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Competitive Landscape:HyperconvergedIntegrated SystemsPublished: 19 October 2017 ID: G00337607

Analyst(s): Jeffrey Hewitt, Kiyomi Yamada

SummaryThe HCIS market has seen recent acquisitions,provider exits and evolutionary disruption.Technology business unit leaders must implementappropriate partnering approaches in the face ofthese changes as they seek to achieve optimalgrowth.

Overview

Key Findings

As the hyperconverged integrated system (HCIS)market has matured in the past two years, somesmaller providers without sufficient installedbases, technical resources and cash to survive ontheir own have exited the market.

HCIS-only providers that have a sustainable salesadvantage based on effective communication oftechnical strengths that can deliver superior costsavings or performance advantages are most likelyto remain viable as the market continues to grow.

HCIS providers without compelling valuepropositions to differentiate their offerings againstother HCIS solutions are unlikely to survive theincreasing competitive pressure that is appearingin the market.

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Technology business unit leaders who seek toidentify and exploit new infrastructure opportunities,and outpace the competition must:

Develop partnering plans for EvolutionaryDisruptors in the HCIS space when the installedbase, cash and technical resources of thosedisruptors can drive sales growth and offercomplementary business opportunities.

Implement partnering approaches with HCIS-onlyproviders when those providers' combinedtechnical and marketing approaches can offersustainable sales advantages compared withcompetitors as the market continues to grow andmature.

Deprioritize partnering investment with HCISproviders that cannot articulate compelling valuepropositions for end users that differentiate theirofferings in the face of increasing competition.

Strategic Planning AssumptionBy the end of 2018, 65% of HCIS revenue will beattributed to Evolutionary Disruptors.

AnalysisHyperconverged integrated systems utilize a modularcompute/network/storage building block node, withdirect-attached storage and a management layer oncommodity hardware that can be combined intoscale-out clusters. The HCIS competitive landscapehas changed with the exit of some players andstronger forays into the space by others. As thefastest-growing category of data centerinfrastructure during the next five years, an ongoingunderstanding of HCIS competitive dynamics is amust for technology business unit leaders who hopeto benefit from its revenue increases.

Competitive Situation and Trends

HCIS represents a type of integrated system (see"Market Definitions and Methodology: IntegratedSystems" and the Definitions section below). By the

end of 2016, the HCIS market had grown to morethan $1.5 billion in revenue, to represent 16% ofoverall worldwide integrated system revenue (seeFigure 1).

Figure 1. 2016 Worldwide Integrated System RevenueShare by Type

Source: Gartner (October 2017)

As a type of integrated system, HCIS is designed toaccommodate scaling from a single or dual node asapplication demand requires. This modular approachfacilitates smaller initial investments andincremental cluster growth when compared to moreproprietary integrated system solutions andtraditional storage area network implementations.

One limiting factor of HCIS is that it has yet to fullyaddress the nuances of network traffic. This haslimited its scalability to 16 to, at most, 20 nodes, in asingle cluster for even the largest end users of thetechnology. This scalability issue has confined mostHCIS use cases today to test/development, virtualdesktop infrastructure, a consolidation solution forsecond-tier server applications, disaster recovery andremote office/branch office (ROBO). These usecases have offered a significant market so far;however, ongoing demand to push HCIS into moreuse cases will drive providers to start to more fullyaddress network traffic optimization with HCIS by theend of 2018.

Hyperconverged integrated systems have reachednew levels of market maturity as indicated byGartner's "Hype Cycle for Compute Infrastructure,

2017," which places these systems just beyond thePeak of Inflated Expectations. As further evidence ofmarket maturity, leaders in adjacent markets such asservers, storage and network infrastructure haverecently entered the market in more significant ways.Examples include Cisco, Dell EMC and HewlettPackard Enterprise (HPE). Other market maturityindicators during the last two years have beenchanges in the startup-provider landscape such asAtlantis Computing selling its intellectual property(IP) to Hive-IO; Gridstore changing its name toHyperGrid, while changing its business model to aservice-based approach; Cisco acquiring Springpath;HPE acquiring SimpliVity; and Nimboxx closing itsdoors.

Market Players

Table 1 is a summary of vendors covered in thisreport and why they were included. Note that this listis not meant to be exhaustive.

Table 1. HCIS Providers in This Report

Provider Reason for Inclusion

Cisco Cisco is a network market leader thathas acted as an EvolutionaryDisruptor with its own solution,HyperFlex.

Dell EMC Dell EMC has its own VxRack andVxRail solutions, and partners withNutanix.

HPE HPE acquired and incorporated HCISofferings into its product lines fromthe startup SimpliVity.

Huawei Huawei is a China-basedinfrastructure provider that isgrowing its HCIS business inside andoutside of China.

NetApp

NetApp is a leader in network-attached storage and has acted asan Evolutionary Disruptor byintroducing its NetApp HCI solution.

Nutanix Nutanix is an HCIS market leaderthat transitioned to a public companyin late 2016.

Pivot3 Pivot3 is a startup company that hasan established market presence invideo surveillance and security.

ScaleComputing

Scale Computing is a startupcompany with a primary focus on theSMB space and use of KVM as ahypervisor.

HPE = Hewlett Packard Enterprise

Source: Gartner (October 2017)

The Future of Competition

Hyperconverged integrated systems as a type ofdata center infrastructure is forecast to represent thefastest revenue increases during the next four years.This significant growth warrants solid strategicapproaches by technology business unit leadersinvolved in the HCIS market if they hope to benefitfrom the projected rises in revenue. HCIS revenue isexpected to grow at a 48% compound annual growthrate from 2016 through 2021, to reach $10.8 billionby the end of the period (see Figure 2).

Figure 2. HCIS Forecast, 2014-2021

Source: Gartner (October 2017)

With the increasing focus on and investments inHCIS by leaders in adjacent markets, HCIS solutionsare expected to add greater features and functions,including greater scalability and hybrid cloudintegration, that will help drive HCIS into more usecases. The Evolutionary Disruptors that have enteredthis market will use their cash and technicalresources to drive significant growth in the marketand will reach 65% of the revenue share by 2021. AllHCIS providers will compete to increase HCISnetwork traffic efficiencies to broaden HCIS adoptioninto more scalable database environments. HCISproviders are also likely to incorporate solutioncapabilities such as analytics and to target edgeenvironments to gain additional share as the HCISmarket continues to evolve. Pay-per-use models suchas those introduced by Dell EMC, HPE and Nutanixwill also be used to leverage sales when end userswish to defer HCIS upfront capital expenditures.

Competitive Profiles

CiscoMARKET OVERVIEW

Cisco has been working with the companySpringpath, a software developer of a distributed filesystem that enables server-based storage and ispurpose-built for hyperconvergence. This workingrelationship with Springpath resulted in theintroduction of Cisco's HCIS offering, HyperFlex, inearly 2016. The Cisco HyperFlex HX series includesfour models supporting up to two processors per

node, with two of those models supporting all-flashstorage. Cisco also added four more models inOctober 2017 built on the latest generation of IntelSkylake processors and architecture. In the thirdquarter of 2017, Cisco announced the intention toacquire Springpath and completed the acquisition inSeptember 2017. With that acquisition, Cisco nowowns both the hardware and software IP to build afully integrated HCIS solution.

HOW CISCO COMPETES

As a leader in the network market, Cisco has aglobally distributed installed base of data centernetwork infrastructure. Cisco has been leveragingthat installed base and its existing sales channels asa means to grow its HCIS business much as it didwith its Cisco UCS servers. Since its launch, CiscoHyperFlex has sold rapidly and established morethan 1,900 customers in many geographiesworldwide. Cisco positions its Cisco HyperFlexofferings as being designed for independent scalingof compute and capacity to achieve optimalefficiencies and a unique clusterwide datadistribution model with a log-structured file system.Cisco HyperFlex is promoted as being built on theunique network fabric of UCS and optimized for flashstorage to deliver high performance and predictablelow latency. Cisco uses the Cisco UCS C-Series rack-mount server and fabric interconnect as thehardware foundation for building HyperFlex andallows use of Cisco UCS B-Series blade servers or C-Series rack-mount servers as compute-only engines,which permits independent scaling of compute andstorage; this means that Cisco's future plans forCisco UCS becomes critical for Cisco HyperFlex. Thesharing of these product plans will become critical toCisco HyperFlex's long-term success.

Dell EMCMARKET OVERVIEW

Dell EMC, a subsidiary of Dell Technologies, is aprovider of servers, storage, networking, dataprotection, cloud computing solutions and integratedsystems on a global level. Dell EMC has three

product plays in the HCIS space. The first is VxRail,which consists of five product series, eachsupporting all-flash or hybrid storage configurations,and each designed for data center needs fromgeneral to situationally specific. The second isVxRack, with two versions: VxRack System Flexutilizes Dell EMC ScaleIO, and VxRack System SDDCutilizes VMware Cloud Foundation. The third is theXC Series, which combines Dell EMC PowerEdgeservers with Nutanix software.

HOW DELL EMC COMPETES

Dell EMC has been one of Nutanix's most significantpartners, accounting for more than 20% of Nutanix'srevenue during some periods, through sales of theDell EMC XC series. Dell EMC continues to maintainthat partnership with Nutanix. In the second quarterof 2017, Dell EMC announced product enhancementsto its other HCIS product lines, VxRail and VxRack,which included Cloud Flex for HCI, a consumption-based pricing approach designed to facilitate morecloudlike purchasing on the part of end users. Withone of the broader and deeper suites of HCISofferings, Dell EMC has been driving sales for anarray of solutions integrated with its sister subsidiary,VMware (for example, VxRail, VxRack System SDDC),as well as more hypervisor-agnostic options such asits VxRack System Flex and XC products. The DelEMC XC business is estimated to be at least 30% ofthe Dell EMC HCIS revenue for the first half of 2017,suggesting that it remains as an importantcontributor to the Dell EMC HCIS portfolio.

Hewlett Packard EnterpriseMARKET OVERVIEW

In the first quarter of 2017, HPE enhanced its HCISproduct portfolio through the acquisition ofSimpliVity. According to Gartner estimates,SimpliVity was the second-place provider in globalHCIS revenue share in 2016 (with 6.3%). HPE offersthe HPE SimpliVity 380, which combines the HPEProLiant DL380 Gen9 Server with SimpliVitysoftware. The HPE SimpliVity 380 is a 2 unit (U) rack-optimized device that supports all-flash storage and

hardware-assisted, in-line deduplication,compression and optimization. HPE has integratedthe SimpliVity software stack with the latest ProLiantversion, Gen10, which includes security featureenhancements, and the first implementation of theSkylake CPU.

HOW HEWLETT PACKARD ENTERPRISE COMPETES

HPE has made a rapid introduction of its firstcombination of SimpliVity software with HPE serverhardware in an effort to gain market traction from itsSimpliVity acquisition as soon as possible. HPE hasan extensive server installed base, along with asizable network of global direct sales and channelpartners that it will utilize to drive sales of this firstoffering, the HPE SimpliVity 380. This approachpresents a significant business opportunity for HPE,but some potential customers are waiting to see howwell HPE will assimilate SimpliVity into its existingproduct lines before they decide to make a purchase.HPE continues to demonstrate SimpliVity productintegration to help convert those prospects into HPESimpliVity customers. HPE is positioning theincreased cost-efficiency of its HPE SimpliVity 380as one of its leading value propositions. HPE offers a"SimpliVity HyperGuarantee" as a part of its productmarketing that includes the promise of a 90%capacity savings across storage and backupcombined when compared with traditional solutions.

HuaweiMARKET OVERVIEW

Huawei is a Chinese provider selling information andcommunication technology solutions globally. ItsHCIS product, FusionCube, has a portfolio that hasbeen expanded to address a variety of use cases andcustomer types. The Huawei FusionCube productportfolio includes: 12U servers, with 16 two-socket oreight four-socket compute/storage nodes; 2Uservers, with four two-socket SSD compute/storagenodes; 4U servers with four two-socket HDDcompute/storage nodes; and a 2U server, with asingle two-socket SSD/HDD compute/storage node.These servers can be installed in a 42U cabinet. The

company has grown its HCIS business based onstrong midmarket consumption to date. Supportedby strong momentum for HCIS adoption in China, thecompany has been aggressively working to expandits HCIS business globally.

HOW HUAWEI COMPETES

Huawei has a track record of unique technologyinnovation and differentiation, as well as integrationcapabilities. The company also manufactures somecomponents, enabling the company to fine-tunesystem costs and performances. In 2016, Huaweistarted its cloud service business, allowing thecompany to position its FusionCube as hybrid cloudinfrastructure. Huawei has continued to enrich itsHCIS portfolio to satisfy a broader set of workingscenarios. It also offers customized solutions forlarge customers. Huawei faces its most challengingmarket outside of China in the United States, wherethe potential for trade issues with China makes someU.S. customers reluctant to purchase from a China-based provider.

NetAppMARKET OVERVIEW

NetApp is one of the more recent entrants that aretargeting the HCIS market. The company announcedits NetApp HCI toward the end of the second quarterof 2017 and expects to ship the first generalavailability units to customers in late October 2017.NetApp HCI offerings start with a minimumconfiguration of two chassis, with two compute andfour storage nodes. From there, compute andstorage nodes can be added independently,depending upon data center requirements. Asspecific configurations, NetApp offers its HCIsolutions as small compute (16 cores)/small storage(5.5TB effective capacity), medium compute (24cores)/medium storage (11TB effective capacity),and large compute (36 cores)/large storage (22TBeffective capacity). The NetApp HCI/SolidFireeffective storage capacity calculation accounts for

Helix data protection, system overhead and globalefficiencies, including always-on compression,deduplication and thin provisioning

HOW NETAPP COMPETES

NetApp has a large installed base of Ontap-basedsystems, as well as direct and channel salesmechanisms, through which it will work to leveragesales of its NetApp HCI offerings. Built on afoundation of SolidFire Element OS 10 and supportfor Ontap Select for file services, NetApp HCI is beingtargeted to the enterprise market with a focus onenterprise cloud, web infrastructure and workloadconsolidation within that enterprise space. NetApp ispositioning its HCI offerings to provide competitiveadvantage through workload consolidation andsimplified, centralized operations. NetApp is alsoattempting to differentiate NetApp HCI withguaranteed performance, increased infrastructureelasticity, less infrastructure overhead and easyautomation when compared to other HCIS solutionsin the market. NetApp's six-node minimum indicatesthat NetApp will focus on larger organizations anduse cases, and will not target the ROBO market. As arelatively recent entrant in the HCIS market, NetAppfaces strong competition from currently establishedproviders. NetApp will need to demonstrate andcommunicate the specific advantages that itscustomers realize with NetApp HCI to gain quicksales traction.

NutanixMARKET OVERVIEW

Nutanix was an early strong entrant in the HCISmarket. Gartner estimates that Nutanix was the HCISleader in 2016, with HCIS revenue topping $445million for that year. Nutanix was the first HCISprovider to transition to a publicly held company,which it did in late 2016. Nutanix software isdesigned with a variety of capabilities to cover a widearray of data center requirements. Nutanix softwareruns on a number of HCIS solutions, including itsown (NX-1000, NX-3000, NX-6000 and NX-8000);OEM partners such as Dell EMC, IBM and Lenovo;

and configurations from Cisco and HPE. Nutanix alsohas its Acropolis and Prism software editionsdesigned to manage Nutanix environments fromsmall to large scale.

HOW NUTANIX COMPETES

Nutanix messaging goes beyond hyperconvergence,and instead, positions Nutanix solutions as enablingenterprise cloud deployments by focusing onenhanced application management, self-service andinfrastructure automation features. Nutanix supportsa wide array of hypervisors, including MicrosoftHyper-V, Nutanix AHV, VMware ESXi and XenServerfor Citrix workloads, as a means to broaden itsmarket appeal. Nutanix has maintained high-qualitytechnical support and leverages repeat purchasesinto its installed base through that support quality. Inthe second quarter of 2017, Nutanix introduced aconsumption-based pricing model for its productscalled "Nutanix Go." If Nutanix can maintain its salesgrowth in the face of competition from largerEvolutionary Disruptors such as Cisco and Dell EMC,then it will remain a significant competitor in themarket.

Pivot3MARKET OVERVIEW

Pivot3, founded in 2002, has established a solidreputation from its HCIS solution, especially aroundsurveillance and security. The company hastransformed its business model from servingspecific verticals and special areas, to addressinggeneral data center workloads. Pivot3 markets itsown branded HCIS appliances, as well as sells itssoftware stack through its OEM partners that bundleit with their hardware. The company supports anumber of strategic hardware partners, includingCisco, Dell EMC, Lenovo and Supermicro.

HOW PIVOT3 COMPETES

Pivot3 has more than a decade of industryexperience with its HCIS products, offering directinput/output performance, granular scalability, highstorage capacity efficiency and multiappliance global

active/active high availability. In April 2017, itintroduced Acuity, its new-generation HCIS platform,with policy-based quality-of-service software thatserves multipriority and mixed workloads on a singleinfrastructure and industry-first nonvolatile memoryexpress flash, data-path performance. With Acuity,Pivot3 continues to broaden its targets and add morehybrid cloud functions. To accelerate sales growth,Pivot3 must more broadly communicate its productfeatures and compelling value propositions, whileincreasing market awareness of its solutions.

Scale ComputingMARKET OVERVIEW

Scale Computing is a privately held company,founded in 2008. The company has established asolid position in the market by serving more than2,500 HCIS customers, mainly smaller companies(500 employees or fewer) globally. Its HC3virtualization platform is a KVM-based HCISappliance, aiming to provide cost-effective scale-outinfrastructure without paying virtualization softwarelicense fees. Recently, it announced a newpartnership agreement with Lenovo.

HOW SCALE COMPUTING COMPETES

Scale Computing's marketing and sales efforts werefocused around the SMB space, but the company istrying to expand its target customers to largerorganizations. HyperCore, its HCIS software, hasadded more storage efficiency and utilization withdeduplication in the latest release (the HC1150DFand HC5150D). Recently, the company introduced asingle-node system to address increasing ROBO andedge needs, as well as software-only options. ScaleComputing must take care not to dilute the focus ofits SMB approach as it attempts to penetrate largerorganizations.

References and Methodology

Market historical data was derived from Gartnerintegrated system market share estimates.Projections were taken from Gartner's integratedsystem forecasts. Provider information was taken

from publicly available information on thoseproviders, including their own company websites andpress releases.

Definitions

Integrated systems comprise a class of data centersystems that deliver a combination of server, sharedECB-storage and network devices, along withmanagement software, in a preintegrated stack.There are four segments in this overall marketcategory:

Integrated Stack Systems: Server, storage andnetwork hardware integrated with applicationsoftware to provide appliance or appliancelikefunctionality

Integrated Infrastructure Systems: Server, ECBstorage and network hardware, along withmanagement software, integrated to provideshared compute infrastructure

Integrated Reference Architectures: Products inwhich a predefined, presized set of componentsare designated as options for an integratedsystem, whereby the user and or/channel canmake configuration choices between thepredefined options

Hyperconverged Integrated Systems: A platformoffering shared compute and storage resources,based on software-defined storage, software-defined compute, commodity hardware and aunified management in terface

For additional details, see "Market Definitions andMethodology: Integrated Systems."

Providers that exhibit evolutionary disruptivebehavior are defined as:

Evolutionary Disruptors: Technology providers thathave an established brand and seek to leveragethat brand in a new market from adjacenttechnology markets, or from part of the traditionaldata center supply chain

Acronym Key and Glossary Terms

ECB external controller-based

HCIS hyperconverged infrastructure system

HDD hard-disk drive

SMB small and midsize business

KVM Kernel-based Virtual Machine

SDDC software-defined data center

SSD solid-state drive

EvidenceThe basis for this report was primary researchlooking at the changes in the competitive landscapeduring the last two years. Observations of thismarket revealed the exit from the market by severalstartup providers, one startup going public as acompany and several market leaders in adjacentmarkets taking Evolutionary Disruptor approaches togain share in the growing HCIS market. Thesechanges warranted a closer look at the market todevelop effective recommendations for providersparticipating in the space.

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