One of the more surprising surprises of a generally surprising year was the announcement by Nutanix CEO and co-founder Dheeraj Pandey that he is to retire once a replacement CEO has been identified and put in place. That is to say, he talks about his next move as retirement. In a Q&A session at the company’s recent annual conference he listed several things he’d like to do more of, such as reading and travelling.
But to hear him talk is to hear a man still driven by thoughts of how much more IT can be cajoled into delivering real value to users. Pandey is not old and has a brain obviously still full of ideas and possible solutions. In addition, unlike some others in the coterie of Silicon Valley CEOs, he is not of the mega-yacht-and-off-over-the-horizon breed.
Indeed, to hear him talk suggests that one of the on-going bees in his bonnet is a desire to skew the IT vendor community away from the traditional zero-sum game where vendor X wins everything and every other vendor suffers loss and penury. If anything, he treats that approach with genuine disdain. Instead there is a view that no one person, no one company, can provide everything - and if sharing the opportunities out is the only way, then let’s also make it the best, most cost-effective way there can be.
Pandey was, of course, not going to escape first of all talking about the other development related to his retirement - a $750 million investment into Nutanix by Bain Capital:
When the Bain investment, being a capital investment, came in, I figured it's the right time to make an announcement as to at least making a great attempt at at finding a successor. There’s still a lot of hard work to deliver the quarters in the next couple of quarters. So I'm taking it one quarter at a time, not really committing to anything. I sit on Adobe's board and I will continue to be on Nutanix's board until the successor has arrived.
Despite being an investment of capital rather than a move to buy a piece of the company, Pandey does see a very specific role for Bain Capital over the investment period, which terminates in 2026. That is to use its skills and experience in helping Nutanix make the transition from the traditional licence acquisition model to the subscription model:
I think going from total contract value and five year terms, to annual contract value and three year terms - and even some of the new products to one year terms - has been the biggest focus of our discussions. And there there's amazing efficiencies to achieve.
This is likely to include advising and training the sales force to understand the key difference between hunting and farming. The traditional full contract value licence sale is really just like hunting, but subscription-based business is farming, and he sees the future being strongly driven by the sales force and customers working together so that customers can see their future directions within the broadening base of the hybrid cloud infrastructure and the sales force can spot when, and how, to best deliver it to them.
The complications of complexity
His thoughts of the future were, at least in part, prompted by the question of what he idenitifies as being the biggest problem in the IT industry?’ He listed off one or two obvious ones, such as cyber-security, but then threw in an interesting skew ball:
I would say that the bigger problem is complexity and the cycle of creative destruction that is getting shorter and shorter. The idea of substituting one technology for another, of rebooting/refreshing technology much faster, upgrading, migrating. Many of these things are not well done. We're not good at lifecycle management.
While many vendors might like this, Pandey just sees it as a massive challenge for customers and end users. For the users there is a real need to make multiple silos look like just one, but he sees few vendors biting that bullet and preferring their own silo to exist separately. That has been one of the goals at which Nutanix has aimed.
One result of this thinking can be seen in the company’s much greater commitment to channel partners, and he acknowledged that it has taken a while to see that it is partner programmes have to been that integrated:
We've come to realise that if we didn't bring it all together, then it would be highly hypocritical for us to really talk about simplicity and yet have these programmes which are no different than products themselves that are not integrated at all.
Now Value Added Resellers are no longer treated differently from global system integrators or service providers, for they all do a lot of things in common. Bringing them all under a single platform has become an important objective of this:
I think this happens to all growing companies. They have too many of these islands, we end up creating too many programmes that don't talk to each other and it ends up becoming really cumbersome for the partners themselves.
A tale of two books
The Founder’s Mentality, co-written by two Bain and Company partners, Chris Zook and James Allen, is one of two beacons Pandey is now using as guides. The other is The Infinite Game, by Simon Sinek, and together they make an interesting pairing.
The fundamental learning from the Founder’s Mindset is that the big barriers to growth are typically generated from within, not from outside, and he pointed to the company’s old position on channel partners as a prime example. Founders tend to continue to act in the same way and allow lots of things to overlap that are redundant and inefficient:
Growth creates complexity, and complexity is the silent killer of growth. What we try to do with subscription was not just to really look at sales force efficiency, but also to create an extremely homogeneous and integrated experience.
Key to this was the introduction of portable licences, which delivered extreme flexibility in procurement and the ability to use the same application both on and off premises. That, he suggested, is the real key to being a hybrid cloud company, not the technology at all.
He admits to real passion about the thinking behind The Infinite Game and its stand against the zero sum game that infests business these days. Nutanix has tended to work with others, on top of the likes of VMware, Dell, more latterly HP and the public cloud in general. That is why it got out of making its own hardware:
We became a worthy rival of ourselves. We have got to compete with ourselves, and if we don't, someone else will define the rules of engagement. I think that has been refreshing and we've never moved away from that clarity.
But in competing with itself the company also learned the scope of its own `back yard’ and the part it played in it:
One of the true pillars of founder’s mentality as well as this mindset is that, just because you win, it doesn't mean someone else loses. There is super linearity in ecosystems and partnerships.
He sees the cloud as a good example of this in practice and as an area which will become much more nuanced, citing three main drivers. One is the growth of the edge and IoT and the fact that the backhaul to a central system of data from those is now a practical impossibility. This will kill any zero sum game between public and private clouds; they both will have roles to play.
Another is the law, in form of geopolitics, where every government is now asserting sovereignty over applications and data. He sees much more to come in the area of applications and data privacy and the way national laws and objectives will affect the future architecture of both public and private clouds. One just has to look at the EU Gaia project and the US Administration’s activities around China’s Tik Tok to see this in action.
The third factor will be the laws of economics around owning versus renting, where things that are predictable are much cheaper to own, and things that are unpredictable are much cheaper to rent:
I think to be able to bring the balance between data gravity, ie laws of physics, data sovereignty, which is laws of the land, and this balance between owning and renting, the economics, will define the true state of hybrid cloud infrastructure.
As reading history is now a favourite Pandey pastime, it begged one final question: which bit of history does he see being repeated right now? His answer stayed on the subject of IT, and was many people’s pride and joy, consolidation. In particular he points to the consolidation of functionality that we now see in the mobile phone. Behind this is the fact that those functions have become pure software, and he sees more of that coming in the enterprise:
I mean, what happened with iOS and Android is being repeated in the world data centers and the enterprise and will continue to be so as we make things more invisible. You probably will see more and more of this service mentality. The reason why the catalogue companies succeeded is because they were service with a one stop shop, and I think you're seeing a lot of one stop shops now with the public cloud as well. The question is, how to really create differentiation and value across different one stop shops. Many of these things are extremely ad hoc. And they need to be made a whole lot more like factories, where it's more repeatable, more OKR and KPIs driven.
I have several friends who have retired early but have in time got bored with it and looked for a new challenge. ………and perhaps there is a pointer or two at the end to what might come next. There is certainly some solid guidance here for every business looking to deliver value via the cloud, and though It may well be a while away, I think this are hints here that this may not be the last we will hear from Dheeraj Pandey.