5 Things Partners Need To Know About Nutanix's Acquisition Of Netsil And Its M&A Strategy

Nutanix's M&A Strategy

Hyper-converged infrastructure pioneer Nutanix is transforming its technology and go-to-market strategy in 2018 as it shifts to becoming a software-only hyper-converged infrastructure vendor. The San Jose, Calif.-based company Monday unveiled its second acquisition in less than two weeks, signing a definitive agreement to buy application discovery and operations management startup Netsil.

Nutanix is also doubling down on its channel strategy by rolling out new software rebates and incentives for partners along with a new hyper-converged infrastructure product line alongside Dell Technologies, the XC Core. With Nutanix software sales recently hitting the $1 billion annual run rate mark, here are five things partners need to know about Nutanix's plans for Netsil and what types of acquisition the company sees on the horizon.

What Netsil Brings To The Table

The San Francisco-based startup launched out of stealth in September 2017 with its monitoring platform for Kubernetes and Docker-based microservices applications, calling it the "Google Maps for Cloud Apps," according to a release. Netsil's flagship Application Operations Center platform enables DevOps teams to gain visibility into all of their applications and services with no code changes required. The platform, which can be consumed as a cloud-based service, aims to make the lives of developers and site engineers easier by speeding up workflows for incident response, deployment management, capacity planning and distributed application performance management. In June 2016, Nutanix CEO and founder Dheeraj Pandey made a personal investment in Netsil, which he still holds, according to a recent 8-K filing with the U.S. Securities and Exchange Commission.

Netsil co-founder and CEO Harjot Gill was previously a Ph.D candidate in Computer and Information Science at the University of Pennsylvania, focused on software-defined networks, distributed systems and multi-core systems. Netsil co-founder and COO Shariq Rizvi was previously director of engineering for Twitter's Ads team.

Netsil Infused Into Nutanix Cloud OS

Purchasing Netsil will give partners a better way to address the growing microservices market as well as open-source container platforms like Kubernetes and Docker. Nutanix said it plans to add Netsil's technology into its Enterprise Cloud OS software to boost customers' ability to secure applications as well as identify and fix performance issues. Netsil, combined with Nutanix Cloud OS, "gives both DevOps and IT teams the power to quickly deploy and operate applications with confidence, in any cloud, at any scale, while ensuring relatability, performance and security," said Sunil Potti, chief product and development officer at Nutanix, in a statement.

Minjar's Public Cloud Play

On March 1, Nutanix revealed plans to acquire Minjar, a company providing a platform with centralized cost control and visibility into public cloud workloads. Minjar's cloud offerings will enable partners to help customers optimize their multi-cloud environments for performance and cost. Minjar's flagship Botmetric service provides unified cost control and enhanced visibility into workloads running in public clouds. Similar to Netsil, Nutanix will integrate Minjar's multi-cloud capabilities into its Enterprise Cloud OS. Nutanix also plans to use Minjar technology to bolster its Nutanix Calm automation and life-cycle management product, as well as Xi Cloud Services.

M&A Strategy In 2018: No Large Acquisitions

During Nutanix's second fiscal quarter earnings report, executives made it clear that the company would not pursue any large acquisitions.

"The DNA of this company will not absorb any large acquisition," said CEO Pandey. "[It's] just not what we're built for."

Pandey said the company will look at "smart technologies, smaller teams" that can enhance Nutanix's overall business in the next three to five years. "There is no instant gratification of an M&A for us," Pandey said. Financial terms of both the Minjar and Netsil deals were not disclosed.

Focus Is On Smaller Acquisitions

Looking at Nutanix's balance sheet, the company closed its second fiscal quarter with cash and cash equivalents of $918 million, up from $366 million in its first fiscal quarter. The cash includes approximately $509 million in net proceeds raised during the quarter through its five-year convertible senior notes, which was done at a zero interest rate.

"With this cash, from an M&A perspective, you should not expect any big large deals," said Duston Williams, Nutanix's CFO, during its second-quarter earnings call. "You should expect more smaller deals just like [Minjar]."