Nutanix, the unicorn startup driving VMware crazy, is about to cause more heartburn with Workspot deal

On Monday, a tiny three-year old startup called Workspot will announce a partnership with Nutanix, a hot startup worth $2 billion that's been upending how companies build their data centers.

The news will likely cause a bit of heartburn to two big, embattled enterprise software companies: VMware and Citrix.

That's because Workspot was cofounded by a former Citrix exec and a former VMware exec. Their new cloud product competes with major software products sold by their former employers.

What Workspot does

Workspot offers a way for companies to run apps on a PC or mobile device from a corporate data center, accessed over the network, without installing the app on their device. It's a technology that goes by the unsexy name of "virtual desktop infrastructure" or VDI.

With VDI, companies eliminate a lot of problems: they make their apps more secure, admins can easily update or change apps, and so on. But, while VDI has been around for decades, it's only been popular for a few specific roles because it's a pain for IT departments to deploy and manage, Workspot CEO Amitabh Sinha told Business Insider.

He ought to know. In his five years at Citrix, he ran the product management for Citrix's major VDI product, XenDesktop.

"I had given up on VDI four years ago like rest of the world because legacy data was causing too many problems," he told us.

Instead he launched a startup that worked on just one part of the VDI problem, allowing companies to run individual applications, like custom-built apps or SAP's financial apps, without installing them on PCs. He's now got a couple of handful of big customers using his cloud service in this way, some of whom are using his product with hundreds to thousands of employees. Examples include the City of Milpitas and Saudi Arabian Airlines, he says.

Workspot wants to be to VDI what Workday is to PeopleSoft, a next-generation cloud alternative, built by the same guys. It's raised $15 million.

But true VDI allows companies to run an entire Windows operating system, and all the apps you would load on your PC, from the data center. Workspot wasn't working on that problem.

Enter Nutanix

Nutanix is killing it in a market it helped invent that also goes by the unsexy name "hyper-converged infrastructure." Nutanix sells a one piece of data center hardware that combines a computer server and computer storage and the special software used to make data centers run more efficiently called a "virtualization hypervisor."

Nutanix has raised $312 million since 2011, and was last valued at about $2 billion.

The king of such virtualization is VMware. On the one hand, Nutanix and VMware have always been close partners because companies can run VMware software on Nutanix's hardware. The engineering teams of both companies have always worked closely together.

But VMware isn't the only hypervisor in town. Microsoft makes a popular one, and it works with Nutanix hardware, too.

Nutanix has also introduced its own hypervisor that competes with VMware called Acropolis. It did this because it wants to pull and IT spending away from VMware and into its own higher-end software and add-on products. Nutanix says makes it super-easy for businesses to switch to another hypervisor, something that wasn't so easy to do before.

As we previously reported, the increasing tension between partners-turned-competitors Nutanix and VMware erupted into an ugly, very public, and somewhat entertaining squabble earlier this year.

VMware even went so far as to design its own competitor to Nutanix, even though VMware doesn't make hardware. It signed partners like Dell and HP to produce and sell it.

Upping the ante

Now Nutanix will up the ante on Monday with the Workspot announcement.

Thanks to Nutanix, Workspot is taking its VDI to the next level: it will run full Windows desktops and all the Windows apps on Nutanix hardware, in direct competition with the software that Citrix or VMware sells.

The promise is that Nutanix + Workspot will make VDI cheaper, easier, and better, Sinha says. With Workspot, companies can manage their VDI with a simple cloud app.

This partnership doesn't mean that Workspot is a huge threat to its rivals, yet. It depends on how much Nutanix's sales force helps the tiny startup sell its wares.

Still, by making it easier for customers to ditch another type of software that VMware sells, Nutanix continues to be a pain in VMware's side.

In the meantime, VMware is under scrutiny now that Dell is trying to buy EMC using some oddball financing tactics involving EMC's stake in VMware. Citrix has been struggling lately, too. It's a target of activist investor Elliott Management and is reportedly trying to sell itself.