VMware sues new Nutanix CEO Ramaswami for breach of contract

The rivalry in between VMware and Nutanix spilled into court this 7 days when VMware submitted a lawsuit in opposition to Rajiv Ramaswami, weeks after he still left VMware to develop into Nutanix CEO.

VMware on Monday night time reported it submitted fit in Exceptional Courtroom of the Point out of California, County of Santa Clara in opposition to Ramaswami. VMware did not identify Nutanix as a defendant but billed Ramaswami with “substance and ongoing breaches of his legal and contractual responsibilities and obligations to VMware.”

Nutanix hired Ramaswami as CEO Dec. 9, after a a few-month look for for a replacement for retiring Nutanix founder Dheeraj Pandey. Pandey aided create the hyper-converged infrastructure (HCI) pioneer into a $one billion-furthermore earnings company given that its 2009 founding, and Nutanix and VMware have merged for most of the HCI computer software market. Ramaswami had been VMware COO of goods and cloud companies given that 2016.

Rajiv Ramaswami

VMware launched a assertion charging that “Rajiv Ramaswami failed to honor his fiduciary and contractual obligations to VMware. For at minimum two months prior to resigning from the company, at the identical time he was functioning with senior leadership to condition VMware’s key strategic eyesight and way, Mr. Ramaswami also was secretly meeting with at minimum the CEO, CFO, and apparently the overall board of directors of Nutanix, Inc. to develop into Nutanix’s Main Government Officer. He joined Nutanix as its CEO only two days after leaving VMware.”

VMware included that Ramaswami showed bad judgment and his negotiations with Nutanix represented a conflict of desire that he ought to have disclosed to VMware.

“VMware expects all staff members to honor their commitments to the company, and govt officers ought to be held to an even larger normal,” VMware included in its assertion. “VMware spends billions of bucks on its roadmap and R&D to bring market improvements to our shoppers and is fully commited to preserving our brand, the technological improvements at the rear of our brand, and the worth we bring to our shoppers.”

VMware included that it submitted fit after failing to “solve this issue without the need of litigation” by reaching out to Ramaswami and Nutanix.

VMware did not disclose the goal of its lawsuit, but a man or woman common with the issue reported it is trying to find monetary damages. He included that VMware built requests in communications with Ramaswami and Nutanix after the using the services of was disclosed, but Nutanix claimed people requests fell exterior of California legislation. Nutanix contends that VMware asked for Ramaswami restrict his role at CEO and agree to not use any staff members from VMware.

“Nutanix and Ramaswami certain VMware that Mr. Ramaswami agreed with his obligation not to choose or misuse confidential information and facts, and VMware does not contend or else,” Nutanix reported in a assertion launched Tuesday. “On the other hand, VMware asked for that Mr. Ramaswami agree to restrict the common performance of his job responsibilities in a way that would equate to an unlawful non-contend covenant, and it asked for that Nutanix agree not to use candidates from VMware in a way that Nutanix thinks would be opposite to the federal antitrust legislation.”

Nutanix also accused VMware of trying to deny Ramaswami an opportunity to develop into a CEO.

“VMware’s lawsuit seeks to make interviewing for a new job wrongful. We view VMware’s misguided action as a response to losing a deeply valued and respected member of its leadership staff,” it included reported in the assertion. “Mr. Ramaswami is happy of his tenure at VMware and counts lots of VMware staff associates as close friends. It is disappointing to see VMware’s management sue him just because he chose to pursue an opportunity to develop into a public company CEO. We think that VMware’s action is nothing at all extra than an unfounded try to hurt a competitor and we intend to vigorously defend this issue in court.”

California legislation is frequently favorable to job-changers, and does not typically acknowledge non-contend agreements. The supply common with the filing reported Ramaswami would be prohibited from actions these types of as sabotaging VMware, recruiting co-personnel even though even now utilized there, stealing trade secrets or conducting organization with shoppers on behalf of Nutanix even though even now functioning for VMware. But he reported an staff is not essential to disclose he is trying to find a job with another company.

VMware-Nutanix fight above HCI market

The romantic relationship in between VMware and Nutanix has developed from a close partnership to a fierce rivalry. VMware and its recent parent company, Dell Technologies, aided Nutanix build the HCI market. Before VMware formulated its individual vSAN HCI computer software, its gross sales and assistance groups generally recommended its shoppers invest in Nutanix HCI systems as a way to take care of storage in intensely virtualized data facilities. Nutanix gross sales also received a jolt after it struck an OEM deal with Dell in 2014, a go that noticeably expanded the startup’s market presence.

3 developments adjusted the VMware-Nutanix romantic relationship. Initially, VMware released vSAN in 2014, placing it in direct competitiveness with Nutanix. The identical 12 months, Nutanix launched its AHV hypervisor that competes with VMware’s ESX. Nutanix tends to make AHV accessible for cost-free with its computer software stack, and permits companies to migrate from ESX if they want to change hypervisors.

Then Dell obtained storage large EMC — the greater part owner of VMware — in 2016. Though Dell has continued its OEM deal with Nutanix, its gross sales of Nutanix computer software on Dell servers have dropped. The Dell EMC VxRail HCI program driven by vSAN is Nutanix’s primary competitor, and Dell pushes that product to its shoppers above its Nutanix systems.

Nutanix also adjusted its gross sales tactic, which is now closer to VMware’s. Though it continues to sell its individual branded HCI systems, Nutanix has built its computer software accessible to operate on all x86 servers and has created partnerships with HPE and Lenovo, and courted Cisco resellers.

The CEOs of VMware and Nutanix have taken pictures at the rivals in public. Through his 2019 VMworld keynote, VMware CEO Pat Gelsinger reported his company was pulling away from Nutanix, without the need of completely mentioning Nutanix by identify.

“We’re crushing Nu … I indicate we’re winning in the marketplace,” Gelsinger reported. “We’re separating from No. 2. We’re winning in the space.” 

Pandey countered on a Nutanix earnings simply call a few days later on that VMware “sells a good deal of vaporware.”

Pandey also reported he required Nutanix to switch VMWare as the “Switzerland of computing” by functioning throughout all significant components platforms.

Who’s No. one?

Analysis organization IDC’s newest HCI earnings tracker showed VMware major with $821 million (forty.2% share) in HCI computer software earnings for the 3rd quarter of 2020. IDC outlined Nutanix next with $513 million (twenty five.one%).

On the other hand, even IDC’s research has been caught up in the VMware-Nutanix rivalry. Pandey criticized IDC’s numbers for a long time, contacting them “funky accounting” and claiming they did not give Nutanix complete credit score for its computer software earnings.

Adhering to IDC’s newest HCI launch this month, Nutanix COO David Sangster posted a blog site on LinkedIn that showed IDC crediting Nutanix with 28.4% of the HCI computer software market when compared to VMware’s 14.five%. Individuals figures, which have been not in IDC’s launch, incorporated gross sales of storage companies not covered in the foundation HCI earnings.