5 Reasons Why A Cisco-Nutanix Licensing Agreement Would Make More Sense Than An Acquisition

Let's Make A Deal

In mid-May, a report that Cisco Systems was trying to acquire hyper-converged startup Nutanix arrived with all the subtlety of a sonic boom. Nutanix -- said to be poised to file for an IPO -- is the early leader in the hyper-converged space, and Cisco doesn't yet have a product in this segment.

Such a deal would give Cisco instant credibility in hyper-converged, but many industry watchers dismissed the report out of hand. But what if Cisco and Nutanix are planning something different -- like an OEM agreement or strategic partnership?

As Nutanix prepares for its .Next customer conference in Miami this week, CRN here offers five reasons why a Cisco-Nutanix OEM agreement would actually make more sense than an acquisition.

1. Nutanix Is On A Mission

Six years after its founding, Nutanix has a $2 billion-plus valuation. The swashbuckling startup touts its technology as a replacement for storage area networks from the likes of EMC and NetApp. With 52 percent of the hyper-converged market, according to IDC, Nutanix has evidence that customers are buying into its pitch.

In some ways, Nutanix is selling a philosophy as much as it is selling product. Its executives often talk about how today's data centers are bloated and disorganized, and about how its technology can simplify hardware sprawl. If this sounds familiar, it's a similar pitch to the one VMware used when it burst onto the scene in the late 1990s.

Yes, Nutanix wants to be the next VMware. And that's why it needs to remain independent.

2. Nutanix Would Be Able To Continue Hiring Top Talent

Nutanix has attracted top-notch engineers who believe in its vision for combining compute and storage on x86 server hardware, including some from VMware.

Brian Byrne, principal engineer at Nutanix, helped develop the Google File System and its successor, Colossus, during three years at Google. He's a rock star in the hyper-converged space. Nutanix has hired other rock star engineers from Facebook and other companies.

This talent didn't come over to Nutanix just to get acquired by another big company. They came to Nutanix to shake things up and to put pressure on legacy enterprise vendors.

3. Cisco Wouldn't Have To Issue Debt

Cisco has around $50 billion in cash parked overseas, and only around $3 billion in the U.S., according to Moody's Investors Service. Jared Rinderer, the senior research analyst at Equity Capital Research Group who first reported that Cisco would be acquiring Nutanix, noted that Cisco would have to issue debt in order to go through with the deal.

With an OEM agreement or strategic partnership, Cisco would presumably be able to offer customers UCS servers with Nutanix software pre-installed. Yes, Cisco could afford to pay whatever it took to acquire Nutanix, but going the partnership route would be far less complex from a financial standpoint.

4. Cisco Could Keep Working With Simplivity, SolidFire, Others

Cisco loves partnering with other vendors to fill gaps in its portfolio. It's currently working with SimpliVity, not on an OEM deal, but in partnership to sell its software on UCS servers. Cisco is also working with SolidFire, and sources told CRN last week that company's software could enable a hyper-converged play on UCS servers.

If Cisco buys Nutanix, these and other ecosystem partnerships might not survive. Sources told CRN SimpliVity was none too pleased when it caught wind of what Cisco and SolidFire were up to.

But if Cisco does an OEM deal or partnership with Nutanix, it would expand its already busy ecosystem of vendor partners with the hottest hyper-converged play on the market.

5. Both Companies Could Keep Battling VMware

Cisco and Nutanix have something in common: Both have, over the years, morphed from being partners with VMware to being stone-cold mortal enemies of VMware.

Yes, Cisco could just acquire Nutanix and leverage its talent and technology against VMware. But with an OEM agreement or strategic partnership, Cisco and Nutanix would each get to keep chipping away at VMware as they have been doing -- with Nutanix continuing to play the role of the anti-VMware.