VMware’s success has resulted in a dominant market position leaving it both searching for new growth opportunities and facing pernicious threats to the market it controls. At VMworld Europe 2015, the company was facing uncertainty from the announcement that its parent company EMC was to be acquired by Dell. Its own long-term strategic vision also appeared somewhat confused and at times unrealistic. 12 months later and things are much clearer. Its strategy for addressing core market challenges, predominantly cloud computing, has much-needed clarity.
Since inception 17 years ago VMware has come to dominate virtualisation within the data centre. Then came cloud computing. Suddenly, there was the possibility of organisations scaling back their own data centres (where VMware was heavily used) and moving their workloads to cloud providers, especially the large public cloud vendor’s (AWS, Microsoft, IBM and Google). VMware’s answer to this has come in four strategic moves.
1. If you can’t beat them, join them
VMware’s initial response was to create its own vCloud Air public cloud platform, originally launched as vCloud Hybrid Service. Additionally, VMware has over 4,200 cloud service provider partners in more than 100 countries making up their vCloud Air Network who provide cloud services using VMware technologies. However, against the might of the public cloud vendors this strategy hasn’t kept pace with the mega cloud providers. At the same time many organisations found that the so-called “lift and shift” of on-premise workloads to those mega cloud providers was more difficult than expected and caused numerous problems. To this end, VMware saw an opportunity to help customers bridge both worlds.
A partnership deal with IBM, a vCloud Air Network partner, announced on 22nd February 2016, saw Big Blue offering its customers a VMware environment running on its SoftLayer cloud infrastructure. Just before its 2016 VMworld Europe conference, VMware announced a partnership with AWS that will see VMware products running on AWS in a service managed and sold by VMware named the VMware Cloud on AWS.
The aim of both deals is to enable a hybrid cloud solution that allows organisations to move workloads from their on-premise VMware environment to identical environments running in the public cloud. To enable this VMware have a new VMware Cloud Foundation product that brings together its vSphere (virtual compute), Virtual SAN (virtual storage) and NSX (virtual network) offerings into a single solution that will run in: a customer’s data centre; VMware’s vCloud Air infrastructure, vCloud Air Network partner infrastructures; and public clouds such as AWS.
While the AWS partnership will not bear fruit until mid-2017, a demo at VMworld showed how a customer could spin up virtual environments in either their own data centre or on AWS and then move workloads between them through a single control panel.
In future, organisations may look to build cloud native applications on top of public cloud services; however, right now they are heavily invested in running workloads on VMware. In order to take advantage of the benefits of cloud they need that same environment running within the cloud infrastructure. Crucially, the partnership deals made with IBM and AWS make real the possibility of allowing organisations to leverage their investment in a VMware environment while being able to reduce their CapEx server estate with the potentially lower cost (and perhaps more importantly flexible and extensible) OpEx public cloud . In this regard, VMware’s strategy looks like a win-win for the company and its customers.
· A smart reality check for Amazon
For AWS this marks a public acknowledgement that there is not only one cloud – the public cloud – but that customers, especially enterprises, require and want hybrid clouds. But it also means that AWS is now in a great position to begin on boarding customers’ traditional workloads and so driving growth in its own business that previously may have gone to competitors such as IBM and Microsoft. While customers of the new offering will belong to VMware, once they begin to move workloads into its cloud environment, AWS hopes that they will begin using its own proprietary cloud services. The deal is therefore not only a win-win for VMware, but also to for AWS.
· New strategy is not without challenges
There remain some challenges to VMware’s cloud strategy. First, the company continues to create confusion through the way it names products and services. The announcement of Cloud Foundation certainly makes it easier to identify what’s required to deploy a cloud environment. However, its various multi-cloud products and services (incl. Cross-Cloud Architecture and Cross-Cloud Services) does create some unnecessary confusion.
It does not help that like many vendors, VMware’s definition of multi-cloud is not that of many customers. While vendors tend to see multi-cloud as the ability to move workloads between cloud environments, customers are more interested in being able to leverage the unique capabilities of different cloud platforms: for example, having an application run in Microsoft Azure while using services from AWS or Google. VMware’s own figures showed that the ability to move workloads between clouds was the least important driver for customers.
2. A place for smaller cloud partners
VMware’s vCloud Air Network partner ecosystem shares some interesting similarities with HPE’s Cloud 28+ initiative – a cloud services catalogue directory that introduces service creators to service consumers in a matchmaking type of environment. Cloud28+ specifically allows services to be discovered according to detailed, but highly important, criteria such as support for certain standards or regulatory compliance.
The new arrangement with AWS may appear a significant threat to VMware’s cloud partners but this may not be the case. There is, at least in the short to medium term, a need among certain organisations (specifically enterprises) for cloud environments that meet certain key criteria. A prime example of this is being able to locate data within a very specific geography. There can also be requirements with respect to Service Level Agreements (SLAs). This could allow smaller partners that specialise in particular vertical to provide value-add services that deliver vertical specific needs and SLAs that a vendor such as AWS will not and this is where VMware excels with 4,200+ partners in more than 100 countries.
Unlike HPE’s Cloud 28+, VMware’s strategy is built around a technology platform that is well established and dominant within the market and now includes their own vCloud Air service, public cloud vendors such as AWS and IBM and other vCloud Air Network partners including OVH, Rackspace, Telefonica, T-Systems, Fujitsu, and many more. There is also the ability to run VMware virtual machines within Microsoft Azure and Google’s Cloud Platform, although these offerings are slightly different from those within AWS and IBM.
3. Embracing the Internet of Things
VMware’s vision is not just confined to its traditional server virtualisation market. It continues to drive new business from its acquisition of Mobile Device Management (MDM) solution AirWatch. From being non-existent only a few years ago, MDM has had to address the rapidly changing mobile device landscape and more recently begin to move into the new challenges of the Internet of Things (IoT).
AirWatch has done well in the MDM market and has become a recognised brand, perhaps more so than VMware itself. Now, the company has turned its attention to IoT and the needs of customers that are and will be increasingly managing large numbers of very different types of devices, from cars to industrial equipment to connected kettles.
The business of managing phones and tablets is viewed by VMware as being about managing people’s identities. The device represents a person and what they should or should not have access to rather than focusing on the hardware. However, in IoT it is clearly about managing devices as more often than not there will be no individual associated with the “thing”. Therefore, the concept of managing devices conflicts with VMware’s core MDM message which centres on the individual.
But, IoT creates another challenge for MDM which is the significant scaling of the number of devices. MDM tools were created to manage the phones of employees within an organisation. The number of employees will be dwarfed by the millions of “things” that an organisation may come to have. This is something that AirWatch has adapted to and can already cite IoT case studies such as Coca Cola Enterprises network of vending machines.
That these are early days with regards to IoT means that there is a long way to go. AirWatch watch is definitely moving in the right direction and at a velocity that is putting it ahead of the majority of customers’ requirements.
4. A step ahead with Containers
With respect to how software applications may be developed and deployed in future VMware is trying to stay ahead of the game through its investments in container technology. While studies, including ones conducted by CIC, show that the container market is small, there is a belief that this will be one of the next big technology trends.
VMware has support for containers in its vSphere product and has an entirely container centric offering called Photon. Recent developments have focused on open source solutions that are gaining traction among developers using containers. Supporting Docker is table stakes but VMware now supports other complimentary technologies such as Google’s Kubernetes.
By supporting an increasing number of container related tech, VMware hopes that it will be able to help its traditional IT operations customers regardless of the choices made by their colleagues in development. This is a sensible way forward and VMware’s aim of making the deployment and management of container environments as fast and easy as possible (just as it did with virtual machines) makes perfect sense and gives it a USP in the container market.
CIC Concludes: A sensible strategy that VMware needs to quickly deliver on
While VMware may have seen off many competitors it still faces an existential threat from itself. CEO Pat Gelsinger himself stated that VMware’s ability to deliver on the promise of its new Cloud Foundation and the deal with AWS is critical to the company’s future.
That VMware has brought forward a clear and sensible strategy by which to address changes in its core market, most noticeably cloud, is very welcome. It also meant that 2016’s VMworld Europe was a much better event than the previous one in 2015. It was far harder to challenge VMware this year on its vision of the future. There are still unanswered questions, especially around how exactly the AWS deal will work, but the overall approach is sound.
The company continues to invest in future market directions in areas such as containers and IoT. Its End User Computing Workspace One offering is perhaps the most unclear and uncertain aspect of the current VMware story. But this does not represent its core market and so is perhaps less important as what it’s doing with its traditional virtualisation products.
If what was outlined at VMworld is the future VMware then it looks to be in a much better place than it was 12 months ago.