VMware vSAN HCI: Complete stack or 'vaporware'?

Days after VMware's CEO proclaimed his vSAN product the winner in the hyper-converged infrastructure space, the CEO of VMWare rival Nutanix countered that VMware "sells a lot of vaporware."

"We're crushing Nu ... I mean we're winning in the marketplace," VMware CEO Pat Gelsinger said during his opening VMworld keynote last week. "We're separating from No. 2. We're winning in the space."

Two days later on Nutanix's earnings call, CEO Dheeraj Pandey took a shot at VMware without mentioning the company by name. "We don't sell vaporware," he said, when referring to why Nutanix wins in competitive deals.

In an exclusive interview after the call, Pandey admitted the vaporware charge was aimed mostly at VMware's vSAN HCI software.

Pat Gelsinger

"VMware sells a lot of vaporware," Pandey said. "A lot of that vaporware becomes evident to customers who buy that stuff. When bundled products don't deliver on their promise, they call us. What we sell is not shelfware."

Whatever VMware is selling with its vSAN HCI software, it is working. VMware reported license bookings of its vSAN HCI software grew 45% year-over-year last quarter, while Nutanix revenue and bookings slipped from last year. VMware's parent Dell also claimed a 77% increase in orders of its Dell EMC VxRail HCI appliances that run vSAN software. Those numbers suggest Dell increased market share against Nutanix, even if Nutanix did better than expected last quarter following a disappointing period. IDC listed VMware as the HCI software market leader and Dell as the hardware HCI leader in the first quarter of 2019, with Nutanix second in both categories. Gartner lists Nutanix as the HCI software leader, but No. 2 VMware made up ground in Gartner's first-quarter numbers.

Nutanix's Pandey attributed at least some of VMware's HCI success to bundling its vSAN software with its overall virtualization stack. Like VMware, Nutanix has its own hypervisor (AHV) and its share of hardware partners -- including Dell -- but VMware has a huge vSphere installed base to sell vSAN into.

Dheeraj Pandey

Pandey said he was unimpressed by VMware's Kubernetes and open source plans laid out at VMworld, which included Tanzu and Project Pacific. Both are still roadmap items but reflect a commitment from VMware to containers and open source software.

"That's worse than vaporware, that's slideware," Pandey said of VMware's announcements. "Everything works in slides. We're based on Linux; we get a lot of leverage out of open source. AHV was based on Linux, and we've made it enterprise grade."

Making vSAN part of its vSphere virtualization platform has paid off for VMware. Customers at VMworld pointed to their familiarity with VMware and vSAN's integration with vSphere, and its NSX software-defined networking as reasons for going with vSAN HCI.

 "What really end up selling it for us was, we were already using VMware for our base product and the vast majority of the deliverables that our customers request is in vSphere," said Lester Shisler, senior IT systems engineer at Harmony Healthcare IT, based in South Bend, Ind. "So whatever pain points we learned along the way with vSAN, we were going to have to learn [with a competing HCI product] as well, along with new software and new management and everything else."

Matthew Douglas, chief enterprise architect at Sentara Healthcare in Norfolk, Va., said Nutanix was among the HCI options he looked at before picking vSAN.

"VMware was ultimately the choice," he said. "All the others were missing some components. VMWare was a consistent platform for hyper-converged infrastructure. Plus, there was NSX and all these things that fit together in a nice, uniform fashion. And as an enterprise, I couldn't make a choice of all these independent different tools. Having one consistent tool was the differentiator."

Despite losing share, Nutanix's last-quarter results were mixed. Its revenue of $300 million and billings of $372 million were both down from last year but better than expected following the disappointing previous quarter. Nutanix's software and support revenue of $287 million increased 7%, a good sign for the HCI pioneer's move to a software-centric business model. Nutanix also reported a 16% growth in deals over $1 million from the previous quarter.

However, operating expenses also increased. Sales and marketing spend jumped to $254 million from $183 million the previous year. Nutanix, which has never recorded a profit, lost $194 million in the quarter -- more than double its losses from a year ago. It finished the quarter with $909 million in cash, down from $943 million last year.

Pandey said he is more concerned about growth and customer acquisition than profitability.

"Profitability is a nuanced word," Pandey said. "We defer so much in our balance sheet. Right now we care about doing right by the customer when we sell them subscriptions."