Nutanix On Collision Course With SMB HCI Vendors

Nutanix has gone down-market with its new Xpress product line, which it says is “designed to bring the power of the Nutanix enterprise cloud platform to small and medium businesses (SMBs).” This is a curious development, particularly given Nutanix's aggressive positioning as a “web-scale” company.

Just under a year ago, Nutanix released its own Acropolis hypervisor, an alternate hypervisor to VMware, which aids profitability in its run to an IPO. The company filed its S-1 back in December 2015, but things have gone quiet since then as the market has softened, and it's unclear when the IPO might eventually be.

Acropolis is based on the KVM hypervisor, and this is where things start to get murky.

Scale Computing also sells a hyperconverged infrastructure appliance with a hypervisor based on KVM. Unlike Nutanix, Scale has been consistent in marketing itself as for the SMB market for many years. Other analysts and commentators have praised Scale's focus on this market and it appears to be largely paying off for the company. Scale co-founder Jason Collier told me they had over 1500 customers, “coming up on 1600 customers”, but only just under one hundred staff. Scale Computing recently unveiled new, all-flash versions of their HC3 product line which boost the I/O performance of the platform, but it remains firmly aimed at the SMB market.

“SMB is our focus,” said Scale Co-Founder Jason Collier. “We saw it as an under-served market, and we wanted to develop products that we wanted to use, because we were those small to mid-size folks.”

Then there's SimpliVity, which recently made headlines with its appearance on HBO's Silicon Valley as the Box. (Pure Storage had previously made an appearance on the show. What is it with storage companies and TV shows?) SimpliVity also sells hyperconverged infrastructure, but it has a fancy accelerator card as well as fancy software on commodity hardware, and also sells into the higher end of the SMB market, as well as enterprise.

And then we get into the plethora of other companies also doing HCI in the mid-market: Pivot3, which just bought Nexgen (which spun out of SanDisk earlier this year) which is growing strongly.

Not to mention VMware's VSAN, which recently released version 6.2 which added many of the features that analysts decried as missing, making the product much more compelling than earlier versions.

It's a pretty crowded market already, and with Nutanix traditionally positioned towards enterprise, I asked the company why it was moving to target SMB. A company responded via email:

Nutanix clearly sees potential in being able to dominate this notoriously challenging market. “While individual SMBs can’t match the infrastructure spend of a Global 2000,” the spokesperson said, “according to Gartner, mid-market and SMB companies make up about 60 percent of IT spend globally. It’s a significant market that has been under-served.”

“Our SMB investment is focused on developing the right go-to-market strategies to make this a profitable part of our enterprise cloud business.”

Nutanix is attempting to re-position itself as an “Enterprise Cloud Company” as per the new tagline on its website, but enterprise and SMB are two very different markets, and appealing to both of them with the same core technology is a substantial challenge.

Nutanix isn't ignorant of this challenge, saying “A lot of vendors look at the SMB market as an easy segment to penetrate – just strip out some enterprise functionality from an existing platform, say your product is for the SMB and you’re gold. But that approach ignores the reality that SMBs have different needs than enterprises. That’s why it was important for us to differentiate Nutanix Xpress from our enterprises offerings so distinctly, and our roadmap will focus around serviceability and cloud solutions.”

I'm not clear on what those distinct differences are yet, but with Nutanix making a bold play for some of the SMB market, it will be anything but boring to watch.

Disclosure: I have received a refurbished Scale Computing HC1000 cluster from Scale Computing to use in my lab. I will be a guest of Nutanix at its upcoming .NEXT conference in Las Vegas. I am a member of VMware's vExpert program. For more detailed disclosure information, check my blog.

This article first appeared in Forbes.com here.