have been on over the last year and continue to be on this year as well,” the CEO said.

His company’s goal is to make it easy for customers to use public clouds. “The cloud really, in our view, is the operating model. It’s not just the destination.”

To simplify the usage, Nutanix creates an open hybrid multi-cloud platform that allows its customers to run and manage applications wherever and whenever they prefer.

“That is the first part of our journey that becomes our vision and mission. We are moving from selling individual point products to putting the portfolios together,” Rajiv said.

Meanwhile, priority number 2 is to complete Nutanix’s journey to being a subscription software company.

“Nutanix started as an appliance company and then became a software company. Over the last few years, we transform our business to become a subscription company,” the CEO said.

The company is focusing on two engines — winning new businesses and expanding its customer base, and maintaining customer loyalty with a high rate of contract renewal.

The third priority is scaling to partnership, which is critical amidst the current intensive competition in the hybrid cloud world, Rajiv emphasized.

“Over the past years, we have done more with HP and Lenovo. We created new partnership with Red Hat and formalized our partnership with Citrix. We continue to work with our cloud partners, Microsoft and AWS.”

The last priority is to articulate a financial business model in order to continue the company’s top-line growth, with the annual contract value (ACV) billing — the metric that shows how much a customer contract is worth by averaging and normalizing its value over one year — by 25% per year for the next three years.

Meanwhile, Nutanix aims to achieve a sustainable free cash flow by the end of 2022 and operating income positive with two quarters after that. Rajiv insisted that his company raised the estimates every quarter for the last four quarters.

With a new business model, Nutanix is selling short-term subscriptions and no longer sells networking as a standalone product while management, operations, and automation will be sold as a package rather than separately.

The company’s financial model has two main components — new upsurge business and contract renewal. Rajiv said Nutanix continues to make progress on those fronts although there are more to be done this year.

Subscription is the right model

He is convinced that subscription is the right and suitable business model for Nutanix, as it offers more alternatives for customers to access the company’s products and services.

“From the customer’s perspective, subscriptions give them a lot of freedom and choices. They can engage and no log-in. They can work with us in whatever duration they like,” Rajiv said.

He noted that during the pandemic, many people are not ready to make long-term contracts due to financial difficulties.

“Having the flexibility to invest for the short term is actually very good for the customers. And they also like the simplicity of our subscription. They can not only use it in their own data centre, but also take that subscription license as the exactly same software that we deliver for use in a public cloud.”

Rajiv insists that the subscription model with complete license flexibility and affordability really benefits the customers.

Moreover, this model gives Nutanix more predictability of the business, given the rate of contract renewal. The subscription model also helps the company create brand loyalty while improving brand awareness, access and engagement.

“The vision is to make the cloud invisible so that companies can focus on their business outcomes. The mission statement is to be liked by our customers with an open hybrid multi-cloud platform that can help them build, run, manage and secure all the applications,” the CEO said.

Major challenges and competitors

Rajiv said the major challenges for the company this year involve how to gradually execute all those four priorities and maintain the lead of the market both in revenue and popularity.

Meanwhile, COVID-19 remains a major risk factor, as the company needs to learn and adapt to work in a distributed environment.

“As a tech company, we must have a lot of resilience and guts to be able to adapt and move on. The situation like COVID comes in. We have to adapt and thrive. That’s what make us resilient.”

Rajiv classifies competition into three categories — largely legacy architecture or companies that provide storage or networking for enterprises, companies attempting to build a hybrid multi-cloud solution, and companies using public clouds natively.

“With what we have done with HCI, we break the cycle across all of those. We put them all together, run them on commodity hardware and provide a lot of saving to our customers and make it easy for them to use,” he said.

Although there are big players in the field, Nutanix remains in the front with four major advantaged over its competitors — expertise in data workforce management, simplicity, freedom and flexibility to customers at every layer, and focus on customers’ satisfaction.

In order to sustain the growth, Rajiv says the company pays attention to ESG policy.

Nutanix aims to make the data centre, products and IT infrastructure much more efficient with less power consumption and reduced carbon emission.

The CEO also noted that an essential element for a sustainable growth is to continue building the talent base and becoming more diverse across location, gender and perspective.

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