After announcing a new software-centric approach on an earnings call with investors, Nutanix CEO Dheeraj Pandey told SDxCentral that open source code will be a major piece of the company’s pure software play.

Pandey said Nutanix will further embrace Apache Software Foundation open source tools in 2018, 2019, and beyond as the company attempts to deliver consumer grade developer building blocks in Xi. Xi refers to the company’s public cloud service that allows customers to move on-premise workloads to Google’s public cloud. It is slated for release in 2018.

This marks the company’s “first foray into PaaS [platform-as-a-service] services,” he told SDxCentral. “In 2018 we will look at PaaS very deeply in the context of hybrid cloud. We see a huge opportunity using Apache services on and off premises.”

Nutanix will shift to a software-only company over the next two years, Pandey said on yesterday’s conference call to report the company’s first quarter fiscal 2018 earnings.

“We now have a meaningful competitive advantage in being the most portable operating system built for the enterprise cloud,” he said. “A software-only form factor gives us ubiquity.”

The company beat Wall Street’s expectations for the quarter that ended Oct. 31. It reported $275.6 million in revenue, growing 46 percent compared to last year. Billings totaled $315.3 million in the quarter, growing 32 percent year-over-year.

It also reported $797 million in software and support billings — this doesn’t include hardware — over the last 12 months, a 33 percent increase compared to a year ago.

Software-Centric Shift

Today Nutanix sells its data center software stack on its own branded servers. Customers can also run Nutanix’s operating system (OS) on hardware from Dell EMC, Cisco, Hewlett Packard Enterprise, IBM, and other vendors.

Hardware currently makes up about 26 percent of the company’s total billings, said CFO Duston Williams on the call.

Under its new, software-centric approach, Nutanix estimates hardware will only represent 5 percent of billings by the end of fiscal year 2019 with software and support making up the remaining 95 percent.

“It’s worth noting what the past 12 months would have looked like had we chosen not to bill any pass-through hardware-related transactions,” Williams said. “Nutanix would have recorded nearly $800 million in pure software and support billings and delivered gross margins above 80 percent.”

Nutanix started off as a hyperconverged infrastructure vendor but has been repositioning itself as a hybrid cloud company over the past couple years. Its OS now includes a hypervisor, software-defined storage, operations and systems management, and networking and automation capabilities.

The company plans to add more products to its cloud software stack in 2018.

“My favorite product is Calm,” Pandey told SDxCentral, referring to Nutanix’s multi-cloud management tool, slated for availability next year. “The vision there is how do you really blur the lines with multiple clouds, not just Xi and on prem, but across different clouds. Mobility is the killer app for the multi-cloud world and that’s where Calm needs to do a lot of hard work.”

Stacking Up Against VMware

Nutanix also wants to compete against rival VMware, which has its own growing cloud stack. Shifting to a software-only model will strengthen its competitive posture, Pandey said.

“More than 60 percent of our customers still use VMware underneath us, but there are an increasing number saying I don’t have to pay for virtualization as a line item in the budget — I need most things one-click. A lot of the VMware components and pieces of software are pretty bulky, with months of implementation costs. For the customer who wants to consume software at scale, they can buy it from us as much as they could have bought it from VMware.”

<<< This article was originally published on SDxCentral’s website here. >>>