Nutanix Aligned with VMware Accounts

Nutanix: Appears Set to Benefit from New VMware Sales Strategy

Key Takeaways

• Preliminary data for Nutanix indicates a rise in Net Score data to 33.9%, the highest level since April 2021, representing a 26-point rebound from an all-time low Net Score three quarters ago, from planned Adoptions and existing
customer Increases

• Following Broadcom’s acquisition of VMware and the pricing model change announcement in December, our VMware survey data (notably Replacements) has surged, suggesting less stickiness under this model than previously held

• ITDMs are citing pricing and ROI as the top reason for both Nutanix Adoption and VMware Replacement in our preliminary July TSIS results

• Shared account data between the two vendors shows a substantial increase in Nutanix’s Net Score compared with the preannouncement period (October 2023)

Please note: this article summarizes the full report, which includes more data visualization and analysis. If you would like a copy of the full report, please use the pop up form or reach out to us at service@etr.ai 

Recent VMware Pricing and Delivery Model Changes

In December of 2023, Broadcom announced substantial changes to VMware, ending perpetual licenses in favor of a subscription-based model. Additionally, VMware products will be sold only under the Cloud Foundation (VCF) and vSphere Foundation (VVF) bundles with available add-on services and no longer as point products. Despite VMware’s reputation for stickiness due to the quality of the technology, we think this news has generally not been well received among its installed base. With widespread media reports of customers claiming price increases as high as 10x, some VMware users are seeking alternatives for virtualization needs.

Price increases upon renewal have been common in software in recent years. In our ETR Insights 392 interview, a VP of a large business services enterprise remarked, "Many agreements—Microsoft, Splunk—they have multi-year enterprise agreements where generally those costs stay flat by contract... and those flat year-over-year costs based on those multi-year contracts are really being offset by significant increases. One that I know a lot of companies, including mine, are dealing with now is VMware and the Broadcom acquisition. It's really shifted the licensing models, to a point that I think a lot of folks are going to start looking at alternatives to VMware."

Cutting our July 2024 preliminary Broadcom TSIS data (n = 868) to include only VMware products (excluding Carbon Black), our current survey iteration reflects this sentiment. Over 13% of responding IT decision makers (ITDMs) responded with plans to Replace the platform, up from just 4% in October 2023, before the changes were announced. The combined Net Score among these products has dipped into negative territory for the first time in over 14 years that we have tracked VMware products and Large Organizational data is marginally worse. Among Fortune 100 respondents (n = 80), Net Score fell below –5%, with nearly 16% of ITDMs stating they intend to Replace the products.

Examining the reasoning for a planned switch, 61% of customers intending to Replace VMware cited Product Cost / ROI as their primary reason for moving away from the vendor, followed by Vendor Relationship / Support. This raises the question of which vendors or alternative products stand to benefit from elevated churn among VMware customers.

VMware customers unwilling or unable to pay for bundled subscription products have technical alternatives in containerizing applications or shifting to the cloud. For those intending to remain on a virtualization platform though, Nutanix may be a primary beneficiary of churning VMware users over the next few years as contracts come up for renewal.

Our July 2024 TSIS has received spending intentions from 221 Nutanix customers to date, with 17% indicating plans to Adopt the vendor in the second half of the year. This citation rate is nearly twice the percentage last quarter and triple the October 2023 number, the last quarter of our TSIS before VMware pricing was announced. Increased spending citations are 10 points higher than this October period, while Decrease and Replace citations have also fallen marginally. Viewing an aggregate, citation-weighted average for publicly traded vendors we track in our TSIS, Nutanix data has had the largest y/y increase within Adoptions (minimum 50 citations).

As Adoption citations have grown for Nutanix, the top reasons cited have shifted from Product Technical Capabilities and Feature Breadth in April to Product Cost / ROI this quarter. This price category was tied for fourth highest only three months ago, but now sits as the clear number one reason. Planned migrations from VMware customers unhappy with the strategic sales change beginning to shift to Nutanix may explain this sudden weighting on ROI over technical features.

Shared Accounts Offer Further Evidence

IT organizations commonly use multiple virtualization vendors for different needs, particularly at the large enterprise level, allowing us to analyze a rich subset of ITDM respondents utilizing both Nutanix and VMware products. From October 2023, before the new pricing and bundling changes were announced, to our preliminary July 2024 data now, customers using both platforms indicated a 22-point drop in spending intention on VMware (n = 188, shown below). Isolating the critical Large Organization segment data, which comprises 70% of the shared account population this quarter, our survey shows an incrementally worse 25-point decline.

Slicing our shared account data another way, we can see the Net Score deltas for the 57 customers utilizing Nutanix and who indicated plans to Replace a VMware product the back half of the year. Within this cohort, the Nutanix Net Score has risen 54 points since October and 27 points since last quarter. The quantity of this subset has also grown rapidly, from 23 in October, to 53 in April, and 57 in the current survey.

Given the timing and pace of Net Score changes for both virtualization platforms and the sharp trends in spending intentions within shared accounts, we expect that Nutanix will be a primary beneficiary of new logos and increased spending from elevated VMware churn. However, the tailwind of new accounts and ACV growth for Nutanix would be a gradual, multiyear process, as VMware users face switching hurdles and are locked into current VMware contracts. Nutanix CEO Rajiv Ramaswami recently noted that “many of the smarter customers actually did lock in three- to five-year deals with VMware before the acquisition closed.” Despite the uncertain timing on this, our IT decision maker community is clearly evaluating the new VMware model with scrutiny, presenting an opportunity for Nutanix and other virtualization platforms to fight for market share.

Contact the ETR research team if you would like to discuss the July 2024 TSIS data, request your own custom surveys, or speak with one the IT decision makers in our community via our expert network service, ETR Connect.

Enterprise Technology Research (ETR) is a technology market research firm that leverages proprietary data from our targeted IT decision maker (ITDM) community to provide actionable insights about spending intentions and industry trends. Since 2010, we have worked diligently at achieving one goal: eliminating the need for opinions in enterprise research, which are often formed from incomplete, biased, and statistically insignificant data. Our community of ITDMs represents $1+ trillion in annual IT spend and is positioned to provide best-in-class customer/evaluator perspectives. ETR’s proprietary data and insights from this community empower institutional investors, technology companies, and ITDMs to navigate the complex enterprise technology landscape amid an expanding marketplace. Discover what ETR can do for you at www.etr.ai