VMware sues new Nutanix CEO Ramaswami for breach of contract

The rivalry amongst VMware and Nutanix spilled into courtroom this week when VMware submitted a lawsuit against Rajiv Ramaswami, months soon after he left VMware to come to be Nutanix CEO. VMware on Monday evening said it submitted go well with in Top-quality Court docket of the Point out of […]

The rivalry amongst VMware and Nutanix spilled into courtroom this week when VMware submitted a lawsuit against Rajiv Ramaswami, months soon after he left VMware to come to be Nutanix CEO.

VMware on Monday evening said it submitted go well with in Top-quality Court docket of the Point out of California, County of Santa Clara against Ramaswami. VMware did not title Nutanix as a defendant but billed Ramaswami with “product and ongoing breaches of his legal and contractual responsibilities and obligations to VMware.”

Nutanix employed Ramaswami as CEO Dec. 9, soon after a three-thirty day period look for for a substitute for retiring Nutanix founder Dheeraj Pandey. Pandey assisted build the hyper-converged infrastructure (HCI) pioneer into a $1 billion-in addition revenue corporation since its 2009 founding, and Nutanix and VMware have blended for most of the HCI computer software marketplace. Ramaswami had been VMware COO of products and solutions and cloud expert services since 2016.

Rajiv RamaswamiRajiv Ramaswami

VMware unveiled a statement charging that “Rajiv Ramaswami unsuccessful to honor his fiduciary and contractual obligations to VMware. For at least two months ahead of resigning from the corporation, at the identical time he was functioning with senior management to shape VMware’s critical strategic eyesight and path, Mr. Ramaswami also was secretly conference with at least the CEO, CFO, and seemingly the complete board of directors of Nutanix, Inc. to come to be Nutanix’s Chief Government Officer. He joined Nutanix as its CEO only two days soon after leaving VMware.”

VMware added that Ramaswami confirmed bad judgment and his negotiations with Nutanix represented a conflict of fascination that he should really have disclosed to VMware.

“VMware expects all staff members to honor their commitments to the corporation, and executive officers should really be held to an even higher regular,” VMware added in its statement. “VMware spends billions of bucks on its roadmap and R&D to deliver marketplace innovations to our consumers and is committed to guarding our brand name, the technological innovations behind our brand name, and the price we deliver to our consumers.”

VMware added that it submitted go well with soon after failing to “take care of this issue devoid of litigation” by reaching out to Ramaswami and Nutanix.

VMware did not disclose the aim of its lawsuit, but a individual familiar with the issue said it is searching for monetary damages. He added that VMware made requests in communications with Ramaswami and Nutanix soon after the employing was disclosed, but Nutanix claimed all those requests fell outside the house of California legislation. Nutanix contends that VMware requested Ramaswami restrict his role at CEO and concur to not use any staff members from VMware.

“Nutanix and Ramaswami certain VMware that Mr. Ramaswami agreed with his obligation not to get or misuse confidential information and facts, and VMware does not contend if not,” Nutanix said in a statement unveiled Tuesday. “Even so, VMware requested that Mr. Ramaswami concur to restrict the ordinary efficiency of his work responsibilities in a manner that would equate to an unlawful non-compete covenant, and it requested that Nutanix concur not to use candidates from VMware in a manner that Nutanix thinks would be contrary to the federal antitrust legislation.”

Nutanix also accused VMware of making an attempt to deny Ramaswami an option to come to be a CEO.

“VMware’s lawsuit seeks to make interviewing for a new work wrongful. We perspective VMware’s misguided action as a response to dropping a deeply valued and highly regarded member of its management group,” it added said in the statement. “Mr. Ramaswami is very pleased of his tenure at VMware and counts quite a few VMware group users as pals. It is disappointing to see VMware’s management sue him just simply because he chose to pursue an option to come to be a general public corporation CEO. We feel that VMware’s action is very little far more than an unfounded endeavor to hurt a competitor and we intend to vigorously protect this issue in courtroom.”

California legislation is typically favorable to work-changers, and does not normally acknowledge non-compete agreements. The resource familiar with the filing said Ramaswami would be prohibited from steps this sort of as sabotaging VMware, recruiting co-workers even though continue to utilized there, thieving trade tricks or conducting business enterprise with consumers on behalf of Nutanix even though continue to functioning for VMware. But he said an employee is not necessary to disclose he is searching for a work with an additional corporation.

VMware-Nutanix battle above HCI marketplace

The relationship amongst VMware and Nutanix has evolved from a near partnership to a intense rivalry. VMware and its present guardian corporation, Dell Technologies, assisted Nutanix generate the HCI marketplace. Just before VMware produced its very own vSAN HCI computer software, its income and help teams frequently advised its consumers purchase Nutanix HCI devices as a way to control storage in intensely virtualized knowledge facilities. Nutanix income also obtained a jolt soon after it struck an OEM deal with Dell in 2014, a transfer that drastically expanded the startup’s marketplace presence.

Three developments transformed the VMware-Nutanix relationship. First, VMware released vSAN in 2014, putting it in immediate opposition with Nutanix. The identical year, Nutanix unveiled its AHV hypervisor that competes with VMware’s ESX. Nutanix will make AHV available for cost-free with its computer software stack, and enables businesses to migrate from ESX if they want to change hypervisors.

Then Dell obtained storage giant EMC — the the vast majority proprietor of VMware — in 2016. Though Dell has ongoing its OEM deal with Nutanix, its income of Nutanix computer software on Dell servers have dropped. The Dell EMC VxRail HCI procedure pushed by vSAN is Nutanix’s most important competitor, and Dell pushes that product or service to its consumers above its Nutanix devices.

Nutanix also transformed its income approach, which is now closer to VMware’s. Though it continues to market its very own branded HCI devices, Nutanix has made its computer software available to operate on all x86 servers and has constructed partnerships with HPE and Lenovo, and courted Cisco resellers.

The CEOs of VMware and Nutanix have taken pictures at the rivals in general public. Throughout his 2019 VMworld keynote, VMware CEO Pat Gelsinger said his corporation was pulling absent from Nutanix, devoid of entirely mentioning Nutanix by title.

“We are crushing Nu … I imply we are successful in the marketplace,” Gelsinger said. “We are separating from No. 2. We are successful in the space.” 

Pandey countered on a Nutanix earnings phone a number of days afterwards that VMware “sells a lot of vaporware.”

Pandey also said he wanted Nutanix to change VMWare as the “Switzerland of computing” by operating throughout all big components platforms.

Who’s No. 1?

Investigate firm IDC’s hottest HCI revenue tracker confirmed VMware leading with $821 million (forty.2% share) in HCI computer software revenue for the 3rd quarter of 2020. IDC listed Nutanix 2nd with $513 million (twenty five.1%).

Even so, even IDC’s investigation has been caught up in the VMware-Nutanix rivalry. Pandey criticized IDC’s numbers for years, contacting them “funky accounting” and boasting they did not give Nutanix entire credit history for its computer software revenue.

Pursuing IDC’s hottest HCI launch this thirty day period, Nutanix COO David Sangster posted a blog site on LinkedIn that confirmed IDC crediting Nutanix with 28.four% of the HCI computer software marketplace as opposed to VMware’s fourteen.five%. People figures, which were not in IDC’s launch, involved income of storage expert services not coated in the foundation HCI revenue.

Rosa G. Rose

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