Out With the Old, In With the New. VMware’s New Reality and the Carnage to Come

VMworld this year was an interesting example of just how different the technology industry is today from only a handful of years ago. Solid partners of old have suddenly become, if not outright enemies, at least frenemies. Meanwhile a big dose of “if you can’t beat them, join them” has been going on.

First up was the expected announcement of the NSX networking controller, VMwares network virtualization offering built on the back of its Nicira acquisition last year. NSX allows enterprises to virtualize their networks in the same way that they can virtualize their servers. As the company so rightly points out, the network layer, once firmly tied to physical hardware, is more and more becoming decoupled and software is being layered on top of hardware to give users more flexibility, agility and all those other “ity’s” that technology vendors talk about.

In launching NSX, VMware rolled out a bunch of partnerships – notable is the top of rack integration section which includes the usual hardware suspects (such as Arista and Juniper) but, stuck down the bottom is Cumulus Networks, the startup I’ve covered previously that is trying its hardest to disrupt the legacy hardware vendors. Meanwhile, although hardly talked about any more, there is VCE, that happy little joint venture between Cisco, EMC and VMware that was meant to take on the world selling Vblock – in theory leveraging the best of all three vendors. In practice however, Vblock is made all the less relevant by AWS for storage and compute, a raft of storage startups doing interesting things with flash and companies like Cumulus Networks bringing commoditization to the networking world.

In covering the news, GigaOm’s Stacey Higginbotham suggested that perhaps it was an example of VMware embracing openness – the reality is far more stark than this. VMware is standing on a burning platform. While VCE was an attempt to extend revenue streams leveraging other legacy vendors, the reality for the company has gotten even more stark in recent years VMware now knows that nothing is sacred and even if it has to go to war with past partners to survive, it will do so.

While companies like Cumulus Networks appear low down on the list of partners, and VMware CEO Pat Gelsinger passes platitudes about Cisco et al being important partners still – have no doubt that this is one company that will do whatever it needs to to retain its position. VCE notwithstanding.

The other interesting announcement was the general availability of vCloud Hybrid, VMwares hybrid cloud offering that is firmly aimed at creating a chink in the armor of the public cloud elephant in the room, AWS. And an elephant it is indeed, AWS has, according to recent Gartner research, more than five times the utilized compute capacity of all of the other 14 cloud providers in the Gartner Magic Quadrant. Combined!

Alongside the GA announcement, VMware is offering three US data centers and a partnership with Savvis to extend the vCloud Hybrid footprint. Again, don’t be fooled into thinking that VMware is doing for pragmatic reasons. While Gelsinger previously used fear techniques to scare VMware partners away from working with AWS, the harsh reality of market share has taken its toll and VMware has to start offering their customers more options – and that means giving them a hybrid cloud offering. Even if, in doing so, they potentially screw over their partner ecosystem who have been using VMware kit to deliver their own cloud solutions to customers. As I said before, desperate times call for desperate measures – and the continuing exodus of high level executives from VMware and to greener pastures shows just how desperate times really are for the company.

There’s a problem here though – the VMware hybrid cloud may work ok for VMware companies moving legacy applications to the cloud, but there’s the slight matter of new applications. The number of new enterprise applications being created is growing every day and simply providing scalable infrastructure won’t really meet the needs of the teams doing this work – they want higher level services. Which brings us, albeit circuitously, to Pivotal, the spin out that got all the cool assets from both VMware and EMC.

VMware announced this week that Cloud Foundry would be included as a part of its vCloud Hybrid offering – the question here is how much VMware can really articulate a high value proposition when it’s using a tool that it doesn’t have ownership or control of? While there was some lightweight banter on Twitter this week about VMware’s intentions for the spin out – the fact still remains that no matter how the marketers spin their “deep partnership” stories, there are seriously conflicted drivers at stake here. VMware sales people are like kids on crack with their lovely licensing streams, they don’t want any stupid developer tools putting that at risk. Meanwhile Pivotal is partnering (as it has to to gain market credibility) with every man and his dog, and in doing so delivering a picture which is far more open and heterogeneous than even the most liberal of VMware people feel comfortable with.

VMware is an interesting company, at an interesting crossroads. It’s by no means a deal stuck frozen in the glare of oncoming headlights – those that matter within the company know full well just how much is at stake here – but in order to survive they need to make some cuts that are going to be deep and painful – internally, to partners and to customers. There’s going to be carnage in the process.

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