Nutanix CEO to Partners: 'Be Patient' as 'We Transform Ourselves'

After helping to co-found Nutanix back in September 2009, CEO Dheeraj Pandey has been leading the company through product development, business growth and an IPO in 2015. In the last two years he has continued to lead the company’s transformation from a vendor that sold hardware which was pre-loaded with its hyperconverged infrastructure (HCI) software into a company that had dropped its hardware sales and will now only sell its HCI software.

Nutanix’s Dheeraj Pandey

Now as the company is celebrating its 10^th anniversary, Pandey sat down with Channel Futures last week at the company’s annual Nutanix .Next 2019 user and partner conference in Anaheim, California, where he talked about the channel, Nutanix’s March stock drop, his customers and the company’s future.

Channel Futures: Things have been busy at Nutanix in the last nine months. In March, Nutanix’s stock fell 31% after it issued lower-than-expected guidance for its third fiscal quarter sales. By April, the company had lost its chief revenue officer, Louis Attanasio, and then its global channel chief, Rodney Foreman, to resignations. All three events occurred within nine months after company president, Sudheesh Nair, left last August to join another company. How do you explain these things to the IT marketplace?

Dheeraj Pandey: Success is never a straight line and Wall Street is so elastic in the way it makes decisions. One day they’ll hate you and the other day they will love you. One day they will dump you and the other day they’ll actually go on a buying frenzy. They are memory-less. That’s good about Wall Street.

The deal is we have more money in the bank than we had a year ago. The company is successfully transitioning as a software company and every quarter we are growing and talking about subscriptions. These are two big transformations that we are doing in front of the public eye.

CF: Are your customers and partners worried about these things or asking you about them?

Pandey: To customers and the channel, I say, be patient and look at our Main Street behavior, which is quality of products, quality of customer support, quality of customer success. Look at those things and be with us as we transform ourselves, just like Microsoft did five, six or seven years ago. Adobe did, PTC did, Cadence did, Synopsys did, all of these companies that went through these tough transitions as a public company; that’s what we’re going through right now.

The ones that didn’t, like big business software companies that did not go after subscription business on-prem, they are the ones suffering right now. And we don’t want to actually go through that kind of an eventuality where we call ourselves a hybrid cloud company and yet we have nothing in terms of subscription on prem.

CF: Can you talk about what that transformation means?

Pandey: We’re going through a transformation, going from hardware to software and going from software to subscription, and finally going from $1 billion to $3 billion in revenue. A transformation means a lot of things. I think what you saw in the last six to nine months is about transforming ourselves into a company that is just as startup-like, just as customer-focused as before, but that is also planning focused.

CF: You said you are now looking at the channel in a new way — as a customer as well as a means to sell your products and services. Can you describe that?

Pandey: Looking at the channel and at our customers, that’s one thing that we missed for a long, long time. For that last 10 years we always looked at the channel as partners as opposed to as customers. There’s a big difference between the two. In one case you’re looking at the end-user customer and the channel partner is in your peripheral vision. In the other case you are looking at …

… the channel partner directly and the end-user customer in your peripheral vision — and the two are very different ways of really connecting.

CF: So how will this new approach change your relationship with the channel?

Pandey: We had to do a way better job of enablement, of training, of even going in and looking at them as if they were the customer. I think that makes for a more honest relationship with our channel partners. And when you become a software company, a few things have to change, like doing enterprise license agreements (ELAs) and enterprise purchase agreements (EPAs), and when you talk about subscriptions, there is a whole different offer that you have to bring in front of the channel. The channel is used to selling our hardware, but it now has to be transformed to sell our software and I think that’s the transformation journey we are on.

CF: So what do you see for Nutanix right now?

Pandey: We’ve become a software company in the last two years. We were always a software company, but we had to put this hardware shell around it so the customers could get the best customer experience, just like Apple did. We are out of selling the devices completely. Customers can run Nutanix software on any hardware they want to run it on and on AWS bare metal servers in Amazon data centers. The operating system is becoming more holistic with networking, security, different kinds of data management platforms, backups — they’re all coming together on this platform.

CF: Nutanix customers now buy their hardware preloaded with Nutanix HCI applications from hardware vendors, including your recently widened partnership with HPE, instead of directly from Nutanix, right?

Pandey: Yes, customers have run our applications in the past on Dell servers and Lenovo servers, Fujitsu, Hitachi and others, but HPE is a big part of the overall equation for us. And then in that essence of portability, the fact that we can really take this whole thing to a public cloud is one of the most powerful messages coming from us. Hardware sales are no longer recognized on our books, and it’s not in our profit and loss statement or on our balance sheet. We have a lot of arrangements with the OEM providers so we can actually do combined support.

CF: What’s the next big thing to help Nutanix channel partners?

Pandey: Cloud right now is this vertically integrated stack where no one but the cloud provider makes money. How are we going to make it into pure software so we can turn the channel partners into cloud providers? That is the real future of cloud. But I’m not talking only about professional services revenue. I’m talking about cloud service revenue, which means they are hosting someone’s compute. The thing that channel partners struggle with the most is customer on-boarding, customer experience, customer identity, billing, metering, payment, all the ecosystem. We give the channel partners everything. We’re working on some of these early deals with our service providers where we are saying, “Look, you take the whole thing and nothing but the whole thing.” Now when they host that service and they have customers who have Nutanix hosted on prem, now they can tether the two together and really build hybrid cloud solutions.