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

The rivalry amongst VMware and Nutanix spilled into courtroom this week when VMware submitted a lawsuit from Rajiv Ramaswami, weeks soon after he remaining VMware to turn into Nutanix CEO.

VMware on Monday night time mentioned it submitted go well with in Top-quality Court docket of the Condition of California, County of Santa Clara from Ramaswami. VMware did not name Nutanix as a defendant but billed Ramaswami with “materials and ongoing breaches of his legal and contractual duties and obligations to VMware.”

Nutanix employed Ramaswami as CEO Dec. nine, soon after a 3-month research for a substitution for retiring Nutanix founder Dheeraj Pandey. Pandey aided build the hyper-converged infrastructure (HCI) pioneer into a $1 billion-in addition profits company given that its 2009 founding, and Nutanix and VMware have combined for most of the HCI program sector. Ramaswami experienced been VMware COO of solutions and cloud expert services given that 2016.

Rajiv Ramaswami

VMware unveiled a statement charging that “Rajiv Ramaswami failed to honor his fiduciary and contractual obligations to VMware. For at minimum two months just before resigning from the company, at the exact same time he was functioning with senior management to condition VMware’s crucial strategic eyesight and course, Mr. Ramaswami also was secretly conference with at minimum the CEO, CFO, and seemingly the overall board of administrators of Nutanix, Inc. to turn into Nutanix’s Main Govt Officer. He joined Nutanix as its CEO only two days soon after leaving VMware.”

VMware additional that Ramaswami showed poor judgment and his negotiations with Nutanix represented a conflict of fascination that he need to have disclosed to VMware.

“VMware expects all employees to honor their commitments to the company, and executive officers need to be held to an even bigger conventional,” VMware additional in its statement. “VMware spends billions of dollars on its roadmap and R&D to convey sector innovations to our prospects and is committed to preserving our manufacturer, the technological innovations driving our manufacturer, and the worth we convey to our prospects.”

VMware additional that it submitted go well with soon after failing to “resolve this matter without litigation” by achieving out to Ramaswami and Nutanix.

VMware did not disclose the target of its lawsuit, but a person common with the matter mentioned it is searching for monetary damages. He additional that VMware created requests in communications with Ramaswami and Nutanix soon after the using the services of was disclosed, but Nutanix claimed all those requests fell exterior of California regulation. Nutanix contends that VMware asked for Ramaswami restrict his function at CEO and agree to not employ any employees from VMware.

“Nutanix and Ramaswami certain VMware that Mr. Ramaswami agreed with his obligation not to choose or misuse private information, and VMware does not contend normally,” Nutanix mentioned in a statement unveiled Tuesday. “Even so, VMware asked for that Mr. Ramaswami agree to restrict the standard functionality of his occupation duties in a fashion that would equate to an unlawful non-contend covenant, and it asked for that Nutanix agree not to employ candidates from VMware in a fashion that Nutanix thinks would be contrary to the federal antitrust rules.”

Nutanix also accused VMware of trying to deny Ramaswami an possibility to turn into a CEO.

“VMware’s lawsuit seeks to make interviewing for a new occupation wrongful. We view VMware’s misguided action as a response to getting rid of a deeply valued and respected member of its management workforce,” it additional mentioned in the statement. “Mr. Ramaswami is proud of his tenure at VMware and counts lots of VMware workforce members as pals. It is disappointing to see VMware’s administration sue him just simply because he selected to pursue an possibility to turn into a general public company CEO. We feel that VMware’s action is absolutely nothing a lot more than an unfounded attempt to hurt a competitor and we intend to vigorously defend this matter in courtroom.”

California regulation is frequently favorable to occupation-changers, and does not commonly recognize non-contend agreements. The source common with the submitting mentioned Ramaswami would be prohibited from steps these types of as sabotaging VMware, recruiting co-workers while nevertheless utilized there, stealing trade techniques or conducting business enterprise with prospects on behalf of Nutanix while nevertheless functioning for VMware. But he mentioned an personnel is not required to disclose he is searching for a occupation with an additional company.

VMware-Nutanix fight over HCI sector

The romance amongst VMware and Nutanix has developed from a shut partnership to a fierce rivalry. VMware and its present-day dad or mum company, Dell Technologies, aided Nutanix create the HCI sector. In advance of VMware created its possess vSAN HCI program, its product sales and assistance teams typically suggested its prospects purchase Nutanix HCI techniques as a way to take care of storage in heavily virtualized details facilities. Nutanix product sales also been given a jolt soon after it struck an OEM deal with Dell in 2014, a move that considerably expanded the startup’s sector presence.

3 developments modified the VMware-Nutanix romance. Initially, VMware introduced vSAN in 2014, putting it in immediate levels of competition with Nutanix. The exact same calendar year, Nutanix unveiled its AHV hypervisor that competes with VMware’s ESX. Nutanix tends to make AHV offered for absolutely free with its program stack, and permits businesses to migrate from ESX if they want to swap hypervisors.

Then Dell acquired storage huge EMC — the bulk owner of VMware — in 2016. When Dell has ongoing its OEM deal with Nutanix, its product sales of Nutanix program on Dell servers have dropped. The Dell EMC VxRail HCI method pushed by vSAN is Nutanix’s main competitor, and Dell pushes that item to its prospects over its Nutanix techniques.

Nutanix also modified its product sales tactic, which is now closer to VMware’s. When it carries on to promote its possess branded HCI techniques, Nutanix has created its program offered to run on all x86 servers and has developed partnerships with HPE and Lenovo, and courted Cisco resellers.

The CEOs of VMware and Nutanix have taken pictures at the rivals in general public. In the course of his 2019 VMworld keynote, VMware CEO Pat Gelsinger mentioned his company was pulling absent from Nutanix, without totally mentioning Nutanix by name.

“We’re crushing Nu … I necessarily mean we are winning in the marketplace,” Gelsinger mentioned. “We’re separating from No. two. We’re winning in the place.” 

Pandey countered on a Nutanix earnings call a handful of days later that VMware “sells a lot of vaporware.”

Pandey also mentioned he wished Nutanix to exchange VMWare as the “Switzerland of computing” by functioning throughout all important hardware platforms.

Who’s No. 1?

Investigate company IDC’s most recent HCI profits tracker showed VMware top with $821 million (40.two% share) in HCI program profits for the 3rd quarter of 2020. IDC stated Nutanix second with $513 million (twenty five.1%).

Even so, even IDC’s analysis has been caught up in the VMware-Nutanix rivalry. Pandey criticized IDC’s quantities for several years, calling them “funky accounting” and saying they did not give Nutanix comprehensive credit score for its program profits.

Pursuing IDC’s most recent HCI release this month, Nutanix COO David Sangster posted a blog on LinkedIn that showed IDC crediting Nutanix with 28.4% of the HCI program sector in comparison to VMware’s 14.five%. Individuals figures, which have been not in IDC’s release, included product sales of storage expert services not coated in the foundation HCI profits.