Yesterday HPE surprised some folks (including me!) when it acquired mid-range storage vendor Nimble for $1.2B. We think that makes this an exciting week in storage!
First and foremost, congratulations to our sometimes competitors / sometimes co-conspirators at Nimble, who stand for a lot of the same things we do here at Pure – a simple, modern, and (lately) flash approach to storage. Ultimately, this means that HPE sees and understands the massive value in modernizing the storage architecture with flash and the continued value of on-prem, cloud-era infrastructure. According to an article published by Joe McKendrick of Forbes, 80 percent of enterprises intend to use a combination of on-premises and cloud solutions. That’s a significant market, and like HPE, we see its continued viability.
On the other hand, HP just acquired SimpliVity to go after mid-market IT infrastructure with a hyper-converged play, which seems like it is in direct competition with Nimble’s mid-market storage focus. That’s just part of what makes this acquisition so interesting. Read on for our take!
Why HPE acquired Nimble (and vice-versa)
- Slowing growth. HPE’s overall storage business has been struggling as of late (-13% last quarter), and they’ve shown particular weakness in mid-range. Acquiring mid-range asset Nimble helps shore-up the slowing HPE storage business, especially given a new product cycle from Dell/EMC’s Unity offering.
- Defense is the best offense. Perhaps more worrisome than slowing growth for HPE would be for Nimble to land at an HPE competitor, causing more challenges. Lenovo had recently announced an OEM partnership w/ Nimble, and one could argue that Hitachi, NetApp, and IBM were also all potential Nimble acquirers.
- Nimble’s enterprise transformation fell short. Nimble’s been on a two-year journey to try and move up-market and re-invent itself as an enterprise supplier. Unfortunately, such a transformation has both technology and go-to-market challenges. Nimble struggled in retrofitting its platform to all-flash, never got serious traction in Fibre Channel, and had many challenges in transforming its Sales and Channel focus up-market. The acquisition seems to end that up-market focus for the Nimble technology.
What’s odd about this transaction?
- 100% technology overlap. If you believe 3Par, they do everything Nimble does, and much, much more. And on the surface, that seems to be true. 3Par appears to have literally every feature that Nimble offers, and then many, many more. 3Par (like Nimble), purports to have fully-retrofitted themselves for flash.
- 100% market overlap. 3Par certainly scales much higher into the enterprise than Nimble, but 3Par also scales very, very low in the mid-range with the 3Par 8000 platform at under $20,000. This means that 3Par has Nimble covered on both sides.
- Channel confusion. If you follow Nimble’s earnings calls, they have been focused on building two key partnerships – Cisco for Converged Infrastructure with SmartStack, and Lenovo as an OEM. It’s hard to imagine either of these relationships continuing under the HPE umbrella – meaning lots of potential for channel disruption as a result.
- Strategy confusion. While HCIA hasn’t been particularly impactful on enterprise storage (where Pure plays), it’s competing squarely with mid-range and entry-level SAN storage by adding simplicity and cost-reducing small-midsize IT. HP’s SimpliVity acquisition seemed to indicate they were gearing-up to bet big on HCIA and take-on Nutanix / vSAN / HyperFlex / VxRAIL and the like.
What really lies ahead?
- Product rationalization. HPE’s going to need to clarify the swimlanes: 3Par 8000 vs. Nimble vs. SimpliVity. All seem to be aimed at the same buying segment.
- Support challenges. From what I understand, Nimble has great support. HPE’s support is believed to be one of the key complaints from once-happy 3Par customers. Mid-market customers are far less locked-in and loyal to their storage suppliers – none have to put up with mediocre support.
- Assembling a winning portfolio from challenger brands. But most interestingly, HPE seems to be going down a path of assembling a portfolio of emerging technologies (i.e. often the 2nd-4th share player), hoping to accelerate them with HP’s channel. SGI, Aruba, SimpliVity, and now Nimble. Will it work?
The year’s just getting going, and, as always, the storage market never fails to disappoint. We believe that the all-flash transformation is just getting started, and that a new generation of all-flash arrays is being born that will take what is possible with webscale architectures, cloud-native applications, and big, big, big data to new heights. We can’t wait to see what the rest of 2017 has in store for storage, and you can bet that we at Pure have a few tricks up our sleeves ;).